UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended ~~June 30, 2022~~March 31, 2023 or


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-07283

REGAL REXNORD CORPORATION

(Exact name of registrant as specified in its charter)


Wisconsin						39-0875718
(State or other jurisdiction of incorporation)						(IRS Employer Identification No.)

200 State Street, Beloit, Wisconsin 53511

(Address of principal executive office)

(608) 364-8800

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	RRX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated filer

☐

Smaller Reporting Company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

On ~~August 3, 2022~~May 4, 2023 the registrant had outstanding ~~66,477,529~~66,278,651 shares of common stock, $0.01 par value per share.

REGAL REXNORD CORPORATION

INDEX


		Page
PART I — FINANCIAL INFORMATION
Item 1 —	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Statements of Income	5
	Condensed Consolidated Statements of Comprehensive Income	6
	Condensed Consolidated Balance Sheets	7
	Condensed Consolidated Statements of Equity	8
	Condensed Consolidated Statements of Cash Flows	109
	Notes to Condensed Consolidated Financial Statements	10
	1. Basis of Presentation	10
	2. Oth er Financial Information	11
	3. A cquisitions and Divestitures	13
	4. Accumulated Other Comprehensive Income (Loss)	17
	5. Goodwill and Intangible Assets	17
	6. Segment Informati on	18
	7. Debt and Bank Credit Facilities	20
	8. Retirement Plans	22
	9. Shareholders' Equity	23
	10. Income Taxes	23
	11. Earnings Per Share	24
	12. Contingencies	24
	13. Derivative Financial Instruments	26
	14. Fair Value	30
	15. Restructuring Activities	31

Item 2 —	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	3732
Item 3 —	Quantitative and Qualitative Disclosures about Market Risk	4638
Item 4 —	Controls and Procedures	4841

PART II — OTHER INFORMATION
Item 1 —	Legal Proceedings	4841
Item 1A —	Risk Factors	4841
Item 2 —	Unregistered Sales of Equity Securities and Use of Proceeds	4941
Item 6 —	Exhibits	5042
~~Signature~~Signatures		5143

CAUTIONARY STATEMENT

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company’s current estimates, expectations and projections about the Company’s future results, performance, prospects and opportunities.Such forward-looking statements may include, among other things, statements ~~relating to the merger with the Rexnord Process & Motion Control business (the "Rexnord PMC business") (the "Rexnord Transaction") or~~about the acquisition of ~~Arrowhead Systems, LLC ("Arrowhead") (the "Arrowhead Transaction" and, together with the Rexnord Transaction, the "Transactions"~~Altra Industrial Motion Corp. (“Altra”), ~~and~~ the benefits and synergies of the ~~Transactions,~~acquisition of Altra (the "Altra Transaction"), future opportunities for the Company and any other statements regarding the Company’s future operations, anticipated economic activity, business levels, credit ratings, future earnings, planned activities, anticipated growth, market opportunities, strategies, competition and other expectations and estimates for future periods.Forward-looking statements include statements that are not historical facts and can be identified by forward-looking words such as “anticipate,” “believe,” “confident,” “estimate,” “expect,” “intend,” “plan,” “may,” “will,” “project,” “forecast,” ~~"would," "could," "should,"~~“would,” “could,” “should,” and similar expressions. These forward-looking statements are based upon information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause ~~actual results,~~the Company's performance, prospects, or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Important factors that could cause actual results to differ materially from the results referred to in the forward-looking statements the Company makes in this report include:

•the Company’s substantial indebtedness as a result of the Altra Transaction and the effects of such indebtedness on the Company’s financial flexibility after the Altra Transaction;

•the Company’s ability to achieve its objectives on reducing its indebtedness on the desired timeline;

•dependence on key suppliers and the potential effects of supply disruptions;

•fluctuations in commodity prices and raw material costs;

•any unforeseen changes to or the effects on liabilities, future capital expenditures, revenue, expenses, synergies, indebtedness, financial condition, losses and future prospects;

•the possibility that the Company may be unable to achieve expected benefits, synergies and operating efficiencies in connection with the ~~Transactions~~Altra Transaction and the merger with the Rexnord Process & Motion Control business (the "Rexnord PMC business") within the expected time-frames or at all and to successfully integrate Altra and the Rexnord PMC ~~and Arrowhead businesses;~~business;

•expected or targeted future financial and operating performance and results;

•operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) being greater than expected following the ~~Transactions;~~Altra Transaction or our merger with the Rexnord PMC business;

•the Company's ability to retain key executives and employees;

•the continued financial and operational impacts of and uncertainties relating to the COVID-19 pandemic on customers and suppliers and the geographies in which they operate;

•uncertainties regarding the ability to execute restructuring plans within expected costs and timing;

•challenges to the tax treatment that was elected with respect to the merger with the Rexnord ~~Transaction~~PMC business and related transactions;

•requirements to abide by potentially significant restrictions with respect to the tax treatment of the merger with the Rexnord ~~Transaction~~PMC business which could limit the Company’s ability to undertake certain corporate actions that otherwise could be advantageous;

•actions taken by competitors and their ability to effectively compete in the increasingly competitive global electric motor, drives and controls, power generation and power transmission industries;

•the ability to develop new products based on technological innovation, such as the Internet of Things, and marketplace acceptance of new and existing products, including products related to technology not yet adopted or utilized in geographic locations in which the Company does business;

•dependence on significant customers;

•seasonal impact on sales of products into HVAC systems and other residential applications;

•risks associated with climate change and uncertainty regarding our ability to deliver on our climate commitments and/or to meet related investor, customer and other third party expectations relating to our sustainability efforts;

•risks associated with global manufacturing, including ~~risks~~those associated with public health crises and political, societal or economic instability, including instability caused by the conflict between Russia and Ukraine;

•issues and costs arising from the integration of acquired companies and businesses and the timing and impact of purchase accounting adjustments;

•~~the Company's overall debt levels and its ability to repay principal and interest on its outstanding debt;~~

•prolonged declines in one or more markets, such as heating, ventilation, air conditioning, refrigeration, power generation, oil and gas, unit material handling, water heating and aerospace;

•economic changes in global markets, such as reduced demand for products, currency exchange rates, inflation rates, interest rates, banking crises, recession, government policies, including policy changes affecting taxation, trade, tariffs, immigration, customs, border actions and the like, and other external factors that the Company cannot control;

•product liability, asbestos and other litigation, or claims by end users, government agencies or others that products or customers' applications failed to perform as anticipated, particularly in high volume applications or where such failures are alleged to be the cause of property or casualty claims;

•unanticipated liabilities of acquired businesses;

•unanticipated adverse effects or liabilities from business exits or ~~divestitures;~~divestitures, including in connection with our evaluation of strategic alternatives for the global motors and generators portion of our Industrial Systems operating segment;

•the Company's ability to identify and execute on future M&A opportunities, including significant M&A transactions;

•the impact of any such M&A transactions on the Company's results, operations and financial condition, including the impact from costs to execute and finance any such transactions;

•unanticipated costs or expenses that may be incurred related to product warranty issues;

•infringement of intellectual property by third parties, challenges to intellectual property and claims of infringement on third party technologies;

•effects on earnings of any significant impairment of goodwill;

•losses from failures, breaches, attacks or disclosures involving information technology infrastructure and data;

•costs and unanticipated liabilities arising from rapidly evolving data privacy laws and regulations;

•cyclical downturns affecting the global market for capital goods;

•and other risks and uncertainties including, but not limited, to those described in the Company's Annual Report on Form 10-K on file with the ~~SEC~~Securities and Exchange Commission (the "SEC") and from time to time in other filed reports including the Company's Quarterly Reports on Form 10-Q. For a more detailed description of the risk factors associated with the Company, please refer to Part I - Item 1A - Risk Factors in the Company's Annual Report on Form 10-K for the fiscal year ended ~~January 1,~~December 31, 2022 on file with the SEC and subsequent SEC filings.

Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this report are made only as of the date of this report, and the Company undertakes no obligation to update any forward-looking information contained in this report to reflect subsequent events or circumstances.

PART I—FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

REGAL REXNORD CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Amounts in Millions, Except Per Share Data)


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30, 2022		July 3, 2021		June 30, 2022		July 3, 2021			March 31, 2023		March 31, 2022
Net Sales	Net Sales	$	1,349.4	$	886.9	$	2,647.9	$	1,701.0	Net Sales	$	1,224.1	$	1,298.5
Cost of Sales	Cost of Sales	915.9		629.2		1,792.5		1,193.5		Cost of Sales	826.0		876.6
Gross Profit	Gross Profit	433.5		257.7		855.4		507.5		Gross Profit	398.1		421.9
Operating Expenses	Operating Expenses	238.6		140.2		490.6		288.5		Operating Expenses	329.2		252.0

Asset Impairments		—		2.3		—		2.3
Total Operating Expenses		238.6		142.5		490.6		290.8

Income from Operations	Income from Operations	194.9		115.2		364.8		216.7		Income from Operations	68.9		169.9
Other Income, Net		(1.5)		(1.2)		(2.8)		(2.4)
Interest Expense	Interest Expense	13.4		11.5		22.4		24.1		Interest Expense	95.4		9.0
Interest Income	Interest Income	(0.8)		(1.7)		(1.9)		(3.2)		Interest Income	(31.9)		(1.1)
Other Income, Net										Other Income, Net	(1.4)		(1.3)
Income before Taxes	Income before Taxes	183.8		106.6		347.1		198.2		Income before Taxes	6.8		163.3
Provision for Income Taxes	Provision for Income Taxes	40.6		20.6		76.8		41.9		Provision for Income Taxes	12.3		36.2
Net Income		143.2		86.0		270.3		156.3
Net (Loss) Income										Net (Loss) Income	(5.5)		127.1
Less: Net Income Attributable to Noncontrolling Interests	Less: Net Income Attributable to Noncontrolling Interests	1.2		1.6		2.7		3.0		Less: Net Income Attributable to Noncontrolling Interests	0.4		1.5
Net Income Attributable to Regal Rexnord Corporation		$	142.0	$	84.4	$	267.6	$	153.3
Earnings Per Share Attributable to Regal Rexnord Corporation:
Net (Loss) Income Attributable to Regal Rexnord Corporation										Net (Loss) Income Attributable to Regal Rexnord Corporation	$	(5.9)	$	125.6
(Loss) Earnings Per Share Attributable to Regal Rexnord Corporation:										(Loss) Earnings Per Share Attributable to Regal Rexnord Corporation:
Basic	Basic	$	2.13	$	2.07	$	3.99	$	3.78	Basic	$	(0.09)	$	1.86
Assuming Dilution	Assuming Dilution	$	2.12	$	2.06	$	3.96	$	3.74	Assuming Dilution	$	(0.09)	$	1.85
Weighted Average Number of Shares Outstanding:	Weighted Average Number of Shares Outstanding:									Weighted Average Number of Shares Outstanding:
Basic	Basic	66.8		40.7		67.1		40.6		Basic	66.2		67.4
Assuming Dilution	Assuming Dilution	67.1		41.0		67.5		41.0		Assuming Dilution	66.6		67.9

See Accompanying Notes to Condensed Consolidated Financial Statements

REGAL REXNORD CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in Millions)

Three Months Ended Six Months Ended
June 30, 2022 July 3, 2021 June 30, 2022 July 3, 2021
Net Income $ 143.2 $ 86.0 $ 270.3 $ 156.3
Other Comprehensive Income (Loss) Net of Tax:
Foreign Currency Translation Adjustments (120.8) 10.0 (121.2) (11.7)
Hedging Activities:
Increase (Decrease) in Fair Value of Hedging Activities, Net of Tax Effects of $(10.5) Million and $4.2 Million for the Three Months Ended June 30, 2022 and July 3, 2021 and $(2.2) Million and $8.8 Million for the Six Months Ended June 30, 2022 and July 3, 2021, Respectively (32.9) 13.3 (6.8) 27.9
Reclassification of (Gains) Losses included in Net Income, Net of Tax Effects of $(1.5) Million and $(2.7) Million for the Three Months Ended June 30, 2022 and July 3, 2021 and $(3.5) Million and $(5.5) Million for the Six Months Ended June 30, 2022 and July 3, 2021, Respectively (5.3) (8.6) (11.3) (17.3)
Pension and Post Retirement Plans:
Reclassification Adjustments for Pension and Post Retirement Benefits included in Net Income, Net of Tax Effects of $0.1 Million and $0.1 Million for the Three Months Ended June 30, 2022 and July 3, 2021 and $0.1 Million and $0.2 Million for the Six Months Ended June 30, 2022 and July 3, 2021, Respectively 0.1 0.4 0.3 0.7
Other Comprehensive (Loss) Income (158.9) 15.1 (139.0) (0.4)
Comprehensive (Loss) Income (15.7) 101.1 131.3 155.9
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests (1.1) 2.3 0.8 3.4
Comprehensive (Loss) Income Attributable to Regal Rexnord Corporation $ (14.6) $ 98.8 $ 130.5 $ 152.5


	Three Months Ended
	March 31, 2023		March 31, 2022
Net (Loss) Income	$	(5.5)	$	127.1
Other Comprehensive Income (Loss) Net of Tax:
Foreign Currency Translation Adjustments	34.5		(0.4)

Hedging Activities:
Increase in Fair Value of Hedging Activities, Net of Tax Effects of $5.3 million and $8.3 million for the Three Months Ended March 31, 2023 and March 31, 2022, Respectively	16.8		26.1
Reclassification of Losses (Gains) included in Net Income, Net of Tax Effects of $0.4 million and $(2.0) million for the Three Months Ended March 31, 2023 and March 31, 2022, Respectively	1.3		(6.0)
Pension and Post Retirement Plans:

Reclassification Adjustments for Pension and Post Retirement Benefits included in Net Income, Net of Tax Effects of $(0.1) million and zero for the Three Months Ended March 31, 2023 and March 31, 2022, Respectively	(0.4)		0.2
Other Comprehensive Income	52.2		19.9
Comprehensive Income	46.7		147.0
Less: Comprehensive Income Attributable to Noncontrolling Interests	0.7		1.9
Comprehensive Income Attributable to Regal Rexnord Corporation	$	46.0	$	145.1

See Accompanying Notes to Condensed Consolidated Financial Statements

REGAL REXNORD CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in Millions, Except Per Share Data)


