# Regal Rexnord Corp: Form 10-Q for the period ended Sep 30, 2024

- Company: [Regal Rexnord Corp](/companies/rrx.md) (CIK 82811)
- Form: 10-Q
- Filed: 2024-11-05
- Accepted by EDGAR: Nov 5, 2024, 19:11 ET
- Period: 2024-09-30
- Accession: 0000082811-24-000210
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/82811/000008281124000210/rbc-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/82811/000008281124000210/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $1.48bn | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $4.57bn | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $921.1m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $2.89bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $556.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $1.68bn | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $174.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $501.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $98.0m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $305.1m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $8.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $53.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $72.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $155.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $1.09 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $2.32 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $1.09 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $2.33 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 66,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 66,800,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $396.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $80.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $69.9m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $50.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $458.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $2.96bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $14.56bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $1.21bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2024-09-30 | $5.65bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $4.7m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $6.47bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 38,130 characters.

### (Dollars In Millions Except Per Share Data, Unless Otherwise Noted)

### Overview

Regal Rexnord Corporation (NYSE: RRX) (“we,” “us,” “our” or the “Company”) and its associates around the world help create a better tomorrow by providing sustainable solutions that power, transmit and control motion. The Company’s electric motors and air moving subsystems provide the power to create motion. A portfolio of highly engineered power transmission components and subsystems efficiently transmit motion to power industrial applications. Our automation offering, comprised of controls, actuators, drives, and small, precision motors control motion in applications ranging from factory automation to providing precision control in surgical tools. We are headquartered in Milwaukee, Wisconsin and have manufacturing, sales and service facilities worldwide.

Our company is comprised of three operating segments: Industrial Powertrain Solutions ("IPS"), Power Efficiency Solutions ("PES") and Automation & Motion Control ("AMC").

A description of our three operating segments is as follows:

- The IPS segment designs, produces and services a broad portfolio of highly-engineered transmission products, including mounted and unmounted bearings, couplings, mechanical power transmission drives and components, gearboxes and gear motors, clutches, brakes, and industrial powertrain components and solutions. Increasingly, the segment produces industrial powertrain solutions, which are integrated sub-systems comprised of Regal Rexnord motors plus the critical power transmission components that efficiently transmit motion to power industrial applications. The segment serves a broad range of markets that include general industrial, metals and mining, agricultural and construction, food and beverage, energy, alternative energy, and other markets.
- The PES segment designs and produces fractional to approximately 5 horsepower AC and DC motors, electronic variable speed controls, electronic drives, fans and blowers, as well as integrated subsystems comprised of two or more of these components. The segment's products are used in residential and light commercial HVAC, water heaters, commercial refrigeration, commercial building ventilation, pool and spa, irrigation, dewatering, agricultural and other applications.
- The AMC segment designs, produces and services conveyor products, conveying automation subsystems, aerospace components, precision motion control solutions, high-efficiency miniature servo motors, controls, drives and linear actuators, as well as power management products that include automatic transfer switches and paralleling switchgear.

The segment sells into markets that include industrial automation, robotics, food and beverage, aerospace, medical, agricultural and construction, general industrial, data center, and other markets.

On September 23, 2023, we signed an agreement to sell our industrial motors and generators businesses which represent the substantial majority the Industrial Systems operating segment. The transaction closed on April 30, 2024. See Note 3 - Held for Sale, Acquisitions and Divestitures of the Notes to the Condensed Consolidated Financial Statements for further information, as well as Note 6 - Segment Information of the Notes to the Condensed Consolidated Finance Statements for a description of the Company's operating segments.

#### Components of Profit and Loss

*Net Sales*. We sell our products to a variety of manufacturers, distributors and end users. Our customers consist of a large cross-section of businesses, ranging from Fortune 100 companies to small businesses. A number of our products are sold to Original Equipment Manufacturers ("OEMs"), who incorporate our products, such as electric motors, into products they manufacture, and many of our products are built to the requirements of our customers. The majority of our sales derive from direct sales to customers by sales personnel employed by the Company, however, a significant portion of our sales are derived from sales made by manufacturer’s representatives, who are paid exclusively on commission. Our product sales are made via purchase order, long-term contract, and, in some instances, one-time purchases. Many of our products have broad customer bases, with levels of revenue concentration by customer varying widely across our business units.

Our level of net sales for any given period is dependent upon a number of factors, including (i) the demand for our products and for the products in which our products are components; (ii) the strength of the economy generally and the end markets in which we compete; (iii) our customers’ perceptions of our product quality at any given time; (iv) our quote, lead and delivery times; (v) the selling price of our products; (vi) inventory levels in the channels through which our products are sold; and (vii) the weather. As a result, our total revenue has tended to experience quarterly variations and our total revenue for any particular quarter may not be indicative of future results.

We use the term “organic sales" to refer to sales from existing operations excluding (i) sales from acquired businesses recorded prior to the first anniversary of the acquisition (“Acquisition Sales”), (ii) less the amount of sales attributable to any businesses divested/to be exited, and (iii) the impact of foreign currency translation. The impact of foreign currency translation is determined by translating the respective period’s organic sales using the same currency exchange rates that were in effect during the prior year periods. We use the term “organic sales growth” to refer to the increase in our sales between periods that is attributable to organic sales. We use the term “acquisition growth” to refer to the increase in our sales between periods that is attributable to Acquisition Sales. Organic sales, organic sales growth and acquisition growth are non-GAAP financial measures. See reconciliation for these measures to GAAP net sales in Non-GAAP Measures below.

*Gross Profit*. Our gross profit is impacted by our levels of net sales and cost of sales. Our cost of sales consists of costs for, among other things (i) raw materials, including copper, steel and aluminum; (ii) components such as castings, bars, tools, bearings and electronics; (iii) wages and related personnel expenses for fabrication, assembly and logistics personnel; (iv) manufacturing facilities, including depreciation on our manufacturing facilities and equipment, insurance and utilities; and (v) shipping. The majority of our cost of sales consists of raw materials and components. The price we pay for commodities and components can be subject to commodity price fluctuations. We attempt to mitigate this through fixed-price agreements with suppliers and our hedging strategies. When we experience commodity price increases, we have tended to announce price increases to our customers who purchase via purchase order, with such increases generally taking effect a period of time after the public announcements. For those sales we make under long-term contracts, we tend to include material price formulas that specify quarterly or semi-annual price adjustments based on a variety of factors, including commodity prices.

Outside of general economic cyclicality, our business units experience different levels of variation in gross profit from quarter to quarter based on factors specific to each business. Generally, our segments each have broad customer base and a variety of applications for their products, thereby helping to mitigate large quarter-to-quarter fluctuations outside of general economic conditions. However, for example, a portion of our PES segment manufactures products that are used in air conditioning applications. As a result, our sales for that business may be lower in the first and fourth quarters and higher in the second and third quarters.

*Operating Expenses*. Our operating expenses consist primarily of (i) general and administrative expenses; (ii) sales and marketing expenses; (iii) general engineering and research and development expenses; and (iv) handling costs incurred in conjunction with distribution activities. Personnel related costs are our largest operating expense.

Our general and administrative expenses consist primarily of costs for (i) salaries, benefits and other personnel expenses related to our executive, finance, human resource, information technology, legal and operations functions; (ii) occupancy expenses; (iii) technology related costs; (iv) depreciation and amortization; and (v) corporate-related travel. The majority of our general and administrative costs are for salaries and related personnel expenses. These costs can vary by business given the location of our different manufacturing operations.

Our sales and marketing expenses consist primarily of costs for (i) salaries, benefits and other personnel expenses related to our sales and marketing function; (ii) internal and external sales commissions and bonuses; (iii) travel, lodging and other out-of-pocket expenses associated with our selling efforts; and (iv) other related overhead.

Our general engineering and research and development expenses consist primarily of costs for (i) salaries, benefits and other personnel expenses; (ii) the design and development of new energy efficiency products and enhancements; (iii) quality assurance and testing; and (iv) other related overhead. Our research and development efforts tend to be targeted toward developing new products that would allow us to maintain or gain additional market share, whether in new or existing applications. In particular, a large driver of our research and development efforts is to raise the energy efficiency and lower the environmental impact of our products and sub-systems.

*Income from Operations*. Our income from operations consists of segment gross profit less segment operating expenses. In addition, there are shared operating costs that cover corporate, engineering and IT expenses that are consistently allocated to the operating segments and are included in segment operating expenses. Income from operations is a key metric used to measure year-over-year performance of the segments.

#### Altra Transaction

On March 27, 2023, in accordance with the terms and conditions of the Altra Merger Agreement, by and among us, Altra, and Merger Sub, pursuant to the satisfaction of specified conditions, Merger Sub merged with and into Altra, with Altra surviving the Altra Merger as our wholly owned subsidiary. See Note 3 - Held for Sale, Acquisitions and Divestitures of the Notes to the Condensed Consolidated Financial Statements for further information regarding the Altra Transaction.

In connection with the Altra Transaction, we entered into certain financing arrangements, which are described below under “Liquidity and Capital Resources.”

#### 2024 Outlook

The Company has updated its annual guidance for diluted earnings per share to a range of $3.27 to $3.57. The change reflects weaker factory automation demand in the Automation & Motion Control segment and weaker general commercial demand in the Power Efficiency Solutions segment.