		June 30, 2022		January 1, 2022			March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash and Cash Equivalents	Cash and Cash Equivalents	$	702.5	$	672.8	Cash and Cash Equivalents	$	1,143.3	$	688.5
Trade Receivables, Less Allowances of $18.7 Million and $18.7 Million in 2022 and 2021, Respectively		854.8		785.8
Trade Receivables, Less Allowances of $29.7 million and $30.9 million in 2023 and 2022, Respectively						Trade Receivables, Less Allowances of $29.7 million and $30.9 million in 2023 and 2022, Respectively	1,028.3		797.4
Inventories	Inventories	1,388.4		1,192.4		Inventories	1,732.5		1,336.9
Prepaid Expenses and Other Current Assets	Prepaid Expenses and Other Current Assets	141.2		145.1		Prepaid Expenses and Other Current Assets	200.4		150.9
Deferred Financing Fees						Deferred Financing Fees	—		17.0
Assets Held for Sale	Assets Held for Sale	10.6		12.5		Assets Held for Sale	4.6		9.8
Total Current Assets	Total Current Assets	3,097.5		2,808.6		Total Current Assets	4,109.1		3,000.5
Net Property, Plant and Equipment	Net Property, Plant and Equipment	822.0		908.5		Net Property, Plant and Equipment	1,214.7		807.0
Operating Lease Assets	Operating Lease Assets	114.4		112.4		Operating Lease Assets	159.3		110.9
Goodwill	Goodwill	4,026.0		4,039.2		Goodwill	6,526.7		4,018.8
Intangible Assets, Net of Amortization	Intangible Assets, Net of Amortization	2,326.6		2,429.2		Intangible Assets, Net of Amortization	4,414.6		2,229.9
Deferred Income Tax Benefits	Deferred Income Tax Benefits	35.7		35.7		Deferred Income Tax Benefits	47.3		43.9
Other Noncurrent Assets	Other Noncurrent Assets	36.3		33.8		Other Noncurrent Assets	75.7		57.9

Total Assets	Total Assets	$	10,458.5	$	10,367.4	Total Assets	$	16,547.4	$	10,268.9
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current Liabilities:	Current Liabilities:					Current Liabilities:
Accounts Payable	Accounts Payable	$	652.8	$	643.8	Accounts Payable	$	666.7	$	497.7
Dividends Payable	Dividends Payable	23.3		22.3		Dividends Payable	23.2		23.2

Accrued Compensation and Employee Benefits	Accrued Compensation and Employee Benefits	124.8		143.9		Accrued Compensation and Employee Benefits	219.0		141.1
Other Accrued Expenses	Other Accrued Expenses	261.9		253.2		Other Accrued Expenses	383.5		280.0

Current Operating Lease Liabilities	Current Operating Lease Liabilities	27.4		27.2		Current Operating Lease Liabilities	39.2		26.4
Current Maturities of Long-Term Debt	Current Maturities of Long-Term Debt	30.6		4.9		Current Maturities of Long-Term Debt	74.2		33.8
Total Current Liabilities	Total Current Liabilities	1,120.8		1,095.3		Total Current Liabilities	1,405.8		1,002.2
Long-Term Debt	Long-Term Debt	2,132.5		1,913.6		Long-Term Debt	7,210.6		1,989.7
Deferred Income Taxes	Deferred Income Taxes	620.1		679.7		Deferred Income Taxes	1,150.8		591.9

Pension and Other Post Retirement Benefits	Pension and Other Post Retirement Benefits	102.9		111.7		Pension and Other Post Retirement Benefits	116.4		97.6
Noncurrent Operating Lease Liabilities	Noncurrent Operating Lease Liabilities	90.5		89.5		Noncurrent Operating Lease Liabilities	123.2		88.1
Other Noncurrent Liabilities	Other Noncurrent Liabilities	76.0		69.4		Other Noncurrent Liabilities	84.9		76.8
Contingencies (see Note 12)		0		0
Contingencies (see Note 12 - Contingencies)						Contingencies (see Note 12 - Contingencies)
Equity:	Equity:					Equity:
Regal Rexnord Corporation Shareholders' Equity:	Regal Rexnord Corporation Shareholders' Equity:					Regal Rexnord Corporation Shareholders' Equity:
Common Stock, $0.01 par value, 100.0 Million Shares Authorized, 66.5 Million and 67.6 Million Shares Issued and Outstanding for 2022 and 2021, Respectively		0.7		0.7
Common Stock, $0.01 par value, 100.0 million Shares Authorized, 66.3 million and 66.2 million Shares Issued and Outstanding for 2023 and 2022, Respectively						Common Stock, $0.01 par value, 100.0 million Shares Authorized, 66.3 million and 66.2 million Shares Issued and Outstanding for 2023 and 2022, Respectively	0.7		0.7
Additional Paid-In Capital	Additional Paid-In Capital	4,611.6		4,651.8		Additional Paid-In Capital	4,619.2		4,609.6
Retained Earnings	Retained Earnings	1,996.6		1,912.6		Retained Earnings	2,100.9		2,130.0
Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss	(332.2)		(195.1)		Accumulated Other Comprehensive Loss	(300.2)		(352.1)
Total Regal Rexnord Corporation Shareholders' Equity	Total Regal Rexnord Corporation Shareholders' Equity	6,276.7		6,370.0		Total Regal Rexnord Corporation Shareholders' Equity	6,420.6		6,388.2
Noncontrolling Interests	Noncontrolling Interests	39.0		38.2		Noncontrolling Interests	35.1		34.4
Total Equity	Total Equity	6,315.7		6,408.2		Total Equity	6,455.7		6,422.6
Total Liabilities and Equity	Total Liabilities and Equity	$	10,458.5	$	10,367.4	Total Liabilities and Equity	$	16,547.4	$	10,268.9

See Accompanying Notes to Condensed Consolidated Financial Statements.

REGAL REXNORD CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(Dollars in Millions, Except Per Share Data)


		Three Months Ended													Three Months Ended
		Common Stock $0.01 Par Value		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total Equity			Common Stock $0.01 Par Value		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total Equity
March 31, 2022		$	0.7	$	4,631.1	$	1,927.5	$	(175.6)	$	40.1	$	6,423.8
December 31, 2022														December 31, 2022	$	0.7	$	4,609.6	$	2,130.0	$	(352.1)	$	34.4	$	6,422.6
Net (Loss) Income														Net (Loss) Income	—		—		(5.9)		—		0.4		(5.5)
Other Comprehensive Income														Other Comprehensive Income	—		—		—		51.9		0.3		52.2
Dividends Declared ($0.35 Per Share)														Dividends Declared ($0.35 Per Share)	—		—		(23.2)		—		—		(23.2)
Stock Options Exercised														Stock Options Exercised	—		(7.5)		—		—		—		(7.5)

Replacement Equity-Based Awards Granted														Replacement Equity-Based Awards Granted	—		11.1		—		—		—		11.1
Share-Based Compensation														Share-Based Compensation	—		6.0		—		—		—		6.0

March 31, 2023														March 31, 2023	$	0.7	$	4,619.2	$	2,100.9	$	(300.2)	$	35.1	$	6,455.7

January 1, 2022														January 1, 2022	$	0.7	$	4,651.8	$	1,912.6	$	(195.1)	$	38.2	$	6,408.2
Net Income	Net Income	—		—		142.0		—		1.2		143.2		Net Income	—		—		125.6		—		1.5		127.1
Other Comprehensive Loss		—		—		—		(156.6)		(2.3)		(158.9)
Dividends Declared ($0.35 Per Share)		—		—		(23.2)		—		—		(23.2)
Other Comprehensive Income														Other Comprehensive Income	—		—		—		19.5		0.4		19.9
Dividends Declared ($0.33 Per Share)														Dividends Declared ($0.33 Per Share)	—		—		(22.1)		—		—		(22.1)
Stock Options Exercised	Stock Options Exercised	—		(4.3)		—		—		—		(4.3)		Stock Options Exercised	—		(1.4)		—		—		—		(1.4)
Stock Repurchase	Stock Repurchase	—		(20.1)		(49.7)		—		—		(69.8)		Stock Repurchase	—		(25.6)		(88.6)		—		—		(114.2)
Share-Based Compensation	Share-Based Compensation	—		4.9		—		—		—		4.9		Share-Based Compensation	—		6.3		—		—		—		6.3

June 30, 2022		$	0.7	$	4,611.6	$	1,996.6	$	(332.2)	$	39.0	$	6,315.7

April 3, 2021		$	0.4	$	698.1	$	2,105.8	$	(178.5)	$	33.7	$	2,659.5

Net Income		—		—		84.4		—		1.6		86.0
Other Comprehensive Income		—		—		—		14.4		0.7		15.1
Dividends Declared ($0.33 Per Share)		—		—		(13.4)		—		—		(13.4)
Stock Options Exercised		—		(4.2)		—		—		—		(4.2)

Share-Based Compensation		—		4.5		—		—		—		4.5
Dividends Declared to Noncontrolling Interests		—		—		—		—		(4.5)		(4.5)

July 3, 2021		$	0.4	$	698.4	$	2,176.8	$	(164.1)	$	31.5	$	2,743.0
March 31, 2022														March 31, 2022	$	0.7	$	4,631.1	$	1,927.5	$	(175.6)	$	40.1	$	6,423.8

See Accompanying Notes to Condensed Consolidated Financial Statements.

~~REGAL REXNORD CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~

~~(Unaudited)~~

~~(Dollars in Millions, Except Per Share Data)~~

Six Months Ended
Common Stock $0.01 Par Value Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolling Interests Total Equity
January 1, 2022 $ 0.7 $ 4,651.8 $ 1,912.6 $ (195.1) $ 38.2 $ 6,408.2
Net Income — — 267.6 — 2.7 270.3
Other Comprehensive Loss — — — (137.1) (1.9) (139.0)
Dividends Declared ($0.68 Per Share) — — (45.3) — — (45.3)
Stock Options Exercised — (5.7) — — — (5.7)
Stock Repurchase — (45.7) (138.3) — — (184.0)
Share-Based Compensation — 11.2 — — — 11.2
June 30, 2022 $ 0.7 $ 4,611.6 $ 1,996.6 $ (332.2) $ 39.0 $ 6,315.7
January 2, 2021 0.4 696.6 2,049.1 (163.3) 32.6 2,615.4
Net Income — — 153.3 — 3.0 156.3
Other Comprehensive (Loss) Income — — — (0.8) 0.4 (0.4)
Dividends Declared ($0.63 Per Share) — — (25.6) — — (25.6)
Stock Options Exercised — (6.0) — — — (6.0)
Share-Based Compensation — 7.8 — — — 7.8
Dividends Declared to Noncontrolling Interests — — — — (4.5) (4.5)
July 3, 2021 $ 0.4 $ 698.4 $ 2,176.8 $ (164.1) $ 31.5 $ 2,743.0

~~See Accompanying Notes to Condensed Consolidated Financial Statements.~~

REGAL REXNORD CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in Millions)


		Six Months Ended					Three Months Ended
		June 30, 2022		July 3, 2021			March 31, 2023		March 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income		$	270.3	$	156.3
Adjustments to Reconcile Net Income to Net Cash (Used in) Provided by Operating Activities (Net of Acquisitions and Divestitures):
Depreciation and Amortization		156.3		62.3

Asset Impairments		—		2.3
Noncash Lease Expense		20.6		12.4
(Gain) Loss on Sale or Disposition of Assets, Net		(1.7)		0.5
Share-Based Compensation Expense		11.2		7.8
Financing Fees Amortization		1.4		8.6
Net (Loss) Income						Net (Loss) Income	$	(5.5)	$	127.1
Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by (Used In) Operating Activities (Net of Acquisitions and Divestitures):						Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by (Used In) Operating Activities (Net of Acquisitions and Divestitures):
Depreciation						Depreciation	30.2		30.6
Amortization						Amortization	46.3		47.3

Change in Operating Assets and Liabilities		(353.2)		(113.6)
Net Cash Provided by Operating Activities		104.9		136.6
Noncash Lease Expense						Noncash Lease Expense	7.7		9.9

Share-Based Compensation Expense						Share-Based Compensation Expense	21.7		6.3
Financing Fee Expense						Financing Fee Expense	23.0		0.9

Other Non-Cash Changes						Other Non-Cash Changes	0.3		(0.3)
Change in Operating Assets and Liabilities, Net of Acquisitions and Divestitures						Change in Operating Assets and Liabilities, Net of Acquisitions and Divestitures
Receivables						Receivables	31.7		(48.2)
Inventories						Inventories	47.1		(144.3)
Accounts Payable						Accounts Payable	(18.3)		(2.6)
Current Liabilities and Other						Current Liabilities and Other	(78.0)		(32.6)
Net Cash Provided by (Used in) Operating Activities						Net Cash Provided by (Used in) Operating Activities	106.2		(5.9)
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant and Equipment	Additions to Property, Plant and Equipment	(32.6)		(24.3)		Additions to Property, Plant and Equipment	(18.7)		(13.4)
Proceeds Received from Sales of Property, Plant and Equipment	Proceeds Received from Sales of Property, Plant and Equipment	5.5		1.8		Proceeds Received from Sales of Property, Plant and Equipment	6.1		1.4

Business Acquisitions, Net of Cash Acquired	Business Acquisitions, Net of Cash Acquired	(35.0)		(3.8)		Business Acquisitions, Net of Cash Acquired	(4,852.9)		(35.0)

Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(62.1)		(26.3)		Net Cash Used in Investing Activities	(4,865.5)		(47.0)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings Under Revolving Credit Facility	Borrowings Under Revolving Credit Facility	1,521.5		183.7		Borrowings Under Revolving Credit Facility	893.3		1,340.5
Repayments Under Revolving Credit Facility	Repayments Under Revolving Credit Facility	(1,698.2)		(183.7)		Repayments Under Revolving Credit Facility	(639.5)		(1,122.2)
Proceeds from Short-Term Borrowings	Proceeds from Short-Term Borrowings	6.0		6.2		Proceeds from Short-Term Borrowings	14.1		5.1
Repayments of Short-Term Borrowings	Repayments of Short-Term Borrowings	(8.0)		(6.2)		Repayments of Short-Term Borrowings	(15.9)		(7.0)
Proceeds from Long-Term Borrowings	Proceeds from Long-Term Borrowings	1,536.8		—		Proceeds from Long-Term Borrowings	5,532.9		1,036.8
Repayments of Long-Term Borrowings	Repayments of Long-Term Borrowings	(1,108.4)		(50.2)		Repayments of Long-Term Borrowings	(500.8)		(1,107.5)
Dividends Paid to Shareholders	Dividends Paid to Shareholders	(44.3)		(24.4)		Dividends Paid to Shareholders	(23.2)		(22.3)
Shares Surrendered for Taxes	Shares Surrendered for Taxes	(8.1)		(6.1)		Shares Surrendered for Taxes	(8.2)		(2.8)
Proceeds from the Exercise of Stock Options	Proceeds from the Exercise of Stock Options	3.4		0.1		Proceeds from the Exercise of Stock Options	0.9		1.8

Repurchase of Common Stock	Repurchase of Common Stock	(184.0)		—		Repurchase of Common Stock	—		(114.2)
Distributions to Noncontrolling Interests		—		(4.5)

Financing Fees Paid	Financing Fees Paid	(6.5)		(17.0)		Financing Fees Paid	(50.0)		(4.5)
Net Cash Provided by (Used in) Financing Activities		10.2		(102.1)
Net Cash Provided By Financing Activities						Net Cash Provided By Financing Activities	5,203.6		3.7
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	(23.3)		(1.0)		EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	10.5		1.1
Net Increase in Cash and Cash Equivalents		29.7		7.2
Net Increase (Decrease) in Cash and Cash Equivalents						Net Increase (Decrease) in Cash and Cash Equivalents	454.8		(48.1)
Cash and Cash Equivalents at Beginning of Period	Cash and Cash Equivalents at Beginning of Period	672.8		611.3		Cash and Cash Equivalents at Beginning of Period	688.5		672.8
Cash and Cash Equivalents at End of Period	Cash and Cash Equivalents at End of Period	$	702.5	$	618.5	Cash and Cash Equivalents at End of Period	$	1,143.3	$	624.7
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION					SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid For:	Cash Paid For:					Cash Paid For:
Interest	Interest	$	20.0	$	15.3	Interest	$	75.1	$	10.1
Income taxes	Income taxes	$	96.7	$	46.3	Income taxes	$	23.0	$	18.8

See Accompanying Notes to Condensed Consolidated Financial Statements.