### Results of Operations

| Net Sales: | Three Months Ended September 30, 2024 | September 30, 2023 | Nine Months Ended September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: | ---: | ---: |
| Industrial Powertrain Solutions | $644.2 | $640.7 | $1,963.1 | $1,753.8 |
| Power Efficiency Solutions | 431.6 | 461.3 | 1,227.8 | 1,390.9 |
| Automation & Motion Control | 401.6 | 419.8 | 1,224.0 | 1,096.1 |
| Industrial Systems(1) | — | 128.0 | 157.8 | 401.7 |
| Consolidated | $1,477.4 | $1,649.8 | $4,572.7 | $4,642.5 |
| Gross Profit as a Percent of Net Sales: |  |  |  |  |
| Industrial Powertrain Solutions | 41.6% | 33.7% | 40.9% | 35.2% |
| Power Efficiency Solutions | 30.5% | 29.9% | 28.7% | 28.0% |
| Automation & Motion Control | 39.0% | 38.4% | 39.7% | 37.7% |
| Industrial Systems(1) | —% | 21.3% | 24.8% | 21.0% |
| Consolidated | 37.7% | 32.9% | 36.7% | 32.4% |
| Operating Expenses as a Percent of Net Sales: |  |  |  |  |
| Industrial Powertrain Solutions | 28.5% | 27.5% | 27.9% | 29.2% |
| Power Efficiency Solutions | 17.0% | 15.8% | 17.9% | 15.8% |
| Automation & Motion Control | 31.3% | 28.1% | 30.4% | 29.8% |
| Industrial Systems(1) | —% | 152.4% | 24.7% | 61.3% |
| Consolidated | 25.9% | 34.1% | 25.8% | 28.1% |
| Income (Loss) from Operations as a Percent of Net Sales: |  |  |  |  |
| Industrial Powertrain Solutions | 13.1% | 6.1% | 13.1% | 6.0% |
| Power Efficiency Solutions | 13.6% | 14.1% | 10.8% | 12.2% |
| Automation & Motion Control | 7.7% | 10.3% | 9.2% | 7.9% |
| Industrial Systems(1) | —% | (131.2)% | 0.2% | (40.4)% |
| Consolidated | 11.8% | (1.2)% | 11.0% | 4.3% |
| Income (Loss) from Operations | $174.1 | $(20.4) | $501.9 | $200.1 |
| Interest Expense | 98.0 | 111.5 | 305.1 | 323.3 |
| Interest Income | (5.1) | (3.5) | (13.2) | (40.5) |
| Other (Income) Expense, Net | (0.2) | (2.5) | 0.4 | (6.7) |
| Income (Loss) before Taxes | 81.4 | (125.9) | 209.6 | (76.0) |
| Provision for Income Taxes | 8.4 | 12.7 | 53.2 | 34.9 |
| Net Income (Loss) | 73.0 | (138.6) | 156.4 | (110.9) |
| Less: Net Income Attributable to Noncontrolling Interests | 0.3 | 0.9 | 1.4 | 2.4 |
| Net Income (Loss) Attributable to Regal Rexnord Corporation | $72.7 | $(139.5) | $155.0 | $(113.3) |

(1) Results for the Industrial Systems segment covers results through the close of the sale on April 30, 2024.

#### Three Months Ended September 30, 2024 Compared to September 30, 2023

Net sales decreased $172.4 million or 10.4% for the third quarter of 2024 compared to the third quarter of 2023. The decrease consisted of an organic sales decline of 2.7% and a negative foreign currency translation impact of 0.2%. In addition, the $172.4 million decrease includes an impact of $128.0 million related to the sale of the industrial motors and generators businesses, which closed on April 30, 2024. The organic sales decline was driven by a decrease of $28.6 million within PES and a decrease of $17.2 million within AMC, partially offset by an increase of $5.3 million within IPS. Gross profit increased $14.1 million or 2.6% for the third quarter of 2024 as compared to the third quarter of 2023 primarily driven by an increase in gross profit of $52.2 million within IPS, partially offset by a decrease of $27.2 million due to the divestiture of the industrial motors and generators businesses and decreases at AMC and PES. The gross profit increase of $14.1 million includes the absence of $8.8 million of acquisition-related inventory step-up amortization at IPS and AMC in the third quarter of 2024. Total operating expenses for the third quarter of 2024 decreased $180.4 million or 32.1% as compared to the third quarter of 2023 primarily driven by a reduction of $195.1 million from the divestiture of the industrial motors and generators businesses, including the loss on assets held for sale of $112.7 million and goodwill impairment of $57.3 million.

IPS net sales for the third quarter of 2024 were $644.2 million, an increase of $3.5 million or 0.5% as compared to the third quarter of 2023. The increase consisted of an organic sales increase of 0.8%, partially offset by a negative foreign currency translation impact of 0.3%. The increase in organic sales was primarily driven by strength in energy, aerospace & defense and metals & mining, partially offset by weakness in alternative energy and machinery/off-highway markets. Gross profit increased $52.2 million or 24.2% as compared to the third quarter of 2023 primarily driven by benefits from productivity improvements and acquisition-related cost synergies and the absence of $7.1 million of acquisition-related inventory step-up amortization in the third quarter of 2024. Total operating expenses for the third quarter of 2024 are relatively consistent with the third quarter of 2023.

PES net sales for the third quarter of 2024 were $431.6 million, a decrease of $29.7 million or 6.4% as compared to the third quarter of 2023. The decrease consisted of an organic sales decline of 6.2% and a negative foreign currency translation impact of 0.2%. The decrease in organic sales was primarily driven by lower sales volumes due to weakness in the general commercial market and in commercial HVAC outside the U.S., along with a lag in our capacity ramping in response to higher than anticipated residential HVAC demand acceleration. Gross profit decreased $6.2 million or 4.5% as compared to the third quarter of 2023 primarily driven by lower volumes, partially offset by a decrease of $5.9 million in restructuring expenses. Total operating expenses for the third quarter of 2024 are relatively consistent with the third quarter of 2023.

AMC net sales were $401.6 million, a decrease of $18.2 million or 4.3% as compared to the third quarter of 2023. The decrease consisted of an organic sales decline of 4.1% and a negative foreign currency translation impact of 0.2%. The decrease in organic sales was primarily driven by $24.5 million from lower sales volumes due to weakness in discrete automation, partially offset by strength in the food & beverage, aerospace and defense, data center, and medical markets. Gross profit decreased $4.7 million or 2.9% compared to the third quarter of 2023 driven by a decline in sales volume, partially offset by benefits from acquisition-related cost synergies and other cost control actions taken during 2024. Total operating expenses for the third quarter of 2024 are relatively consistent with the third quarter of 2023.