REGAL REXNORD CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June 30, 2022~~March 31, 2023

(Unaudited)

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

1. BASIS OF PRESENTATION

The accompanying (a) Condensed Consolidated Balance Sheet of Regal Rexnord Corporation (the “Company”), as of ~~January 1,~~December 31, 2022, which has been derived from audited Consolidated Financial Statements, and (b) unaudited interim Condensed Consolidated Financial Statements as of ~~June 30, 2022~~March 31, 2023 and for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and March 31, 2022, ~~and July 3, 2021,~~ have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

It is suggested that these Condensed Consolidated Financial Statements be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in the Company’s ~~2021~~2022 Annual Report on Form 10-K filed with the SEC on ~~March 2, 2022.~~February 24, 2023.

In the opinion of management, all adjustments considered necessary for a fair presentation of financial results have been made. Except as otherwise discussed, such adjustments consist of only those of a normal recurring nature. Operating results for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, ~~2022.~~2023.

The Condensed Consolidated Financial Statements have been prepared in accordance with GAAP, which requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Condensed Consolidated Financial Statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. The Company uses estimates in accounting for, among other items, allowance for ~~doubtful accounts;~~credit losses; excess and obsolete inventory; share-based compensation; acquisitions; product warranty obligations; pension and post retirement assets and liabilities; derivative fair values; goodwill and other asset impairments; health care reserves; ~~retirement benefits;~~ rebates and incentives; litigation claims and contingencies, including environmental matters; and income taxes. The Company accounts for changes to estimates and assumptions when warranted by factually based experience.

Effective ~~for fiscal year 2022,~~during the first quarter of 2023, in conjunction with the Altra Transaction (as defined in Note 3 - Acquisitions and Divestitures), the Company ~~approved a~~realigned its four operating segments with the change to its management structure and operating model following the Altra Transaction. The new operating and reportable segments are: Industrial Powertrain Solutions (IPS), Power Efficiency Solutions (PES), Automation & Motion Control (AMC) and Industrial Systems. Prior period financial information has been reclassified to reflect these new reportable segments. See Note 6 - Segment Information for further information. The results of operations of Altra for the period from the acquisition date to March 31, 2023 were immaterial and will be reflected in the fiscal year end from a 52-53 week year ending on the Saturday closest to December 31 to a calendar year ending on December 31. The Company made the fiscal year change on a prospective basis and did not adjust operatingCompany’s results for the quarter ended June 30, 2023. The Company’s results of operations for the three months ended March 31, 2023 include transaction-related costs which are recorded in Operating expenses in the Condensed Consolidated Statements of Income. See Note 3 - Acquisitions and Divestitures.

Reclassifications

Certain prior ~~periods. While this change will impact~~year amounts have been reclassified in the ~~comparability~~Condensed Consolidated Statements of ~~future results with each of the fiscal quarters and the annual fiscal period in 2022, the impact is not expected~~Cash Flows to ~~be material to our quarterly or annual results.~~

~~Change in Accounting Principle~~

~~As of January 2, 2022, the Company changed its methodology for valuing certain inventories~~conform to the ~~first-in, first-out ("FIFO") cost method from~~presentation used for the ~~last-in, first-out ("LIFO") cost method. The effects of this change have been retrospectively applied to all periods presented. See Note 2 for additional information.~~three months ended March 31, 2023.

~~Recently Issued~~

New Accounting Standards Adopted in 2023

In ~~October 2021,~~September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~ASU 2021-08,~~2022-04, ~~Business Combinations (Topic 805) Accounting for Contract Assets and Contract~~ Liabilities ~~from Contracts with Customers~~- Supplier Finance Programs (Subtopic 405-50) Disclosure of Supplier Finance Program Obligations. The ASU ~~improves the accounting for acquired revenue contracts with customers~~requires that a buyer in a ~~business combination. This ASU becomes effective for fiscal years beginning after December 31, 2022, with early adoption permitted.~~supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The Company ~~is evaluating the effect of adopting~~adopted this new accounting ~~guidance.~~guidance during the three months ended March 31, 2023. See Note 2 - Other Financial Information.

2. OTHER FINANCIAL INFORMATION

~~Inventories~~

As of January 2, 2022, the Company changed its method for valuing certain inventories to the FIFO cost method from the LIFO cost method. The Company believes that this change in accounting is preferable as it provides a better matching of costs and revenues, more closely resembles the physical flow of inventory, better reflects acquisition cost of inventory on the balance sheet, conforms the Company's method of inventory valuation to a single method, results in improved comparability with industry peers and reduces the administrative burden of determining the LIFO valuation.

~~The effects of this change have been retrospectively applied to all periods presented. This change resulted in an increase to retained earnings of $38.4 million as of January 2, 2021.~~

In addition, certain financial statement line items in our Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 3, 2021, Condensed Consolidated Statements of Cash Flows for the six months ended July 3, 2021 and our Condensed Consolidated Balance Sheet as of January 1, 2022, were adjusted as follows (dollars in millions):

As Originally Reported Effect of Change As Adjusted
Condensed Consolidated Statement of Operations for the three months ended July 3, 2021
Cost of Sales $ 635.4 $ (6.2) $ 629.2
Provision for Income Taxes $ 19.2 $ 1.4 $ 20.6
Net income attributable to Regal Rexnord Corporation $ 79.6 $ 4.8 $ 84.4
Earnings Per Share Attributable to Regal Rexnord Corporation:
Basic $ 1.96 $ 0.12 $ 2.07
Assuming Dilution $ 1.94 $ 0.12 $ 2.06
Condensed Consolidated Statement of Operations for the six months ended July 3, 2021
Cost of Sales $ 1,204.1 $ (10.6) $ 1,193.5
Provision for Income Taxes $ 39.4 $ 2.5 $ 41.9
Net income attributable to Regal Rexnord Corporation $ 145.2 $ 8.1 $ 153.3
Earnings Per Share Attributable to Regal Rexnord Corporation:
Basic $ 3.57 $ 0.21 $ 3.78
Assuming Dilution $ 3.54 $ 0.20 $ 3.74
Condensed Consolidated Balance Sheet as of January 1, 2022
Inventories $ 1,106.6 $ 85.8 $ 1,192.4
Deferred Income Taxes $ 652.0 $ 27.7 $ 679.7
Retained Earnings $ 1,854.5 $ 58.1 $ 1,912.6
Condensed Consolidated Statement of Cash Flows for the six months ended July 3, 2021
Net Income $ 148.2 $ 8.1 $ 156.3
Change in Operating Assets and Liabilities $ (105.5) $ (8.1) $ (113.6)
Condensed Consolidated Statement of Comprehensive Income for the three months ended July 3, 2021
Comprehensive income attributable to Regal Rexnord Corporation $ 94.0 $ 4.8 $ 98.8
Condensed Consolidated Statement of Comprehensive Income for the six months ended July 3, 2021
Comprehensive income attributable to Regal Rexnord Corporation $ 144.4 $ 8.1 $ 152.5

~~The following table presents approximate percentage distribution between major classes of inventories inclusive of the accounting method change discussed above:~~

June 30, 2022 January 1, 2022
Raw Material and Work in Process 47.6% 43.4%
Finished Goods and Purchased Parts 52.4% 56.6%

~~Inventories are stated at cost, which is not in excess of market. All inventory is valued using the FIFO cost method.~~

~~Property, Plant, and Equipment~~

~~The following table presents property, plant, and equipment by major classification (dollars in millions):~~

Useful Life in Years June 30, 2022 January 1, 2022
Land and Improvements $ 104.8 $ 109.1
Buildings and Improvements 3 - 50 412.3 449.6
Machinery and Equipment 3 - 15 1,125.1 1,164.8
Property, Plant and Equipment 1,642.2 1,723.5
Less: Accumulated Depreciation (820.2) (815.0)
Net Property, Plant and Equipment $ 822.0 $ 908.5

For the three and six months ended June 30, 2022, the Company recognized no material asset impairments. For the three and six months ended July 3, 2021, the Company recognized $2.3 million of asset impairments related to the transfer of assets to held for sale.

Revenue Recognition

The Company recognizes revenue from the sale of electric motors, electrical motion controls, power generation, automation and power transmission ~~products.~~products and components, factory automation sub-systems, industrial powertrain solutions, air moving products and specialty electrical components and systems. The Company recognizes revenue when control of the product passes to the customer or the service is provided and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services.

~~Nature of Goods and Services~~

The Company sells products with multiple applications as well as customized products that have a single application such as those manufactured for its OEM customers. The Company reports in 4 operating segments: Commercial Systems, Industrial Systems, Climate Solutions and Motion Control Solutions. See Note 6 for a description of the different segments.

~~Nature of Performance Obligations~~

The Company’s contracts with customers typically consist of purchase orders, invoices and master supply agreements. At contract inception, across all 4 segments, the Company assesses the goods and services promised in its sales arrangements with customers and identifies a performance obligation for each promise to transfer to the customer a good or service that is distinct. The Company’s primary performance obligations consist of product sales and customized system/solutions.

~~Product:~~

~~The nature of products varies from segment to segment but across all segments, individual products are not integrated and represent separate performance obligations.~~

~~Customized system/solutions:~~

The Company provides customized system/solutions which consist of multiple products engineered and designed to specific customer specification, combined or integrated into one combined solution for a specific customer application. The goods are transferred to the customer and revenue is typically recognized over time as the performance obligations are satisfied.

~~When Performance Obligations are Satisfied~~

For performance obligations related to substantially all of the Company's product sales, the Company determines that the customer obtains control upon shipment and recognizes revenue accordingly. Once a product has shipped, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from the asset. The Company considers control to have transferred upon shipment because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.

For a limited number of contracts, the Company transfers control and recognizes revenue over time. The Company satisfies its performance obligations over time and the Company uses a cost-based input method to measure progress. In applying the cost-based method of revenue recognition, the Company uses actual costs incurred to date relative to the total estimated costs for the contract in conjunction with the customer's commitment to perform in determining the amount of revenue and cost to recognize. The Company has determined that the cost-based input method provides a faithful depiction of the transfer of goods to the customer.

~~Payment Terms~~

The arrangement with the customer states the final terms of the sale, including the description, quantity, and price of each product or service purchased. Payment terms vary by customer but typically range from due upon delivery to 120 days after delivery. For contracts recognized at a point in time, revenue and billing typically occur simultaneously. The Company generally has payment terms with its customers of one year or less and has elected the practical expedient applicable to such contracts not to consider the time value of money. For contracts recognized using the cost-based input method, revenue recognized in excess of customer billings and billings in excess of revenue recognized are reviewed to determine the net asset or net liability position and classified as such on the Condensed Consolidated Balance Sheets.

~~Returns, Refunds, and Warranties~~

The Company’s contracts do not explicitly offer a “general” right of return to its customers (e.g., customers ordered excess products and return unused items). Warranties are classified as either assurance type or service type warranties. A warranty is considered an assurance type warranty if it provides the customer with assurance that the product will function as intended. A warranty that goes above and beyond ensuring basic functionality is considered a service type warranty. The Company generally only offers limited warranties which are considered to be assurance type warranties and are not accounted for as separate performance obligations. Customers generally receive repair or replacement on products that do not function to specification. Estimated product warranties are provided for specific product groups and the Company accrues for estimated future warranty cost in the period in which the sale is recognized. The Company estimates the accrual requirements based on historical warranty loss experience and the cost is included in Cost of Sales.

~~Volume Rebates~~

In some cases, the nature of the Company’s contract may give rise to variable consideration including volume based sales incentives. If the customer achieves specific sales targets, they are entitled to rebates. The Company estimates the projected amount of the rebates that will be achieved and recognizes the estimated costs as a reduction to Net Sales as revenue is recognized.

~~Disaggregation of Revenue~~

The following tables presents the Company’s revenues disaggregated by geographical ~~region (in millions):~~region:


		Three Months Ended											Three Months Ended
June 30, 2022		Commercial Systems		Industrial Systems		Climate Solutions		Motion Control Solutions		Total
March 31, 2023												March 31, 2023	Industrial Powertrain Solutions		Power Efficiency Solutions		Automation & Motion Control		Industrial Systems		Total
North America	North America	$	210.8	$	92.4	$	254.3	$	427.0	$	984.5	North America	$	293.2	$	367.4	$	141.8	$	73.7	$	876.1
Asia	Asia	44.6		37.6		10.0		38.4		130.6		Asia	16.5		43.8		1.4		36.7		98.4
Europe	Europe	33.9		13.3		14.1		102.9		164.2		Europe	52.8		42.7		43.8		15.6		154.9
Rest-of-World	Rest-of-World	12.6		11.4		15.1		31.0		70.1		Rest-of-World	51.9		15.6		16.2		11.0		94.7
Total	Total	$	301.9	$	154.7	$	293.5	$	599.3	$	1,349.4	Total	$	414.4	$	469.5	$	203.2	$	137.0	$	1,224.1

July 3, 2021		Commercial Systems		Industrial Systems		Climate Solutions		Motion Control Solutions		Total
March 31, 2022												March 31, 2022	Industrial Powertrain Solutions		Power Efficiency Solutions		Automation & Motion Control		Industrial Systems		Total
North America	North America	$	176.1	$	73.9	$	226.7	$	173.2	$	649.9	North America	$	290.3	$	444.4	$	132.1	$	68.5	$	935.3
Asia	Asia	53.5		46.9		7.7		7.4		115.5		Asia	31.2		50.4		3.2		39.4		124.2
Europe	Europe	26.7		12.1		10.4		25.1		74.3		Europe	57.6		46.3		40.5		12.3		156.7
Rest-of-World	Rest-of-World	13.0		12.3		12.5		9.4		47.2		Rest-of-World	37.2		26.1		8.5		10.5		82.3
Total	Total	$	269.3	$	145.2	$	257.3	$	215.1	$	886.9	Total	$	416.3	$	567.2	$	184.3	$	130.7	$	1,298.5

Trade Receivables

The Company's policy for estimating the allowance for credit losses on trade receivables considers several factors including historical write-off experience, overall customer credit quality in relation to general economic and market conditions, and specific customer account analyses to estimate expected credit losses. The specific customer account analysis considers such items as credit worthiness, payment history, and historical bad debt experience. Trade receivables are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible. Adjustments to the allowance for credit losses are recorded in Operating Expenses.

Six Months Ended
June 30, 2022 Commercial Systems Industrial Systems Climate Solutions Motion Control Solutions Total
North America $ 416.7 $ 174.8 $ 492.8 $ 835.5 $ 1,919.8
Asia 86.8 77.0 18.2 72.8 254.8
Europe 66.6 25.6 27.7 201.0 320.9
Rest-of-World 25.1 22.0 28.7 76.6 152.4
Total $ 595.2 $ 299.4 $ 567.4 $ 1,185.9 $ 2,647.9
July 3, 2021 Commercial Systems Industrial Systems Climate Solutions Motion Control Solutions Total
North America $ 330.2 $ 145.0 $ 436.4 $ 337.0 $ 1,248.6
Asia 99.5 90.1 17.0 14.3 220.9
Europe 51.4 23.7 19.9 48.6 143.6
Rest-of-World 25.2 22.8 23.1 16.8 87.9
Total $ 506.3 $ 281.6 $ 496.4 $ 416.7 $ 1,701.0
Inventories

The following table presents approximate percentage distribution between major classes of inventories:


	March 31, 2023	December 31, 2022
Raw Material and Work in Process	64.4%	57.0%
Finished Goods and Purchased Parts	35.6%	43.0%

Inventories are stated at the lower of cost or net realizable value. All inventory is valued using the FIFO cost method.

Property, Plant, and Equipment

The following table presents property, plant, and equipment by major classification:


	Useful Life in Years	March 31, 2023		December 31, 2022
Land and Improvements		$	147.9	$	103.4
Buildings and Improvements	3 - 50	518.7		401.7
Machinery and Equipment	3 - 15	1,385.3		1,111.3
Property, Plant and Equipment		2,051.9		1,616.4
Less: Accumulated Depreciation		(837.2)		(809.4)
Net Property, Plant and Equipment		$	1,214.7	$	807.0

Supplier Finance Program

The Company's supplier finance program with Bank of America ("the Bank") offers the Company's designated suppliers the option to receive payments of outstanding invoices in advance of the invoice maturity dates at a discount. The Company's payment obligation to the Bank remains subject to the respective supplier's invoice maturity date. The Bank acts as a payment agent, making payments on invoices the Company confirms are valid. The supplier finance program is offered for open account transactions only and may be terminated by either the Company or the Bank upon 15 days' notice. The Company has not pledged any assets under this program. The Company has not incurred any subscription, service or other fees related to the Company's supplier finance program. The Company's outstanding obligations under the supplier finance program which are classified within Accounts Payable, were $72.1 million and $69.9 million as of March 31, 2023 and December 31, 2022, respectively.

3. ~~HELD FOR SALE,~~ACQUISITIONS AND DIVESTITURES ~~AND ACQUISITIONS~~

~~Assets Held for Sale~~Altra Transaction

~~The balances that were classified as Assets Held for Sale as of June 30, 2022 and January 1, 2022 were $10.6 million and $12.5 million, respectively.~~

~~2021 Acquisitions~~

~~Rexnord Transaction~~

On October ~~4, 2021,~~26, 2022, the Company entered into an Agreement and Plan of Merger (the “Altra Merger Agreement”) by and among the Company, Altra Industrial Motion Corp., a Delaware corporation (“Altra”), and Aspen Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”). On March 27, 2023, in accordance with the terms and conditions of the Altra Merger Agreement, Merger Sub merged with (the "Altra Merger") and ~~Plan~~into Altra, with Altra surviving the Altra Merger as a wholly owned subsidiary of ~~Merger, dated as of February 15, 2021 (the “Merger Agreement”),~~ the Company completed its combination with the Rexnord Process & Motion Control business (“Rexnord PMC business”) of Zurn Elkay Water Solutions Corporation (formerly known as Rexnord Corporation) (“Zurn”) in a Reverse Morris Trust transaction (the ~~“Rexnord~~“Altra Transaction”).

Pursuant to the ~~Rexnord Transaction, (i) Zurn transferred to its then-subsidiary Land Newco, Inc. (“Land”) substantially all~~Altra Merger Agreement, at the effective time of the ~~assets, and Land assumed substantially all~~Altra Merger (the “Effective Time”), each of ~~the liabilities, of the Rexnord PMC business (the “Reorganization”), (ii) after which all of the~~Altra’s issued and outstanding shares of common stock, ~~$0.01~~ par value $0.001 per share ~~of Land~~ (“~~Land common stock”~~Altra Common Stock”) (other than (i) any shares held by aeither the Company, Altra or Merger Sub, (ii) shares owned by any direct or indirect wholly owned subsidiary of ~~Zurn~~Altra or the Company, (iii) shares for which appraisal rights had been properly demanded according to Section 262 of the Delaware General Corporation Law and (iv) restricted shares of Altra Common Stock granted under Altra’s 2014 Omnibus Incentive Plan and subject to forfeiture conditions) were ~~distributed~~converted into $62.00 in cash, without interest (the “Altra Merger Consideration”). The Altra Merger Agreement generally provided that (1) each vested Altra stock option outstanding immediately prior to the Effective Time was canceled and converted into a ~~series~~cash payment equal to the intrinsic value of ~~distributions~~such option based on the Altra Merger Consideration, (2) each unvested Altra stock option outstanding, immediately prior to ~~Zurn’s stockholders (the “Distributions”, and~~ the ~~final distribution~~Effective Time, was converted into an award of ~~Land~~stock options with respect to the Company's common stock, ~~from Zurn~~par value $0.01 per share ("Common Stock") with an intrinsic value equivalent to ~~Zurn’s stockholders, which was made pro rata for no consideration,~~ the ~~“Spin-Off”) and (iii) immediately after the Spin-Off, a subsidiary~~intrinsic value of the ~~Company (“~~Altra stock option based on the Altra Merger ~~Sub”) merged with and into Land (the “Merger”) and all shares of Land common~~Consideration, (3) each unvested Altra restricted stock ~~(other than those held by Zurn, Land, the Company, Merger Sub or their respective subsidiaries) were converted~~unit outstanding, as of the ~~effective time~~Effective Time, that was subject solely to time-based vesting conditions was converted into an award of restricted stock units with respect to Common Stock with an equivalent value based on the Altra Merger Consideration on substantially similar terms and conditions, (4) each unvested award of Altra restricted shares was converted into an award of cash of equivalent value based on the Altra Merger Consideration on substantially similar terms and conditions, (5) each unvested Altra restricted stock unit outstanding, as of the Effective Time, that was subject to performance-based vesting conditions was converted into an award of time-based restricted stock with an equivalent value based on the Altra Merger ~~(the “Effective Time”)~~Consideration on substantially similar terms and conditions (with performance goals being deemed satisfied at specified levels) and (6) each vested Altra restricted stock unit outstanding as of Effective Time was converted into the right to receive ~~0.22296103 shares of common stock, $0.01 par value per share, of~~a cash payment based on the ~~Company (“Company common stock”), as calculated in the~~Altra Merger ~~Agreement.~~Consideration.

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

Pursuant to the 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~~Altra 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 ~~Rexnord PMC business,~~Altra, 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 orpreliminary purchase ~~of stock or certain business combinations, may be limited.~~

~~The total consideration transferred~~price for the acquisition of ~~Land~~Altra was approximately ~~$4.0~~$5.1 billion, subject to the finalization of purchase ~~accounting adjustments. The total assets and liabilities assumed will be adjusted, based on the final balances per the terms included within the Separation and Distribution Agreement.~~accounting.

The preliminary purchase price of ~~the Rexnord PMC business~~Altra consisted of the ~~following (in millions):~~following:

As Reported as of January 1, 2022 Measurement period adjustments As Reported as of June 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)
Preliminary purchase price $ 3,977.4 $ 4.1 $ 3,981.5


	As of March 31, 2023
Cash paid for outstanding Altra Common Stock (i)	$	4,051.0
Stock based compensation (ii)	23.1
Payment of Altra debt (iii)	1,061.0
Pre-existing relationships (iv)	(0.5)

Preliminary purchase price	$	5,134.6

~~(a) Represents approximately 27~~(i) Cash paid for the common stock component of the preliminary purchase price was based on 65.3 million ~~new~~ shares of ~~Company common stock issued to Zurn stockholders~~outstanding Altra Common Stock as of March 27, 2023 at $62.00 per share, in accordance with 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.~~Altra Merger Agreement.

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

~~(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~~13

(iii) Cash paid by the Company to settle (a) the term loan facility (the "Altra Term Loan Facility"), (b) the revolving credit facility (the "Altra Revolving Credit Facility") and (c) 95.28% of the 6.125% senior notes due 2026 of Stevens Holding Company, Inc., a wholly owned subsidiary of Altra (the "Altra Notes"). $18.1 million of the Altra Notes remained outstanding following the closing of the Altra Transaction. See Note 7 - Debt and Bank Credit Facilities for ~~the Bridge Facility and Land Term Facility (as defined in Note 7) that were determined to be costs of Zurn.~~more information.

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

Purchase Price Allocation

~~The Rexnord PMC business’s~~Altra’s assets and liabilities were measured at estimated fair values at ~~October 4, 2021,~~March 27, 2023, 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.

Due to the timing of the ~~business combination~~Altra Transaction and the nature of the net assets acquired, ~~at June 30, 2022,~~as of March 31, 2023, the valuation process to determine the fair values is not complete and further adjustments are expected ~~during the measurement period.~~in fiscal year 2023. The Company has estimated the preliminary fair value of net assets acquired based on information currently available and will continue to adjust those estimates as additional information becomes available, including the refinement of ~~market participant~~valuation assumptions. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price allocation adjustments will be recorded during the measurement period, but no later than one year from the date of the acquisition. The Company will reflect measurement period adjustments in the period in which the adjustments are determined.

~~The preliminary fair value and subsequent measurement period adjustments of the assets acquired and liabilities and noncontrolling interests assumed were as follows (in millions):~~

As Reported as of January 1, 2022 Measurement period adjustments As Reported as of June 30, 2022
Cash and Cash Equivalents $ 192.8 $ — $ 192.8
Trade Receivables 186.9 (4.4) 182.5
Inventories 262.5 (8.9) 253.6
Prepaid Expenses and Other Current Assets 21.0 — 21.0
Assets Held for Sale 1.4 — 1.4
Deferred Income Tax Benefits 8.8 (7.7) 1.1
Property, Plant and Equipment 412.3 (38.4) 373.9
Operating Lease Assets 46.4 — 46.4
Intangible Assets 1,831.0 23.0 1,854.0
Other Noncurrent Assets 12.3 3.7 16.0
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) 12.1 (496.1)
Pension and Other Post Retirement Benefits (75.1) — (75.1)
Noncurrent Operating Lease Liabilities (38.0) — (38.0)
Other Noncurrent Liabilities (17.0) — (17.0)
Total Identifiable Net Assets 1,547.5 (22.0) 1,525.5
Goodwill 2,433.2 26.1 2,459.3
Noncontrolling Interests (3.3) — (3.3)
Preliminary purchase price $ 3,977.4 $ 4.1 $ 3,981.5

During six months ended June 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 six months ended June 30, 2022 resulted in $26.1 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 part of the Automation Solutions 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.

The preliminary fair value of the assets acquired and liabilities assumed were as ~~follows (in millions):~~follows:


	As of March 31, 2023

Cash and Cash Equivalents	$	259.1
Trade Receivables	258.1
Inventories	436.4
Prepaid Expenses and Other Current Assets	33.0
Property, Plant and Equipment	411.8

Intangible Assets	2,224.0
Deferred Income Tax Benefits	0.7
Operating Lease Assets	42.3
Other Noncurrent Assets	21.6


Accounts Payable	(183.2)
Accrued Compensation and Benefits	(66.1)
Other Accrued Expenses(1)	(145.7)
Current Operating Lease Liabilities	(12.5)
Current Maturities of Long-Term Debt	(0.4)
Long-Term Debt	(25.3)
Deferred Income Taxes	(560.7)
Pension and Other Post Retirement Benefits	(19.8)
Noncurrent Operating Lease Liabilities	(29.7)
Other Noncurrent Liabilities	(8.3)

Total Identifiable Net Assets	2,635.3
Goodwill	2,499.3
Preliminary purchase price	$	5,134.6

As Reported as of January 1, 2022 Measurement period adjustments as of June 30, 2022
Cash and Cash Equivalents $ 1.1 $ — $ 1.1
Trade Receivables 19.1 (0.3) 18.8
Inventories 12.8 — 12.8
Prepaid Expenses and Other Current Assets 7.6 — 7.6
Property, Plant and Equipment 3.7 — 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 Assets 172.0 (0.3) 171.7
Goodwill 143.6 0.3 143.9
Preliminary purchase price $ 315.6 $ — $ 315.6

~~(1)~~ 1) Includes ~~$124.0~~$60.1 million related to ~~Customer Relationships, $18.0 million related~~Altra transaction costs paid by the Company at the closing of the Altra Transaction.