The effective tax rate for the three months ended September 30, 2024 was 10.3% versus (10.1)% for the three months ended September 30, 2023. Refer to Note 10 - Income Taxes for further information.

#### Nine Months Ended September 30, 2024 Compared to September 30, 2023

Net sales decreased $69.8 million or 1.5% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease consisted of an organic sales decline of 6.2% and a negative foreign currency translation impact of 0.3%, partially offset by acquisition growth of 9.5%. In addition, the $69.8 million decrease reflects a negative impact of $222.9 million related to the sale of the industrial motors and generators businesses, which closed on April 30, 2024. The acquisition growth of $442.5 million was from the acquisition of Altra. The organic sales decline was due to lower organic sales of $158.8 million within PES, $67.6 million within AMC, $28.4 million within IPS, and $19.6 million within Industrial Systems. Gross profit increased $176.3 million or 11.7% for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 primarily driven by $175.2 million from the acquisition of Altra, the absence of $52.9 million of acquisition-related inventory step-up amortization at IPS and AMC in 2024, and acquisition-related cost synergies, partially offset by a $37.2 million decrease within PES and a decrease of $45.0 million due to the divestiture of the industrial motors and generated business. Total operating expenses for the nine months ended September 30, 2024 decreased $125.5 million or 9.6% as compared to the nine months ended September 30, 2023 primarily driven by a reduction of $207.4 million from the divestiture of the industrial motors and generators businesses including the $108.4 million decrease to loss on assets held for sale and $57.3 million goodwill impairment recorded during 2023, and a decrease of $68.2 million of transaction and integration related costs, partially offset by an increase of $122.0 million from the acquisition of Altra.

IPS net sales for the nine months ended September 30, 2024 were $1,963.1 million, an increase of $209.3 million or 11.9% as compared to the nine months ended September 30, 2023. The increase consisted of acquisition growth of 13.9%, partially offset by an organic sales decline of 1.6% and a negative foreign currency translation impact of 0.3%. The acquisition growth of $243.2 million was due to the acquisition of Altra. The $28.4 million decrease in organic sales was driven by lower sales volumes due to weakness in alternative energy and machinery/off-highway markets, partially offset by strength in energy and metals & mining markets. Gross profit increased $185.7 million or 30.1% as compared to the nine months ended September 30,

2023 primarily driven by $92.4 million from the acquisition of Altra, the absence of $38.7 million of acquisition-related inventory step-up amortization in 2024, and the benefits of productivity and acquisition-related cost synergies. Total operating expenses for the nine months ended September 30, 2024 increased $34.8 million or 6.8% as compared to the nine months ended September 30, 2023 primarily driven by an increase of $60.0 million from the acquisition of Altra and an increase of $5.1 million of restructuring expense, partially offset by a decrease of $40.8 million of transaction and integration costs.

PES net sales for the nine months ended September 30, 2024 were $1,227.8 million, a decrease of $163.1 million or 11.7% as compared to the nine months ended September 30, 2023. The decrease primarily consisted of an organic sales decline of 11.4% and a negative foreign currency translation impact of 0.3%. The decrease in organic sales was primarily due to lower sales volumes due to weakness in North American residential HVAC as well as commercial HVAC markets in Europe and Asia. Gross profit decreased $37.2 million or 9.6% as compared to the nine months ended September 30, 2023 primarily driven by lower sales volumes, partially offset by management's control over discretionary spending and lower freight costs. Total operating expenses for the nine months ended September 30, 2024 are relatively consistent with the nine months ended September 30, 2023.

AMC net sales were $1,224.0 million, an increase of $127.9 million or 11.7% as compared to the nine months ended September 30, 2023. The increase consisted of acquisition growth of 18.2%, partially offset by an organic sales decline of 6.2% and a negative foreign currency translation impact of 0.3%. The acquisition growth of $199.3 million was due to the acquisition of Altra. The $67.6 million decrease in organic sales was primarily driven by lower volumes due to weakness in discrete automation, partially offset by strength in the aerospace, medical, and data center markets. Gross profit increased $72.8 million or 17.6% compared to the nine months ended September 30, 2023 primarily driven by $82.8 million from the acquisition of Altra, the absence of $14.2 million of acquisition-related inventory step-up amortization in 2024 and the benefits of acquisition-related cost synergies, partially offset by the decline in sales. Total operating expenses for the nine months ended September 30, 2024 increased $46.3 million as compared to the nine months ended September 30, 2023 primarily due to $62.0 million from the acquisition of Altra, partially offset by a decrease of $26.9 million of transaction and integration costs.

On April 30, 2024, the Company completed the sale of its industrial motors and generators businesses, which represented the substantial majority of the Industrial Systems segment, and recognized a $4.3 million loss on the sale during the nine months ended September 30, 2024. The changes in Industrial Systems' sales, gross profit and other operating expenses were primarily driven by the timing of the sale.

The effective tax rate for the nine months ended September 30, 2024 was 25.4% versus (45.9)% for the nine months ended September 30, 2023. Refer to Note 10 - Income Taxes for further information.

### Non-GAAP Measures

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"). As noted above, in this Quarterly Report on Form 10-Q, we also disclose organic sales, organic sales growth and acquisition growth, which are considered non-GAAP financial measures. We use the term "organic sales growth" to refer to its increase in sales between periods that is attributable to sales. "Organic sales" refers to GAAP sales from existing operations excluding any sales from acquired businesses recorded prior to the first anniversary of the acquisition and excluding any sales from business divested/to be exited recorded prior to the first anniversary of the exit and excluding the impact of foreign currency translation. The impact of foreign currency translation is determined by translating the respective period's organic sales using the currency exchange rates that were in effect during the prior year periods. We reconcile these non-GAAP measures in the table below to GAAP net sales. We believe that these non-GAAP financial measures are useful measures for providing investors with additional information regarding our results of operations and for helping investors understand and compare our operating results across accounting periods and compared to our peers. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for the Company's results of operations prepared and presented in accordance with GAAP.

|  | Industrial Powertrain Solutions | Power Efficiency Solutions | Automation & Motion Control | Industrial Systems | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net Sales for Three Months Ended September 30, 2024 | $644.2 | $431.6 | $401.6 | $— | $1,477.4 |
| Impact from Foreign Currency Exchange Rates | 1.8 | 1.1 | 1.0 | — | 3.9 |
| Organic Sales for Three Months Ended September 30, 2024 | $646.0 | $432.7 | $402.6 | $— | $1,481.3 |
| Organic Sales Growth for Three Months Ended September 30, 2024 | 0.8% | (6.2)% | (4.1)% | —% | (2.7)% |
| Impact from Foreign Currency Exchange Rates | (0.3)% | (0.2)% | (0.2)% | —% | (0.2)% |
| Net Sales for Three Months Ended September 30, 2023 | $640.7 | $461.3 | $419.8 | $128.0 | $1,649.8 |
| Net Sales from Businesses Divested | — | — | — | (128.0) | (128.0) |
| Adjusted Net Sales for Three Months Ended September 30, 2023 | $640.7 | $461.3 | $419.8 | $— | $1,521.8 |

|  | Industrial Powertrain Solutions | Power Efficiency Solutions | Automation & Motion Control | Industrial Systems | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net Sales for Nine Months Ended September 30, 2024 | $1,963.1 | $1,227.8 | $1,224.0 | $157.8 | $4,572.7 |
| Net Sales from Businesses Acquired | (243.2) | — | (199.3) | — | (442.5) |
| Impact from Foreign Currency Exchange Rates | 5.5 | 4.3 | 3.8 | 1.4 | 15.0 |
| Organic Sales for Nine Months Ended September 30, 2024 | $1,725.4 | $1,232.1 | $1,028.5 | $159.2 | $4,145.2 |
| Organic Sales Growth for Nine Months Ended September 30, 2024 | (1.6)% | (11.4)% | (6.2)% | (11.0)% | (6.2)% |
| Acquisition Growth for Nine Months Ended September 30, 2024 | 13.9% | —% | 18.2% | —% | 10.0% |
| Impact from Foreign Currency Exchange Rates | (0.3)% | (0.3)% | (0.3)% | (0.8)% | (0.3)% |
| Net Sales for Nine Months Ended September 30, 2023 | $1,753.8 | $1,390.9 | $1,096.1 | $401.7 | $4,642.5 |
| Net Sales from Businesses Divested | — | — | — | (222.9) | (222.9) |
| Adjusted Net Sales for Nine Months Ended September 30, 2023 | $1,753.8 | $1,390.9 | $1,096.1 | $178.8 | $4,419.6 |

### Liquidity and Capital Resources

#### General

Our principal source of liquidity is cash flow provided by operating activities. In addition to operating income, other significant factors affecting our cash flow include working capital levels, capital expenditures, dividends, share repurchases, acquisitions and divestitures, availability of debt financing and the ability to attract long-term capital at acceptable terms.

Cash flow provided by operating activities was $396.2 million for the nine months ended September 30, 2024, a $117.8 million decrease from the nine months ended September 30, 2023. This decrease was driven primarily by lower cash generated by working capital, partially offset by improved income generation.

Cash flow provided by investing activities was $295.9 million for the nine months ended September 30, 2024 as compared to cash flow used in investing activities of $4,952.6 million for the nine months ended September 30, 2023. The change was driven by the use of $4,870.2 of cash to acquire Altra during the prior year period and $374.8 million in proceeds received from the sale of the industrial motors and generators businesses in the current year.

In fiscal 2024, we anticipate capital spending for property, plant and equipment to be approximately $110 million. We believe that our present manufacturing facilities will be sufficient to provide adequate capacity for our operations for the remainder of 2024. We anticipate funding remaining 2024 capital spending with operating cash flows.

Cash flow used in financing activities was $860.9 million for the nine months ended September 30, 2024, compared to $4,354.7 million provided by financing activities for the nine months ended September 30, 2023. We made net debt repayments of $732.7 million during the nine months ended September 30, 2024, compared to net debt borrowings of $4,492.2 million during the nine months ended September 30, 2023. The net debt payments in the current year primarily resulted from payments of $273.5 million on the term loan, $391.8 million on the land term loan and $64.3 million net repayments made on the revolver during the nine months ended September 30, 2024. The net debt borrowings in the prior year were primarily the result of the $4.7 billion of Senior Notes issued in January 2023 and the $840.0 million upsize of the unsecured term loan facility in March 2023, partially offset by the repayment of the $500.0 million of Private Placement Notes in January 2023, $412.5 million net repayments on the revolver and $122.1 million of payments on the term loan. The Company repurchased and retired $50.0 million of common stock during the nine months ended September 30, 2024 to partially offset the dilutive impact of share-based compensation awards. There were no share repurchases for the nine months ended September 30, 2023. There were $69.9 million of dividends paid for the nine months ended September 30, 2024, compared to $69.6 million of dividends paid in the prior year. There were no financing fees paid in the nine months ended September 30, 2024, compared to $51.1 million of fees paid in the prior year.