Summary of Significant Fair Value Methods

The methods used to ~~Trademarks~~determine the fair value of significant identifiable assets and ~~$18.0 million related to Technology.~~liabilities included in the allocation of purchase price are discussed below.

Inventories

Acquired inventory was comprised of finished goods, work in process and raw materials. The ~~allocation~~fair value of ~~purchase~~finished goods was calculated as the estimated selling price, ~~is subject~~adjusted for costs of the selling effort and a reasonable profit allowance relating to ~~finalization during~~the selling effort. The fair value of work in process inventory was primarily calculated as the estimated selling price, adjusted for estimated costs to complete the manufacturing, estimated costs of the selling effort, as well as a ~~period not~~reasonable profit margin on the remaining manufacturing and selling effort. The fair value of raw materials and supplies was determined based on replacement cost which approximates historical carrying value.

Property, Plant and Equipment

The preliminary fair value of Property, Plant, and Equipment was determined using either the cost approach, which relies on an estimate of replacement costs of the assets new and estimated accrued depreciation, or the market approach.

Identifiable Intangible Assets

The preliminary fair value and weighted average useful life of the identifiable intangible assets are as follows:


	Fair Value		Weighted Average Useful Life (Years)
Customer Relationships(1)	$	1,780.0	14.0
Trademarks(2)	340.0		10.0
Technology(3)	104.0		13.0
Total Identifiable Intangible Assets	$	2,224.0

(1) The fair value of Customer Relationships was valued using a multi-period excess earnings method, a form of the income approach, which incorporates the estimated future cash flows to ~~exceed one year~~be generated from Altra's existing customer base.

(2) The Altra Trademarks were valued using the relief from royalty method, which considers both the market approach and the income approach.

(3) The Altra Technology was valued using the relief from royalty method, which considers both the market approach and the income approach.

The intangible assets related to definite-lived customer relationships, trademarks and technology are amortized over their estimated useful lives.

Leases, including right-of-use ("ROU") assets and lease liabilities

Lease liabilities were measured as of the effective date of the acquisition at the present value of future minimum lease payments over the remaining lease term and the incremental borrowing rate of the Company as if the acquired leases were new leases as of the acquisition date.~~Adjustments~~ ROU assets recorded within “Operating Lease Assets” are equal to the ~~preliminary allocation of purchase price may occur related to finalization~~amount of the ~~working capital adjustment,finalization~~lease liability at the acquisition date adjusted for any off-market terms of the ~~valuation~~lease. The remaining lease term was based on the remaining term at the acquisition date plus any renewal or extension options that the Company is reasonably certain will be exercised.

Long-Term Debt

The fair value of ~~intangibles~~the Altra Notes assumed was determined based on the total indebtedness as the debt consummated at the time of closing of the acquisition.

Deferred Income Tax Assets and ~~other long-lived~~Liabilities

The acquisition was structured as a merger and therefore, the Company assumed the historical tax basis of the Altra’s assets ~~adjustment to~~and liabilities. The deferred income tax assets and liabilities include the expected future federal, state, and ~~other changes related to~~foreign tax consequences associated with temporary differences between the ~~valuation~~fair values of the assets acquired and liabilities ~~assumed. The cumulative impact~~assumed and the respective tax bases. Tax rates utilized in calculating deferred income taxes generally represent the enacted statutory tax rates at the effective date of the ~~adjustments~~acquisition in the jurisdictions in which legal title of the underlying asset or liability resides. See Note 10 - Income Taxes for further information related to income taxes.

Other Assets Acquired and Liabilities Assumed (excluding Goodwill)

The Company utilized the carrying values, net of allowances, to value accounts receivable and accounts payable as well as other current assets and liabilities as it was determined that carrying values represented the fair value of those items at the acquisition date. Accounts receivable reflect the best estimate at the acquisition date of the contractual cash flows expected to be collected.

Goodwill

The excess of the consideration for the acquisition over the fair value of net assets acquired was recorded as goodwill. The goodwill is attributable to expected synergies and expanded market opportunities from combining the Company’s operations with those of Altra. The goodwill created in the acquisition is not expected to be deductible for tax purposes.

Transaction Costs

The Company incurred transaction-related costs in connection with the Altra Transaction of approximately $65.6 million during the ~~six~~three months ended ~~June 30,~~March 31, 2023, which include legal and professional services and certain employee compensation costs, including severance, that were recognized as Operating expenses in the Company's Condensed Consolidated Statements of Income. There were no transaction-related costs in connection with the Altra Transaction recognized during the three months ended March 31, 2022. During the year ended December 31, 2022 ~~resulted in $0.3~~the Company incurred $14.7 million of costs related to the Altra Transaction.

The Company also incurred $15.7 million of share-based compensation expense related to the accelerated vesting of awards for certain former Altra employees. See Note 9 – Shareholders' Equity for additional ~~goodwill.~~information.

In connection with the Altra Transaction, the Company incurred additional costs due to the entry into certain financing arrangements. Such financing arrangements are described in Note 7 – Debt and Bank Credit Facilities.

Unaudited Pro Forma Information

The following unaudited supplemental pro forma financial information presents the Company's financial results for the three months ended March 31, 2023 and March 31, 2022, respectively, as if the Altra Transaction had occurred on January 2, 2022, the first day of the Company's fiscal year ended December 31, 2022. The pro forma financial information includes, where applicable, adjustments for: (i) additional amortization expense that would have been recognized related to the acquired intangible assets, (ii) additional interest expense on transaction related borrowings less interest income earned on the investment of proceeds from borrowings prior to the close of the Altra Transaction, (iii) additional depreciation expense that would have been recognized related to the acquired property, plant, and equipment, (iv) transaction costs and other one-time non-recurring costs, including share-based compensation expense related to the accelerated vesting of awards for certain former Altra employees, which reduced expenses by $81.3 million for the three months ended March 31, 2023 and increased expenses by $99.0 million for the three months ended March 31, 2022, (v) additional cost of sales related to the inventory valuation adjustment which increased expenses by $64.2 million for the three months ended March 31, 2022, and (vi) the estimated income tax effect on the pro forma adjustments.

The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the Altra Transaction been completed as of the date indicated or the results that may be obtained in the future.


	For the Three Months Ended March 31, 2023		For the Three Months Ended March 31, 2022
Net Sales	$	1,675.2	$	1,810.2
Net Income Attributable to Regal Rexnord Corporation	$	37.6	$	(70.0)
Earnings Per Share Attributable to Regal Rexnord Corporation:
Basic	$	0.57	$	(1.04)
Assuming Dilution	$	0.56	$	(1.04)

4. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustments, hedging activities and pension and post-retirement benefit adjustments are included in Accumulated Other Comprehensive Income (Loss) ("AOCI") a component of Total Equity.

The following tables present changes in AOCI by component for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~July 3, 2021 (in millions):~~March 31, 2022:

Three Months Ended
June 30, 2022 Hedging Activities Pension and Post Retirement Benefit Adjustments Foreign Currency Translation Adjustments Total
Beginning Balance $ 41.1 $ (13.9) $ (202.8) $ (175.6)
Other Comprehensive (Loss) Income before Reclassifications (43.4) 0.3 (118.8) (161.9)
Tax Impact 10.5 — — 10.5
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) (6.8) 0.2 — (6.6)
Tax Impact 1.5 (0.1) — 1.4
Net Current Period Other Comprehensive (Loss) Income (38.2) 0.4 (118.8) (156.6)
Ending Balance $ 2.9 $ (13.5) $ (321.6) $ (332.2)
July 3, 2021 Hedging Activities Pension and Post Retirement Benefit Adjustments Foreign Currency Translation Adjustments Total
Beginning Balance $ 29.4 $ (30.8) $ (177.1) $ (178.5)
Other Comprehensive Income before Reclassifications 17.5 — 9.3 26.8
Tax Impact (4.2) — — (4.2)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) (11.3) 0.5 — (10.8)
Tax Impact 2.7 (0.1) — 2.6
Net Current Period Other Comprehensive Income 4.7 0.4 9.3 14.4
Ending Balance $ 34.1 $ (30.4) $ (167.8) $ (164.1)

Six Months Ended
June 30, 2022 Hedging Activities Pension and Post Retirement Benefit Adjustments Foreign Currency Translation Adjustments Total
Beginning Balance $ 21.0 $ (14.3) $ (201.8) $ (195.1)
Other Comprehensive (Loss) Income before Reclassifications (9.0) 0.5 (119.8) (128.3)
Tax Impact 2.2 — — 2.2
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) (14.8) 0.4 — (14.4)
Tax Impact 3.5 (0.1) — 3.4
Net Current Period Other Comprehensive (Loss) Income (18.1) 0.8 (119.8) (137.1)
Ending Balance $ 2.9 $ (13.5) $ (321.6) $ (332.2)
July 3, 2021 Hedging Activities Pension and Post Retirement Benefit Adjustments Foreign Currency Translation Adjustments Total
Beginning Balance $ 23.5 $ (31.1) $ (155.7) $ (163.3)
Other Comprehensive Income (Loss) before Reclassifications 36.7 — (12.1) 24.6
Tax Impact (8.8) — — (8.8)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) (22.8) 0.9 — (21.9)
Tax Impact 5.5 (0.2) — 5.3
Net Current Period Other Comprehensive Income (Loss) 10.6 0.7 (12.1) (0.8)
Ending Balance $ 34.1 $ (30.4) $ (167.8) $ (164.1)


	Three Months Ended
March 31, 2023	Hedging Activities		Pension and Post Retirement Benefit Adjustments		Foreign Currency Translation Adjustments		Total
Beginning Balance	$	17.3	$	(13.3)	$	(356.1)	$	(352.1)
Other Comprehensive Income before Reclassifications	22.1		—		34.2		56.3
Tax Impact	(5.3)		—		—		(5.3)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	1.7		(0.5)		—		1.2
Tax Impact	(0.4)		0.1		—		(0.3)
Net Current Period Other Comprehensive Income (Loss)	18.1		(0.4)		34.2		51.9

Ending Balance	$	35.4	$	(13.7)	$	(321.9)	$	(300.2)

March 31, 2022	Hedging Activities		Pension and Post Retirement Benefit Adjustments		Foreign Currency Translation Adjustments		Total
Beginning Balance	$	21.0	$	(14.3)	$	(201.8)	$	(195.1)
Other Comprehensive Income (Loss) before Reclassifications	34.4		0.2		(1.0)		33.6
Tax Impact	(8.3)		—		—		(8.3)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(8.0)		0.2		—		(7.8)
Tax Impact	2.0		—		—		2.0

Net Current Period Other Comprehensive Income (Loss)	20.1		0.4		(1.0)		19.5

Ending Balance	$	41.1	$	(13.9)	$	(202.8)	$	(175.6)

The Condensed Consolidated Statements of Income line items affected by the hedging activities reclassified from AOCI in the tables above are disclosed in Note ~~13.~~13 - Derivative Financial Instruments.

The reclassification amounts for pension and post-retirement benefit adjustments in the tables above are part of net periodic benefit costs recorded in Other Income, Net (see also Note 8)8 - Retirement Plans).

5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

As required, the Company performs an annual impairment test of goodwill as of the end of the October fiscal month or more frequently if events or circumstances change that would more likely than not reduce the fair value of its reporting units below their carrying value.

The following table presents changes to goodwill during the ~~six~~three months ended ~~June 30, 2022 (in millions):~~March 31, 2023:

Total Commercial Systems Industrial Systems Climate Solutions Motion Control Solutions
Balance as of January 1, 2022 $ 4,039.2 $ 428.9 $ 128.8 $ 330.5 $ 3,151.0
Acquisition and Valuation Adjustments 26.4 — — — 26.4
Translation Adjustments (39.6) (5.0) (1.6) (0.5) (32.5)
Balance as of June 30, 2022 $ 4,026.0 $ 423.9 $ 127.2 $ 330.0 $ 3,144.9
Cumulative Goodwill Impairment Charges $ 328.7 $ 183.2 $ 105.1 $ 17.2 $ 23.2


	Total		Industrial Powertrain Solutions		Power Efficiency Solutions		Automation & Motion Control		Industrial Systems








Balance as of December 31, 2022	$	4,018.8	$	2,290.0	$	752.3	$	865.0	$	111.5


Acquisitions	2,499.3		1,395.4		—		1,103.9		—

Translation Adjustments	8.6		5.2		1.1		1.9		0.4
Balance as of March 31, 2023	$	6,526.7	$	3,690.6	$	753.4	$	1,970.8	$	111.9

Cumulative Goodwill Impairment Charges	$	328.7	$	18.1	$	200.4	$	5.1	$	105.1

Intangible Assets

The following table presents intangible assets ~~(in millions)~~including those acquired in the Altra Transaction (see Note 3 - Acquisitions and Divestitures for more information):


			June 30, 2022				January 1, 2022						March 31, 2023						December 31, 2022
		Weighted Average Amortization Period (Years)	Gross Value		Accumulated Amortization		Gross Value		Accumulated Amortization			Weighted Average Amortization Period (Years)	Gross Value		Accumulated Amortization		Net Carrying Amount		Gross Value		Accumulated Amortization		Net Carrying Amount
Amortizable Intangible Assets:
Customer Relationships	Customer Relationships	16	$	2,326.1	$	465.8	$	2,335.4	$	405.0	Customer Relationships	15	$	4,129.2	$	587.9	$	3,541.3	$	2,321.4	$	532.0	$	1,789.4
Technology	Technology	13	246.9		119.0		250.1		114.1		Technology	13	347.6		127.0		220.6		246.2		125.0		121.2
Trademarks	Trademarks	10	393.4		55.0		400.0		37.2		Trademarks	10	725.0		72.2		652.8		392.7		73.4		319.3
Patent and Engineering Drawings		5	16.6		16.6		16.6		16.6

			$	2,983.0	$	656.4	$	3,002.1	$	572.9

Intangible Assets, Net of Amortization			$	2,326.6			$	2,429.2
Total Intangibles											Total Intangibles		$	5,201.8	$	787.1	$	4,414.7	$	2,960.3	$	730.4	$	2,229.9

Amortization expense recorded for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 was ~~$46.5 million and $93.8 million, respectively.~~$46.3 million. Amortization expense recorded for the three ~~and six~~ months ended ~~July 3, 2021~~March 31, 2022 was ~~$11.1 million and $22.3 million, respectively.~~$47.3 million. Amortization expense for fiscal year ~~2022~~2023 is estimated to be ~~$187.0~~$316.7 million. ~~There were no intangible asset impairments during the three and six months ended June 30, 2022 and July 3, 2021, respectively.~~

The following table presents future estimated annual amortization expense for intangible ~~assets (in millions):~~assets:


Year	Year	Estimated Amortization		Year	Estimated Amortization
2023		$	186.4
2024	2024	185.8		2024	$	356.0
2025	2025	183.7		2025	354.0
2026	2026	180.3		2026	350.5
2027	2027	145.7		2027	349.8
2028				2028	349.8

6. SEGMENT INFORMATION

Effective during the first quarter of 2023, the Company realigned its four operating segments taking into account the change to its management structure and operating model following completion of the Altra Transaction. All prior periods have been recast to reflect the current segment presentation. The Company is comprised of 4four operating segments: ~~Commercial Systems,~~ Industrial ~~Systems,~~Powertrain Solutions (IPS), Power Efficiency Solutions (PES), Automation & Motion Control (AMC) and Industrial Systems.