Our working capital was $1,746.9 million as of September 30, 2024, compared to $2,057.6 million as of December 31, 2023. Our working capital decreased primarily as a result of lower cash on hand, due to the Company prioritizing debt reduction and using excess cash to do so.

The following table presents selected financial information and statistics as of September 30, 2024 and December 31, 2023:

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Cash and Cash Equivalents | $458.6 | $574.0 |
| Trade Receivables, Net | 855.8 | 921.6 |
| Inventories | 1,324.5 | 1,274.2 |
| Working Capital | 1,746.9 | 2,057.6 |
| Current Ratio | 2.4:1 | 2.6:1 |

As of September 30, 2024, $433.8 million of our cash was held by foreign subsidiaries and could be used in our domestic operations if necessary. We anticipate being able to support our liquidity and operating needs largely through cash generated from operations. We regularly assess our cash needs and the available sources to fund these needs which includes repatriation of foreign earnings which may be subject to withholding taxes. Under current law, we do not expect restrictions or taxes on repatriation of cash held outside of the United States to have a material effect on our overall liquidity, financial condition or the results of operations for the foreseeable future. As of September 30, 2024, we have repatriated approximately $636.5 million of foreign cash in 2024 to support the repayment of debt. We are continuing to evaluate opportunities to repatriate additional foreign cash in 2024.

We will, from time to time, maintain excess cash balances which may be used to (i) fund operations, (ii) repay outstanding debt, (iii) fund acquisitions, (iv) pay dividends, (v) make investments in new product development programs, (vi) repurchase our common stock, or (vii) fund other corporate objectives.

In May 2024, the Company completed transactions to exchange the unregistered Senior Notes for the registered New Notes, which are described within Note 7 - Debt and Bank Credit Facilities.

The Company plans to use cash generated from operations to fund its interest obligations and reduce the principal balance of its debt over time. The Company also plans to use the net proceeds from the sale of its industrial motors and generators businesses to repay outstanding debt.

As of September 30, 2024, the Company had no standby letters of credit issued under the Multicurrency Revolver Facility, and $1,536.2 million of available borrowing capacity. For the three months ended September 30, 2024 and September 30, 2023 under the Multicurrency Revolving Facility, the average daily balance in borrowings was $70.8 million and $123.9 million, respectively, and the weighted average interest rate was 7.2% and 7.2%, respectively. For the nine months ended September 30, 2024 and September 30, 2023 under the Multicurrency Revolving Facility, the average daily balance in borrowings was $78.9 million and $320.0 million, respectively, and the weighted average interest rate was 7.2% and 6.6%, respectively. The Company pays a non-use fee on the aggregate unused amount of the Multicurrency Revolving Facility at a rate determined by reference to its consolidated funded debt to consolidated EBITDA ratio.

See Note 7 - Debt and Bank Credit Facilities and Note 3 – Held for Sale, Acquisitions and Divestitures for more information.

### Guarantor Information

Regal Rexnord Corporation (the “Parent”) is the issuer of the Senior Notes and the New Notes, which are guaranteed by each of its direct and indirect wholly-owned subsidiaries that is a borrower or guarantor under the Credit Agreement (the “Guarantor Subsidiaries” and, each, a “Guarantor Subsidiary”). The Senior Notes and the New Notes are jointly and severally unconditionally guaranteed on a senior unsecured basis by the Guarantor Subsidiaries. The guarantees are subject to release in limited circumstances upon the occurrence of certain customary conditions. For example, a Guarantor Subsidiary may be released from its guarantee of the Senior Notes and the New Notes under certain circumstances, including following the Parent achieving certain corporate or similar credit ratings. In addition, the guarantee of a Guarantor Subsidiary will automatically terminate under certain circumstances, including if such Guarantor Subsidiary is permanently released from its guarantee of, and is not a borrower under, the Credit Agreement.

If any of the Parent’s subsidiaries that do not guarantee the Senior Notes and the New Notes (the “Non-Guarantor Subsidiaries”) becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, holders of its indebtedness and its trade creditors generally will be entitled to payment on their claims from the assets of such subsidiary before any of those assets would be made available to the Parent or any Guarantor Subsidiary. Consequently, the claims of holders of the Senior Notes and the New Notes are structurally subordinated to all of the existing and future liabilities, including trade payables, of the Non-Guarantor Subsidiaries.

The following tables set forth financial information attributable to the Parent and the Guarantor Subsidiaries (collectively the “Obligor Group”). The financial information of the Obligor Group is presented on a combined basis, excluding intercompany balances and transactions between entities in the Obligor Group which have been eliminated. The financial information of the Obligor Group excludes equity investments in, and equity income or loss from, subsidiaries that are not in the Obligor Group. Material amounts due from, due to, and transactions with Non-Guarantor Subsidiaries which are included in the condensed financial information of the Obligor Group are presented with each table.

The following table sets forth summarized balance sheet information of the Obligor Group as of September 30, 2024 and December 31, 2023. The December 31, 2023 balance sheet information includes balances of the industrial motors and generators businesses which were classified as held for sale in the Condensed Consolidated Balance Sheet at that time:

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Total Current Assets | 1,223.6 | 1,285.0 |
| Goodwill | 4,220.9 | 4,262.6 |
| Intangible Assets, Net of Amortization | 2,229.7 | 2,374.0 |
| Other Noncurrent Assets | 1,029.3 | 1,062.8 |
| Total Assets | 7,479.9 | 7,699.4 |
| Total Current Liabilities | 662.7 | 697.0 |
| Long-Term Debt | 5,629.2 | 6,351.3 |
| Other Noncurrent Liabilities | 3,868.2 | 4,246.1 |
| Total Liabilities | 9,497.4 | 10,597.4 |
| Due from Non-Guarantor Subsidiaries | 531.1 | 526.4 |
| Due to Non-Guarantor Subsidiaries | 3,244.1 | 3,453.1 |

The following table sets forth summarized income statement information of the Obligor Group for the nine months ended September 30, 2024:

|  | Nine Months Ended September 30, 2024 |
| --- | ---: |
| Net Sales | 2,503.9 |
| Gross Profit | 958.8 |
| Income from Operations | 214.1 |
| Interest Expense | 423.7 |
| Net Loss | (213.8) |
| Net Loss Attributable to Regal Rexnord Corporation | (213.8) |
| Net Sales to Non-Guarantor Subsidiaries | 195.5 |
| Interest Expense Due to Non-Guarantors | 125.0 |

### Critical Accounting Estimates

Our critical accounting policies and estimates, which are discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, have not materially changed since that report was filed.

## Market risk

As filed, 9,418 characters.

We are exposed to market risk relating to our operations due to changes in interest rates, foreign currency exchange rates and commodity prices of purchased raw materials. We manage the exposure to these risks through a combination of normal operating and financing activities and derivative financial instruments such as interest rate swaps, commodity cash flow hedges and foreign currency forward exchange contracts. All hedging transactions are authorized and executed pursuant to clearly defined policies and procedures, which prohibit the use of financial instruments for speculative purposes.

Generally, hedges are recorded on the balance sheet at fair value and are accounted for as cash flow hedges, with changes in fair value recorded in Accumulated Other Comprehensive Income (Loss) (“AOCI”) in each accounting period. An ineffective portion of the hedges' change in fair value, if any, is recorded in earnings in the period of change.

#### Interest Rate Risk

We are exposed to interest rate risk on certain of our outstanding debt obligations used to finance our operations and acquisitions. Loans under the Credit Agreement bear interest at variable rates plus a margin, based on our consolidated net leverage ratio. As of September 30, 2024, excluding the impact of interest rate swaps, we had $4,795.9 million of fixed rate debt and $908.8 million of variable rate debt. We utilize interest rate swaps to manage fluctuations in cash flows resulting from exposure to interest rate risk on forecasted variable rate interest payments.

Our variable rate debt exposes us to fluctuations in required interest payments due to changes in interest rates. A hypothetical 10% change in our weighted average borrowing rate on outstanding variable rate debt as of September 30, 2024 would result in a $5.0 million change in after-tax annualized earnings. We entered into two forward starting pay fixed/receive floating non-amortizing interest rate swaps in June 2020, with a total notional amount of $250.0 million to manage fluctuations in cash flows from interest rate risk related to variable rate interest. These swaps were terminated in March 2022 upon closing the Credit Agreement. The cash proceeds of $16.2 million received to settle the terminated swaps is being recognized into interest expense via the effective interest rate method through July 2025 when the terminated swaps were scheduled to expire. We also entered into two forward starting pay fixed/receive floating non-amortizing interest rate swaps in May 2022, with a total notional amount of $250.0 million to manage fluctuations in cash flows from interest rate risk related to variable rate interest. Upon inception, the swaps were designated as a cash flow hedges against forecasted interest payments with gains and losses, net of tax, measured on an ongoing basis, recorded in AOCI.

Details regarding the instruments as of September 30, 2024 are as follows:

| Instrument | Notional Amount | Maturity | Rate Paid | Rate Received | Fair Value |
| --- | ---: | --- | ---: | --- | ---: |
| Swap | $250.0 | March 2027 | 3.0% | SOFR (3 Month) | $1.8 |

As of September 30, 2024 and December 31, 2023, an interest rate swap asset of $1.8 million and $5.3 million, respectively, was included in Other Noncurrent Assets. There was an unrealized gain of $4.6 million (a $3.2 million gain on the terminated swaps and a $1.4 million gain on the active swaps) and $10.6 million, net of tax, as of September 30, 2024 and December 31, 2023, respectively, that was recorded in AOCI for the effective portion of the hedges.

#### Foreign Currency Risk

We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of foreign subsidiaries, intercompany loans with foreign subsidiaries and transactions denominated in foreign currencies. Our objective is to minimize our exposure to these risks through a combination of normal operating activities and the utilization of foreign currency exchange contracts to manage our exposure on the forecasted transactions denominated in currencies other than the applicable functional currency. Contracts are executed with credit worthy banks and are denominated in currencies of major industrial countries. We do not hedge our exposure to the translation of reported results of foreign subsidiaries from local currency to United States dollars.