IPS consists of the majority of the Company's previous Motion Control Solutions (MCS) segment, excluding the conveying and aerospace business units, plus Altra's Power Transmission Technologies segment. The IPS segment designs, produces and services mounted and unmounted bearings, couplings, mechanical power transmission drives and components, gearboxes and

gear motors, clutches, brakes, special components products and industrial powertrain components and solutions serving a broad range of markets including food and beverage, bulk handling, eCommerce/warehouse distribution, energy, agricultural machinery, turf & garden and general industrial.

PES consists of the Company's previous Climate Solutions and ~~Motion Control Solutions.~~

Commercial Systems segments. The PES segment designs and produces fractional to approximately 5 horsepower AC and DC motors, electronic variable speed controls, fans, and blowers for commercial ~~applications. These products serve~~applications and small motors, electronic variable speed controls and air moving solutions serving markets including residential and light commercial HVAC, water heaters, commercial refrigeration, commercial building ventilation, ~~and HVAC,~~ pool and spa, irrigation, dewatering, agriculture, and general commercial equipment.

AMC consists of the Company's previous MCS aerospace and conveying business units, Altra's Automation & Specialty segment and the Thomson Power Systems business that was previously in the Company's Industrial Systems segment. The AMC segment designs, produces and services conveyor products, conveying automation subsystems, aerospace components, rotary precision motion solutions, high-efficiency miniature motors and motion control products, automation transfer switches, switchgear for industrial applications and automation systems that enable and control the transition of rotary motion to linear motion. These products are used in advanced material handling, aerospace and defense, factory automation, data centers, medical device, packaging, printing, semiconductor, robotic, industrial power tool, mobile off-highway, food & beverage processing and other applications.

Industrial Systems consists of the Company's previous Industrial Systems segment excluding the Thomson Power Systems business. The Industrial Systems segment designs and produces integral motors, ~~automatic transfer switches,~~ alternators ~~and switchgear~~ for industrial applications, along with aftermarket parts and kits to support such products. These products serve markets including agriculture, marine, mining, oil and gas, food and beverage, data centers, ~~healthcare,~~ prime and standby power, and general industrial equipment.

Climate Solutions segment designs and produces small motors, electronic variable speed controls and air moving solutions serving markets including residential and light commercial HVAC, water heaters and commercial refrigeration.

Motion Control Solutions segment designs, produces and services mounted and unmounted bearings, conveyor products, conveying automation solutions, couplings, mechanical power transmission drives and components, gearboxes and gear motors, aerospace components, special components products and industrial powertrain components and solutions serving a broad range of markets including food and beverage, bulk handling, eCommerce/warehouse distribution, energy, aerospace and general industrial.

The Company evaluates performance based on the segment's income from operations. Corporate costs have been allocated to each segment based on the net sales of each segment. The reported external net sales of each segment are from external customers.

The following sets forth certain financial information attributable to the Company's operating segments, recast as described above, for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~July 3, 2021 (in millions):~~March 31, 2022:


		Three Months Ended													Three Months Ended
June 30, 2022		Commercial Systems		Industrial Systems		Climate Solutions		Motion Control Solutions		Eliminations		Total
March 31, 2023														March 31, 2023	Industrial Powertrain Solutions		Power Efficiency Solutions		Automation & Motion Control		Industrial Systems		Eliminations		Total
External Sales	External Sales	$	301.9	$	154.7	$	293.5	$	599.3	$	—	$	1,349.4	External Sales	$	414.4	$	469.5	$	203.2	$	137.0	$	—	$	1,224.1
Intersegment Sales	Intersegment Sales	26.1		7.9		4.4		2.3		(40.7)		—		Intersegment Sales	3.5		4.2		5.2		0.7		(13.6)		—
Total Sales	Total Sales	328.0		162.6		297.9		601.6		(40.7)		1,349.4		Total Sales	417.9		473.7		208.4		137.7		(13.6)		1,224.1
Gross Profit	Gross Profit	82.1		44.0		74.6		232.8		—		433.5		Gross Profit	177.4		117.7		75.4		27.6		—		398.1
Operating Expenses	Operating Expenses	40.4		22.8		30.3		145.1		—		238.6		Operating Expenses	151.5		72.3		80.6		24.8		—		329.2

Total Operating Expenses	Total Operating Expenses	40.4		22.8		30.3		145.1		—		238.6		Total Operating Expenses	151.5		72.3		80.6		24.8		—		329.2
Income (Loss) from Operations														Income (Loss) from Operations	25.9		45.4		(5.2)		2.8		—		68.9
Depreciation and Amortization														Depreciation and Amortization	41.6		11.7		19.7		3.5		—		76.5
Capital Expenditures														Capital Expenditures	5.4		8.7		3.1		1.5		—		18.7

March 31, 2022														March 31, 2022
External Sales														External Sales	$	416.3	$	567.2	$	184.3	$	130.7	$	—	$	1,298.5
Intersegment Sales														Intersegment Sales	1.6		2.9		3.4		0.5		(8.4)		—
Total Sales														Total Sales	417.9		570.1		187.7		131.2		(8.4)		1,298.5
Gross Profit														Gross Profit	154.3		177.5		63.0		27.1		—		421.9
Operating Expenses														Operating Expenses	108.0		73.1		50.7		20.2		—		252.0

Total Operating Expenses														Total Operating Expenses	108.0		73.1		50.7		20.2		—		252.0
Income from Operations	Income from Operations	41.7		21.2		44.3		87.7		—		194.9		Income from Operations	46.3		104.4		12.3		6.9		—		169.9
Depreciation and Amortization	Depreciation and Amortization	7.4		3.4		4.4		63.2		—		78.4		Depreciation and Amortization	42.6		12.1		19.7		3.5		—		77.9
Capital Expenditures	Capital Expenditures	5.2		2.7		4.6		6.7		—		19.2		Capital Expenditures	2.5		7.9		1.6		1.4		—		13.4

July 3, 2021
External Sales		$	269.3	$	145.2	$	257.3	$	215.1	$	—	$	886.9
Intersegment Sales		19.9		7.3		5.1		0.8		(33.1)		—
Total Sales		289.2		152.5		262.4		215.9		(33.1)		886.9
Gross Profit*		69.5		27.4		75.5		85.3		—		257.7
Operating Expenses		40.3		23.1		27.0		49.8		—		140.2

Asset Impairments		1.8		—		0.5		—		—		2.3
Total Operating Expenses		42.1		23.1		27.5		49.8		—		142.5
Income from Operations*		27.4		4.3		48.0		35.5		—		115.2
Depreciation and Amortization		7.8		5.7		3.6		13.4		—		30.5
Capital Expenditures		4.5		3.3		3.0		2.8		—		13.6

Six Months Ended
June 30, 2022 Commercial Systems Industrial Systems Climate Solutions Motion Control Solutions Eliminations Total
External Sales $ 595.2 $ 299.4 $ 567.4 $ 1,185.9 $ — $ 2,647.9
Intersegment Sales 54.3 15.2 9.2 4.2 (82.9) —
Total Sales 649.5 314.6 576.6 1,190.1 (82.9) 2,647.9
Gross Profit 176.4 75.3 157.8 445.9 — 855.4
Operating Expenses 81.8 46.2 62.0 300.6 — 490.6
Total Operating Expenses 81.8 46.2 62.0 300.6 — 490.6
Income from Operations 94.6 29.1 95.8 145.3 — 364.8
Depreciation and Amortization 15.1 7.0 8.8 125.4 — 156.3
Capital Expenditures 8.8 4.2 8.9 10.7 — 32.6
July 3, 2021
External Sales $ 506.3 $ 281.6 $ 496.4 $ 416.7 $ — $ 1,701.0
Intersegment Sales 37.4 11.0 9.4 1.5 (59.3) —
Total Sales 543.7 292.6 505.8 418.2 (59.3) 1,701.0
Gross Profit* 136.3 55.4 150.9 164.9 — 507.5
Operating Expenses 78.3 46.2 57.7 106.3 — 288.5
Asset Impairments 1.8 — 0.5 — — 2.3
Total Operating Expenses 80.1 46.2 58.2 106.3 — 290.8
Income from Operations* 56.2 9.2 92.7 58.6 — 216.7
Depreciation and Amortization 15.6 11.6 8.1 27.0 — 62.3
Capital Expenditures 7.8 5.7 6.2 4.6 — 24.3

The following table presents identifiable assets information attributable to the Company's operating segments, recast as described above, as of ~~June 30, 2022~~March 31, 2023 and ~~January 1, 2022 (in millions):~~December 31, 2022:

Commercial Systems Industrial Systems Climate Solutions Motion Control Solutions Total
Identifiable Assets as of June 30, 2022 $ 1,314.9 $ 874.0 $ 1,028.6 $ 7,241.0 $ 10,458.5
Identifiable Assets as of January 1, 2022* 1,264.0 859.9 982.7 7,260.8 10,367.4

*~~Includes the retrospective effect of changing accounting methods for valuing certain inventories to the FIFO cost method from the LIFO cost method. See Note 2 for additional information.~~


	Industrial Powertrain Solutions		Power Efficiency Solutions		Automation & Motion Control		Industrial Systems		Total
Identifiable Assets as of March 31, 2023	$	8,456.2	$	2,234.5	$	5,107.5	$	749.2	$	16,547.4
Identifiable Assets as of December 31, 2022	5,028.5		2,234.1		2,202.2		804.1		10,268.9

7. DEBT AND BANK CREDIT FACILITIES

The following table presents the Company’s indebtedness as of ~~June 30,~~March 31, 2023 and December 31, 2022:


	March 31, 2023		December 31, 2022
Senior Notes	$	4,700.0	$	—
Term Facility	1,359.0		536.3
Private Placement Notes	—		500.0
Land Term Facility	486.8		486.8
Multicurrency Revolving Facility	700.0		429.0
Altra Notes	18.1		—


Other	82.2		76.7
Less: Debt Issuance Costs	(61.3)		(5.3)
Total	7,284.8		2,023.5
Less: Current Maturities	74.2		33.8
Long-Term Debt	$	7,210.6	$	1,989.7

The below discussion of the Company’s indebtedness should be read in conjunction with the Note 7 – Debt and Bank Credit Facilities in the Company’s 2022 ~~and January 1, 2022 (in millions):~~Annual Report on Form 10-K filed on February 24, 2023.

June 30, 2022 January 1, 2022
Term Facility $ 550.0 $ 620.0
Senior Notes 500.0 —
Land Term Facility 486.8 486.8
Multicurrency Revolving Facility 560.0 736.7
Other 75.2 78.7
Less: Debt Issuance Costs (8.9) (3.7)
Total 2,163.1 1,918.5
Less: Current Maturities 30.6 4.9
Long-Term Debt $ 2,132.5 $ 1,913.6

Credit Agreement

On March 28, 2022, the Company entered into a Second Amended and Restated Credit Agreement ~~with the Company's lenders~~ (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent and the lenders named ~~therein. The Credit Agreement (i) replaces~~therein, which was subsequently amended on November 17, 2022 (the "First Amendment") and November 30, 2022 (the "Assumption Agreement"), which in ~~its entirety the Amended and Restated Credit Agreement, dated as of August 27, 2018, as amended by that First Amendment, dated March 17, 2021,~~combination provide for, among ~~the Company and~~ other parties thereto and (ii) amends and restates in its entirety the Amended and Restated Credit Agreement, dated as of October 4, 2021, among Land and the other parties thereto (collectively, the “Former Credit Agreements”).things:

ii.an unsecured term loan facility in the initial principal amount of ~~$486,827,669,~~$486.8 million, under which the Company's subsidiary Land Newco, Inc. remains the sole borrower, maturing on March 28, 2027 (the "Land Term Facility"); and ~~(iii)~~

iii.an unsecured revolving loan in the initial principal amount of up to ~~$1,000,000,000,~~$1,000.0 million, maturing on March 28, 2027, which was upsized by $570.0 million on March 27, 2023 in connection with the Altra Transaction (the "Multicurrency Revolving Facility"). Interest for benchmark rate loans is calculated based on a SOFR benchmark rate, plus a margin spread to be adjusted quarterly based on the Company’s funded debt to EBITDA ratio. The Credit Agreement is subject to customary and market provisions. The subsidiaries of the Company that provided a guaranty of the Company's and Land's obligations under the Former Credit Agreement also entered into subsidiary guaranty agreements with respect to the obligations

Borrowings under the Credit ~~Agreement.~~Agreement bear interest at floating rates based upon indices determined by the currency of the borrowing (SOFR or an alternative base rate for US Dollar borrowings) or at an alternative base rate, in each case, plus an applicable margin. The weighted average interest rate on the Term Facility for the three months ended March 31, 2023 and March 31, 2022 was 6.0% and 2.0%, respectively. The weighted average interest rate on the Land Term Facility for the three months ended March 31, 2023 and March 31, 2022 was 5.9% and 1.7%, respectively.

The Term Facility was drawn in full on March 28, 2022 to refinance the Former Credit Agreements, pay fees, costs, and other expenses incurred therewith, to fund working capital needs and for general corporate purposes of the Company and its subsidiaries. The Term Facility requires quarterly amortization at 5.0% per annum, unless previously prepaid. Per the terms of the Credit Agreement, prepayments can be made without penalty and be applied to the next payment due. The Land Term Facility has no required amortization.