As of September 30, 2024, derivative currency assets (liabilities) of $3.2 million, $(7.2) million and $(0.1) million are recorded in Prepaid Expenses and Other Current Assets, Other Accrued Expenses and Other Noncurrent Liabilities, respectively. As of December 31, 2023, derivative currency assets (liabilities) of $14.4 million, $0.2 million and $(6.9) million, are recorded in Prepaid Expenses and Other Current Assets, Other Noncurrent Assets and Other Accrued Expenses, respectively. The unrealized loss on the effective portions of the hedges of $4.2 million net of tax, and unrealized gain on the effective portions of the hedges of $9.3 million net of tax, as of September 30, 2024 and December 31, 2023 respectively, were recorded in AOCI. As of September 30, 2024 and December 31, 2023, we had $1.4 million and $10.2 million, respectively, net of tax, currency gains on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings.

The following table quantifies the outstanding foreign exchange contracts intended to hedge non-US dollar denominated receivables and payables and the corresponding impact on the value of these instruments assuming a hypothetical 10% appreciation/depreciation of their counter currency on September 30, 2024:

| Currency | Notional Amount | Fair Value | Gain (Loss) From 10% Appreciation of Counter Currency | 10% Depreciation of Counter Currency |
| --- | ---: | ---: | ---: | ---: |
| Chinese Renminbi | $405.2 | $0.4 | $40.5 | $(40.5) |
| Mexican Peso | 295.0 | (6.1) | 29.5 | (29.5) |
| Euro | 573.9 | 1.7 | 57.4 | (57.4) |
| Indian Rupee | 36.2 | 0.1 | 3.6 | (3.6) |
| British Pound | 3.5 | — | 0.4 | (0.4) |

Gains and losses indicated in the sensitivity analysis would be offset by gains and losses on the underlying forecasted non-US dollar denominated cash flows.

#### Commodity Price Risk

We periodically enter into commodity hedging transactions to reduce the impact of changing prices for certain commodities such as copper and aluminum based upon forecasted purchases of such commodities. The contract terms of commodity hedge instruments generally mirror those of the hedged item, providing a high degree of risk reduction and correlation.

Derivative commodity assets (liabilities) of $2.3 million, $0.4 million and $(1.6) million were recorded in Prepaid Expenses and Other Current Assets, Other Noncurrent Assets and Other Accrued Expenses, respectively, as of September 30, 2024. Derivative commodity assets (liabilities) of $1.0 million, $0.1 million and $(0.6) million were recorded in Prepaid Expenses and Other Current Assets, Other Noncurrent Assets and Other Accrued Expenses, respectively as of December 31, 2023. The unrealized gain on the effective portion of the hedges of $0.8 million net of tax and the unrealized gain on the effective portion of the hedges of $0.3 million net of tax, as of September 30, 2024 and December 31, 2023, respectively, was recorded in AOCI. As of September 30, 2024, we had $0.3 million derivative commodity losses on closed hedge instruments. As of December 31, 2023, we had $1.6 million, net of tax, derivative commodity losses on closed hedge instruments in AOCI that were realized in earnings when the hedged items impacted earnings.

The following table quantifies the outstanding commodity contracts intended to hedge raw material commodity prices and the corresponding impact on the value of these instruments assuming a hypothetical 10% appreciation/depreciation of their prices on September 30, 2024:

| Commodity | Notional Amount | Fair Value | Gain (Loss) From 10% Appreciation of Commodity Prices | 10% Depreciation of Commodity Prices |
| --- | ---: | ---: | ---: | ---: |
| Copper | $58.1 | $1.1 | $5.8 | $(5.8) |
| Aluminum | 0.3 | — | — | — |

Gains and losses indicated in the sensitivity analysis would be offset by the actual prices of the commodities.

The net AOCI hedging component balance consists of $2.3 million of gains as of September 30, 2024 which includes $0.6 million of net current deferred gains that are expected to be realized in the next twelve months. The gain/loss reclassified from AOCI into earnings on such derivatives will be recognized in the same period in which the related item affects earnings.

#### Counterparty Risk

We are exposed to credit losses in the event of non-performance by the counterparties to various financial agreements, including our interest rate swap agreements, foreign currency exchange contracts and commodity hedging transactions. We manage exposure to counterparty credit risk by limiting our counterparties to major international banks and financial institutions meeting established credit guidelines and continually monitoring their compliance with the credit guidelines. We do not obtain collateral or other security to support financial instruments subject to credit risk. We do not anticipate non-performance by our counterparties, but cannot provide assurances.

## Controls and procedures

As filed, 1,521 characters.

### Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that (a) information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and (b) information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

### Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 522 characters.

Our business and financial results are subject to numerous risks and uncertainties. These risks and uncertainties have not changed materially from those reported in Part I, Item 1A - Risk Factors in our Annual Report on Form 10-K for the year ended

December 31, 2023, which is incorporated herein by reference. For additional information regarding risks and uncertainties facing the Company, please also see the information provided under the header "Cautionary Statement" contained in this Quarterly Report on Form 10-Q.

Filed Nov 5, 2024.
Source: SEC EDGAR, the filing index for accession 0000082811-24-000210. Last ingested by Listed: Oct 24, 2026, 14:54 ET. No prices; not investment advice.