The weighted average interest rate on the Term Facility for the three months ended June 30, 2022 and July 3, 2021 was 2.1% and 1.4%, respectively. The weighted average interest rate on the Term Facility for the six months ended June 30, 2022 and July 3, 2021 was 1.7% and 1.5%, respectively. The Credit Agreement requires that the Company prepay the loans under the Term Facility with 100% of the net cash proceeds received from specified asset sales and borrowed money indebtedness, subject to certain exceptions.20

~~At June 30, 2022,~~As of March 31, 2023, the Company had ~~$560.0 million of borrowings under the Multicurrency Revolving Facility, $0.1 million of~~no standby letters of credit issued under the ~~facility,~~Multicurrency Revolving Facility, and ~~$439.8~~$870.0 million of available borrowing capacity. For the three months ended ~~June 30,~~March 31, 2023 and March 31, 2022 ~~and July 3, 2021~~ under the Multicurrency Revolving Facility, the average daily balance in borrowings was ~~$730.0~~$580.6 million and ~~$2.4~~$773.7 million, respectively, and the weighted average interest rate was ~~2.1%~~5.8% and 1.4%, respectively. For the six months ended June 30, 2022 and July 3, 2021 under the Multicurrency Revolving Facility, the average daily balance in borrowings was $765.2 million and $4.9 million, respectively, and the weighted average interest rate was 1.7% ~~and 1.4%~~, respectively. The Company pays a non-use fee of 0.3% as of March 31, 2023 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.

As of June 30, 2022, the Company had $486.8 million of borrowings under the Land Term Facility. The Land Term Facility has no required amortization. The weighted average interest rate on the Land Term Facility for three months ended June 30, 2022 was 2.1%. The weighted average interest rate on the Land Term Facility for six months ended June 30, 2022 was 1.7%.Private Placement Notes

In connection with the Rexnord Transaction, on February 15, 2021, the Company entered into a debt commitment letter (the “Bridge Commitment Letter”) and related fee letters with Barclays Bank PLC (“Barclays”), pursuant to which, and subject to the terms and conditions set forth therein, Barclays committed to provide approximately $2.1 billion in an aggregate principal amount of senior bridge loans under a 364-day senior bridge loan credit facility (the “Bridge Facility”). As the Rexnord Transaction was consummated and the payments of amounts in connection therewith occurred without the use of the Bridge Facility, the commitments under the Bridge Commitment Letter were terminated in connection with the closing of the Rexnord Transaction.

~~Senior Notes~~

On April 7, 2022, the Company entered into a Note Purchase Agreement ~~with certain institutional accredited investors (the "Note Purchase Agreement")~~ for the issuance and sale of ~~$500,000,000~~$500.0 million aggregate principal amount of 3.90% senior notes due April 7, 2032 (the ~~"Senior~~"Private Placement Notes"). Following the issuance of the Senior Notes discussed below, on January 27, 2023, the Company repaid the Private Placement Notes in full with no make-whole payments.

Bridge Facility

In connection with the Altra Transaction, on October 26, 2022, the Company entered into a commitment letter pursuant to which JPMorgan Chase Bank, N.A. committed to provide the Company approximately $5,500.0 million in aggregate principal amount of senior bridge loans under a 364-day senior unsecured bridge term loan facility (the “Bridge Facility”) to, among other things, fund, in part, the Altra Transaction. The Bridge Facility was terminated upon issuance of the Senior Notes in January 2023. The Company paid $27.5 million in Bridge Facility fees in fiscal 2022, of which $10.5 million were recognized in Interest Expense in the fourth quarter of 2022 and $17.0 million were recognized in Interest Expense during the three months ended March 31, 2023.

Senior Notes

On January 24, 2023, the Company issued $1,100.0 million aggregate principal amount of its 6.05% senior notes due 2026 (the “2026 Senior Notes”), $1,250.0 million aggregate principal amount of its 6.05% senior notes due 2028 (the “2028 Senior Notes”), $1,100.0 million aggregate principal amount of its 6.30% senior notes due 2030 (the “2030 Senior Notes”) and $1,250.0 million aggregate principal amount of its 6.40% senior notes due 2033 (the “2033 Senior Notes” and, together with the 2026 Senior Notes, 2028 Senior Notes and 2030 Senior Notes, collectively, the “Senior Notes”). The 2026 Senior Notes are scheduled to mature on February 15, 2026, the 2028 Senior Notes are scheduled to mature on April 15, 2028, the 2030 Senior Notes are scheduled to mature on February 15, 2030, and the 2033 Senior Notes are scheduled to mature on April 15, 2033.

The rate of interest on each series of the Senior Notes is subject to an increase of up to 2.00% in anthe event of certain downgrades in the debt rating of the Senior Notes. Interest on the 2026 Senior Notes and the 2030 Senior Notes will be payable semi-annually on February 15 and August 15 of each year, beginning on August 15, 2023. Interest on the 2028 Senior Notes and the 2033 Senior Notes will be payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2023.

The Senior Notes were issued and sold in a private offering ~~exempt from the registration requirements of~~to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of1933 and persons outside the United States in accordance with Regulation S under the Securities Act. Pursuant to a registration rights agreement, the Company will exchange the Senior Notes with registered notes with terms substantially identical to the Senior Notes within 540 days from the date of ~~1933, as amended.~~ issuance.

The Company ~~expects to use the~~received $4,647.0 million in net proceeds from the sale of the Senior Notes, after deducting the initial purchasers’ discounts and estimated offering expenses. The Company used a portion of the net proceeds to repay the Company’s outstanding Private Placement Notes and used the remaining net proceeds, together with the incremental term loan commitments under the Term Facility and cash on hand, to fund the consideration for ~~general corporate purposes.~~the Altra Transaction, repay certain of Altra’s outstanding indebtedness, and pay certain fees and expenses.

Prior to the consummation of the Altra Transaction, the Company used a portion of the proceeds to repay the outstanding borrowings under the Multicurrency Revolving Facility in January 2023 and invested the remaining net proceeds of approximately $3.6 billion in interest bearing accounts. The Company recognized $29.4 million in Interest Income during the three months ended March 31, 2023.

Altra Notes

On March 27, 2023, in connection with the Altra Transaction, the Company assumed $18.1 million aggregate principal amount of 6.125% senior notes due 2026 (the “Altra Notes”). The Company purchased 95.28% of the outstanding Altra Notes for total consideration of $382.7 million. See Note 3 – Acquisitions and Divestitures for more information.

The ~~Note Purchase Agreement is subject to customary and market provisions.~~Altra Notes will mature on October 1, 2026. The ~~subsidiaries~~Altra Notes may be redeemed at the option of the ~~Company that provided~~issuer on or after October 1, 2023. The Notes are guaranteed on a ~~guaranty~~senior unsecured basis by certain of the Company’s and Land’s obligations under the Credit Agreement also entered into subsidiary guaranty agreements with respect to the obligations under the Note Purchase Agreement. The Company may, at its option, prepay at any time all, or from time to time any part of, the Senior Notes, subject to a make-whole amount and certain other restrictions set forth in the Note Purchase Agreement.Company's domestic subsidiaries.

Compliance with Financial Covenants

The Credit Agreement, ~~requires~~Senior Notes, and Altra Notes require the Company to meet specified financial ratios and to satisfy certain financial condition tests. The ~~Note Purchase Agreement contains financial covenants consistent with the financial covenants in the Credit Agreement. The~~ Company was in compliance with all financial covenants contained in the Credit Agreement ~~and Note Purchase Agreement~~ as of ~~June 30, 2022.~~March 31, 2023.

Other Notes Payable

~~At June 30, 2022, other notes payable~~These amounts consist of ~~approximately $75.2 million were outstanding with a~~finance leases as well as certain long-term fixed rate term loans entered into by subsidiaries in Europe that are generally secured by the local property, plant and equipment. The weighted average interest rate ~~of 5.1%. At January 1, 2022,~~on other notes payable ~~of approximately $78.7 million~~for the three months ended March 31, 2023 and March 31, 2022 were ~~outstanding with a weighted average rate of 5.2%.~~4.8% and 5.1%, respectively.

Other Disclosures

Based on rates for instruments with comparable maturities and credit quality, which are classified as Level 2 inputs (see also Note ~~14)~~14 - Fair Value), the approximate fair value of the Company's total debt was ~~$2,125.9~~$7,283.1 million and ~~$1,918.5~~$1,926.6 million as of ~~June 30,~~March 31, 2023 and December 31, 2022, ~~and January 1, 2022,~~ respectively.

Maturities of long-term debt outstanding as of March 31, 2023, excluding debt issuance costs, are as follows:


Year	Amount of Maturity
2023	$	56.8
2024	73.4
2025	73.7
2026	1,191.6
2027	2,289.4
Thereafter	3,661.2
Total	$	7,346.1

8. RETIREMENT ~~AND POST RETIREMENT HEALTH CARE~~ PLANS

The following table presents the Company’s net periodic benefit cost (income) ~~components (in millions):~~components:


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30, 2022		July 3, 2021		June 30, 2022		July 3, 2021			March 31, 2023		March 31, 2022
Service Cost	Service Cost	$	0.5	$	0.3	$	0.8	$	0.6	Service Cost	$	0.3	$	0.3
Interest Cost	Interest Cost	3.5		1.4		7.1		2.9		Interest Cost	5.6		3.6
Expected Return on Plan Assets	Expected Return on Plan Assets	(5.2)		(3.1)		(10.3)		(6.2)		Expected Return on Plan Assets	(6.7)		(5.1)
Amortization of Prior Service Cost and Net Actuarial Loss	Amortization of Prior Service Cost and Net Actuarial Loss	0.2		0.5		0.4		0.9		Amortization of Prior Service Cost and Net Actuarial Loss	(0.5)		0.2
Net Periodic Benefit Income	Net Periodic Benefit Income	$	(1.0)	$	(0.9)	$	(2.0)	$	(1.8)	Net Periodic Benefit Income	$	(1.3)	$	(1.0)

The service cost component is included in Cost of Sales and Operating Expenses. All other components of net periodic benefit costs are included in Other Income, Net on the Company's Condensed Consolidated Statements of Income.

For the three months ended June 30, 2022 and July 3, 2021, the Company contributed $1.3 million and $1.6 million, respectively, to post retirement plans. For the six months ended June 30, 2022 and July 3, 2021, the Company contributed $3.0

2722

For the three months ended March 31, 2023 and March 31, 2022, the Company contributed $1.5 million and ~~$2.8~~$1.7 million, ~~respectively.~~respectively, to retirement plans. The Company expects to make total contributions of ~~$7.6~~$6.5 million in ~~2022.~~2023. The Company contributed a total of ~~$6.0~~$8.3 million in fiscal ~~2021.~~2022.

For the three months ended March 31, 2023 and March 31, 2022, the Company contributed $6.2 million and $5.9 million, respectively, to defined contribution plans.

In connection with the Altra Transaction, $30.5 million of plan benefit obligations and $13.8 million of plan assets included in the Altra business were transferred to the Company on March 27, 2023.

9. SHAREHOLDERS’ EQUITY

~~Repurchase of Common Stock~~

~~At a meeting of the Board of Directors on October 26, 2021, the Company's Board of Directors approved the authorization to purchase up to $500.0 million of shares.~~ ~~During the~~ ~~three and six months ended June 30, 2022, the Company~~ ~~purchased 575,042 shares or $69.8 million and 1,306,236 shares or $184.0 million of common stock, respectively~~. ~~The Company did not repurchase and retire any common stock during the~~ ~~six months ended July 3, 2021.~~

~~As of~~ ~~June 30, 2022, there was approximately $250.3 million in common stock available for repurchase under the October 2021 program~~.

Share-Based Compensation

The Company recognized approximately ~~$4.9~~$21.7 million and ~~$4.5~~$6.3 million in share-based compensation expense for the three months ended ~~June 30,~~March 31, 2023 and March 31, 2022, ~~and July 3, 2021, respectively, and approximately $11.2~~respectively. The $21.7 million ~~and $7.8~~includes $15.7 million related to the accelerated vesting of awards for ~~the six months ended June 30, 2022 and July 3, 2021, respectively.~~certain former Altra employees. The total income tax benefit recognized in the Condensed Consolidated Statements of Income for share-based compensation expense was ~~$1.2~~$1.4 million and ~~$0.7~~$1.5 million for the three months ended ~~June 30,~~March 31, 2023 and March 31, 2022, ~~and July 3, 2021, respectively, and $2.7 million and $1.3 million for the six months ended June 30, 2022 and July 3, 2021,~~ respectively. The Company recognizes compensation expense on grants of share-based compensation awards on a straight-line basis over the vesting period of each award.

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, the Company granted the following share-based incentive awards:

Award Type Number of Awards Weighted Average Grant-Date Fair Value
Options and SARs 135,816 $ 42.21
Restricted Stock Awards 10,287 $ 131.27
Restricted Stock Units 85,017 $ 149.66
Performance Share Units 40,763 $ 174.91

See Note 9, Shareholders' Equity, to the audited consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended January 1, 2022, for further information regarding share-based compensation.


Award Type	Number of Awards	Weighted Average Grant-Date Fair Value
Options and SARs1	147,174	$	54.96
Restricted Stock Awards1	20,400	$	135.29
Restricted Stock Units1	248,794	$	141.92
Performance Share Units	58,807	$	235.77

1 Certain outstanding equity-based awards held by employees of Altra that related to shares of Altra Common Stock were replaced by equity-based awards of the Company Common Stock with substantially similar terms and conditions. These awards include 32,419 options with a weighted-average grant date fair value of $57.64, 20,114 restricted stock awards with a weighted-average grant date fair value of $135.50 and 161,414 restricted stock units with a weighted-average grant date fair value of $135.50 issued as replacement awards for Altra unvested awards outstanding at close of the Altra Transaction on March 27, 2023.

10. INCOME TAXES

The effective tax rate for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~22.1%~~180.9% versus ~~19.3%~~22.2% for the three months ended ~~July 3, 2021. The effective tax rate for the six months ended June 30, 2022 and July 3, 2021 was 22.1% and 21.1%, respectively.~~March 31, 2022. The effective tax rate for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 was higher than the same period in the prior year primarily driven by non-deductible transaction costs associated with the ~~jurisdictional mix~~Altra Transaction and withholding taxes resulting from the cash repatriation of ~~earnings related to the impact of the Rexnord Transaction in fiscal 2021.~~foreign earnings.

As of ~~June 30, 2022~~March 31, 2023 and ~~January 1,~~December 31, 2022, the Company had approximately ~~$8.6~~$9.4 million and ~~$8.8~~$5.7 million of unrecognized tax benefits, all of which would impact the effective income tax rate if recognized. Potential interest and penalties related to unrecognized tax benefits are recorded in income tax expense. The Company had approximately $1.2 million and ~~$1.3~~$1.2 million of accrued interest as of ~~June 30, 2022~~March 31, 2023 and ~~January 1,~~December 31, 2022, respectively.

With few exceptions, the Company is no longer subject to US Federal and state/local income tax examinations by tax authorities for years prior to 2018, and the Company is no longer subject to non-US income tax examinations by tax authorities for years prior to 2015.

2823

11. EARNINGS PER SHARE

Diluted earnings per share is calculated based upon earnings applicable to common shares divided by the weighted-average number of common shares outstanding during the period adjusted for the effect of other dilutive securities. The amount of the anti-dilutive shares were 0.4 million and 0.1 million for the three months ended ~~June 30,~~March 31, 2023 and March 31, 2022, ~~and July 3, 2021, respectively. The amount of the anti-dilutive shares were 0.2 million and 0.1 million for the six months ended June 30, 2022 and July 3, 2021,~~ respectively. The following table reconciles the basic and diluted shares used in earnings per share calculations for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~July 3, 2021 (in millions):~~March 31, 2022:


		Three Months Ended		Six Months Ended			Three Months Ended
		June 30, 2022	July 3, 2021	June 30, 2022	July 3, 2021		March 31, 2023	March 31, 2022
Denominator for Basic Earnings Per Share	Denominator for Basic Earnings Per Share	66.8	40.7	67.1	40.6	Denominator for Basic Earnings Per Share	66.2	67.4
Effect of Dilutive Securities	Effect of Dilutive Securities	0.3	0.3	0.4	0.4	Effect of Dilutive Securities	0.4	0.5
Denominator for Diluted Earnings Per Share	Denominator for Diluted Earnings Per Share	67.1	41.0	67.5	41.0	Denominator for Diluted Earnings Per Share	66.6	67.9

12. CONTINGENCIES

~~NaN~~One of the Company's subsidiaries that it acquired in 2007 is subject to numerous claims filed in various jurisdictions relating to certain sub-fractional motors that were primarily manufactured through 2004 and that were included as components of residential and commercial ventilation units manufactured and sold in high volumes by a third party. These ventilation units are subject to product safety requirements and other potential regulation of their performance by government agencies such as the US Consumer Product Safety Commission (“CPSC”). The claims generally allege that the ventilation units were the cause of fires. The Company has recorded an estimated liability for incurred claims. Based on the current facts, the Company cannot assure that these claims, individually or in the aggregate, will not have a material adverse effect on its subsidiary's financial condition. The Company's subsidiary cannot reasonably predict the outcome of these claims, the nature or extent of any CPSC or other remedial actions, if any, that the Company's subsidiary may need to undertake with respect to motors that remain in the field, or the costs that may be incurred, some of which could be significant.

As a result of the Company's acquisition of the Rexnord PMC business, it is entitled to indemnification from third parties to agreements with the Rexnord PMC business against certain contingent liabilities of the Rexnord PMC business, including certain pre-closing environmental liabilities.

The Company believes that, pursuant to the transaction documents related to the Rexnord PMC business' acquisition of the Stearns business from Invensys plc ("Invensys"), Invensys (now known as Schneider Electric) is obligated to defend and indemnify us with respect to the matters described below relating to the Ellsworth Industrial Park Site and to various asbestos claims. The indemnity obligations relating to the matters described below are subject, together with indemnity obligations relating to other matters, to an overall dollar cap equal to the purchase price, which is an amount in excess of ~~$900~~$900.0 million. In the event that the Company is unable to recover from Invensys with respect to the matters below, it may be entitled to indemnification from Zurn Water Solutions Corporation (formerly known as Rexnord Corporation) ("Zurn"), subject to certain limitations. The following paragraphs summarize the most significant actions and proceedings:

•In 2002, the Company's subsidiary, Rexnord Industries, LLC ("Rexnord Industries") was named as a potentially responsible party ("PRP"), together with at least ten other companies, at the Ellsworth Industrial Park Site, Downers Grove, DuPage County, Illinois (the "Site"), by the United States Environmental Protection Agency ("USEPA"), and the Illinois Environmental Protection Agency ("IEPA"). Rexnord Industries' Downers Grove property is situated within the Ellsworth Industrial Complex. The USEPA and IEPA allege there have been one or more releases or threatened releases of chlorinated solvents and other hazardous substances, pollutants or contaminants at the Site, allegedly including but not limited to a release or threatened release on or from Rexnord Industries' property. The relief sought by the USEPA and IEPA includes further investigation and potential remediation of the Site and reimbursement of USEPA's past costs. In early 2020, Rexnord Industries entered into an administrative order with the USEPA to do remediation work on its Downers Grove property. ~~Rexnord Industries' allocated share~~The soil excavation work and transporting and disposing of ~~past~~the excavated material was completed in October 2020. An AS/SVE system construction was completed in February 2022 and ~~future costs related~~is anticipated to ~~the Site, including~~operate for ~~investigation and/or remediation, could be significant.~~three years. All previously pending property damage and personal injury lawsuits against Rexnord Industries related to the Site have been settled or dismissed. Pursuant to its indemnity obligation, Invensys continues to defend Rexnord Industries in known matters related to the Site, including the costs of the remediation work pursuant to the 2020 administrative order, and has paid 100% of the costs to date. This indemnification right would not protect Rexnord Industries against liabilities related to

environmental conditions that were unknown to Invensys at the time of the acquisition of the Stearns business from Invensys.

•Multiple lawsuits (with approximately ~~300~~350 claimants) are pending in state or federal court in numerous jurisdictions relating to alleged personal injuries due to the alleged presence of asbestos in certain brakes and clutches previously manufactured by the Rexnord PMC business' Stearns brand of brakes and clutches and/or its predecessor owners. Invensys and FMC, prior owners of the Stearns business, have paid 100% of the costs to date related to the Stearns lawsuits. Similarly, the Rexnord PMC business' Prager subsidiary is the subject of claims by multiple claimants alleging personal injuries due to the alleged presence of asbestos in a product allegedly manufactured by Prager. However, all these claims are currently on the Texas Multi-district Litigation inactive docket, and the Company does not believe that they will become active in the future. To date, the Rexnord PMC business' insurance providers have paid 100% of the costs related to the Prager asbestos matters. We believe that the combination of the Company's insurance coverage and the Invensys indemnity obligations will cover any future costs of these matters.

In connection with the Company's acquisition of the Rexnord PMC business, transaction documents related to the Rexnord PMC business’ acquisition of The Falk Corporation from Hamilton Sundstrand Corporation were assigned to Rexnord Industries, and provide Rexnord Industries with indemnification against certain products related asbestos exposure liabilities. The Company believes that, pursuant to such indemnity obligations, Hamilton Sundstrand is obligated to defend and indemnify Rexnord Industries with respect to asbestos claims described below, and that, with respect to these claims, such indemnity obligations are not subject to any time or dollar limitations.

The following paragraph summarizes the most significant actions and proceedings for which Hamilton Sundstrand has accepted responsibility:

•Rexnord Industries is a defendant in multiple lawsuits pending in state or federal court in numerous jurisdictions relating to alleged personal injuries due to the alleged presence of asbestos in certain clutches and drives previously manufactured by The Falk Corporation. The ultimate outcome of these lawsuits cannot presently be determined. Hamilton Sundstrand is defending Rexnord Industries in these lawsuits pursuant to its indemnity obligations and has paid 100% of the costs to date.

The Company is, from time to time, party to litigation and other legal or regulatory proceedings that arise in the normal course of its business operations and the outcomes of which are subject to significant uncertainty, including product warranty and liability claims, contract disputes and environmental, asbestos, intellectual property, employment and other litigation matters. The Company's products are used in a variety of industrial, commercial and residential applications that subject the Company to claims that the use of its products is alleged to have resulted in injury or other damage. Many of these matters will only be resolved when one or more future events occur or fail to occur. Management conducts regular reviews, including updates from legal counsel, to assess the need for accounting recognition or disclosure of these contingencies, and such assessment inherently involves an exercise in judgment. The Company accrues for exposures in amounts that it believes are adequate, and the Company does not believe that the outcome of any such lawsuit individually or collectively will have a material effect on the Company's financial position, its results of operations or its cash flows.

The Company recognizes the cost associated with its standard warranty on its products at the time of sale. The amount recognized is based on historical experience. The following table presents a reconciliation of the changes in accrued warranty costs for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~July 3, 2021 (in millions):~~March 31, 2022:


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30, 2022		July 3, 2021		June 30, 2022		July 3, 2021			March 31, 2023		March 31, 2022
Beginning Balance	Beginning Balance	$	23.4	$	16.3	$	23.0	$	15.5	Beginning Balance	$	28.8	$	23.0
Less: Payments	Less: Payments	(7.7)		(4.2)		(13.3)		(8.7)		Less: Payments	(3.3)		(5.6)
Provisions	Provisions	8.0		4.6		14.0		10.0		Provisions	6.2		6.0
Acquisitions										Acquisitions	9.8		—

Translation Adjustments		(0.3)		—		(0.3)		(0.1)
Ending Balance	Ending Balance	$	23.4	$	16.7	$	23.4	$	16.7	Ending Balance	$	41.5	$	23.4

These liabilities are included in Other Accrued Expenses and Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets.

13. DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative instruments are commodity price risk, currency exchange risk, and interest rate risk. Forward contracts on certain commodities are entered into to manage the price risk associated with forecasted purchases of materials used in the Company's manufacturing process. Forward contracts on certain currencies are entered into to manage forecasted cash flows in certain foreign currencies. Interest rate swaps are utilized to manage interest rate risk associated with the Company's floating rate borrowings.

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

The Company recognizes all derivative instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets. The Company designates commodity forward contracts as cash flow hedges of forecasted purchases of commodities, currency forward contracts as cash flow hedges of forecasted foreign currency cash flows and interest rate swaps as cash flow hedges of forecasted SOFR-based interest payments. There were no significant collateral deposits on derivative financial instruments as of ~~June 30, 2022~~March 31, 2023 or ~~July 3, 2021.~~

~~Cash Flow Hedges~~March 31, 2022.

The effective portion of the gain or loss on the derivative is reported as a component of AOCI and reclassified into the same line within the Condensed Consolidated Statement of Income as the earnings effect of the hedged item in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or changes in market value of derivatives not designated as hedges are recognized in current earnings.

~~At June 30,~~As of March 31, 2023 and December 31, 2022, the Company had ~~$16.7~~$16.4 million and $11.9 million, respectively, net of tax, of derivative gains on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings. At January 1, 2022, the Company had $5.6 million, net of tax, of derivative gains on closed hedge instruments in AOCI that was subsequently realized in earnings when the hedged items impacted earnings.

~~As of June 30, 2022, the~~The Company had the following currency forward contracts outstanding (with maturities extending through ~~December 2023) to hedge forecasted foreign currency cash flows (in millions)~~August 2024):


	~~Notional Amount (in US Dollars)~~
~~Chinese Renminbi~~	$	~~249.5~~
~~Mexican Peso~~	~~204.1~~
~~Euro~~	~~208.7~~
~~Indian Rupee~~	~~79.4~~

~~Australian Dollar~~	~~14.1~~

~~British Pound~~	~~1.8~~
~~Thai Baht~~	~~0.5~~


	March 31, 2023		December 31, 2022
Chinese Renminbi	$	251.4	$	173.8
Mexican Peso	189.1		215.2
Euro	342.3		159.6
Indian Rupee	44.2		33.1



British Pound	6.0		2.1

~~As of June 30, 2022, the~~The Company had the following commodity forward contracts outstanding (with maturities extending through ~~November 2023)~~August 2024) to hedge forecasted purchases of commodities (notional amounts expressed in terms of the dollar value of the hedged ~~item (in millions))~~item):


	~~Notional Amount~~
~~Copper~~	$	~~145.3~~
~~Aluminum~~	~~7.1~~


	March 31, 2023		December 31, 2022
Copper	$	67.4	$	89.4
Aluminum	2.3		4.0

The Company entered into 2two receive variable/pay-fixed forward starting non-amortizing interest rate swaps in June 2020, with a total notional amount of $250.0 million, which were subsequently terminated in March 2022. The cash proceeds of $16.2 million received to settle the terminated swaps ~~will be~~is being recognized as a reduction of interest expense via the effective

interest rate method through July 2025 when the terminated swaps were scheduled to expire. The Company entered into 2two additional receive variable/pay-fixed forward starting non-amortizing interest rate swaps in May 2022, with a total notional amount of $250.0 million. These swaps will expire in March 2027.

~~The following table presents the fair~~Fair values of derivative instruments as of ~~June 30,~~March 31, 2023 and December 31, 2022 ~~and January 1, 2022 (in millions):~~were:

June 30, 2022
Prepaid Expenses and Other Current Assets Other Noncurrent Assets Other Accrued Expenses Other Noncurrent Liabilities
Designated as Hedging Instruments:
Interest Rate Swap Contracts $ — $ — $ — $ 1.8
Currency Contracts 8.4 0.8 2.8 0.5
Commodity Contracts 0.5 — 19.3 3.4
Not Designated as Hedging Instruments:
Currency Contracts 0.6 — 0.7 —
Commodity Contracts — — 0.3 —
Total Derivatives $ 9.5 $ 0.8 $ 23.1 $ 5.7

January 1, 2022
Prepaid Expenses and Other Current Assets Other Noncurrent Assets Other Accrued Expenses Other Noncurrent Liabilities
Designated as Hedging Instruments:
Interest Rate Swap Contracts $ — $ 5.3 $ — $ —
Currency Contracts 8.3 0.7 1.3 —
Commodity Contracts 8.9 0.1 1.2 0.5
Not Designated as Hedging Instruments:
Currency Contracts 0.3 — 0.4 —
Commodity Contracts 0.4 — — 0.1
Total Derivatives $ 17.9 $ 6.1 $ 2.9 $ 0.6

3226


	March 31, 2023
	Prepaid Expenses and Other Current Assets		Other Noncurrent Assets		Other Accrued Expenses		Other Noncurrent Liabilities
Designated as Hedging Instruments:
Interest Rate Swap Contracts	$	—	$	4.3	$	—	$	—
Currency Contracts	22.0		2.0		2.4		0.1
Commodity Contracts	2.3		0.4		3.3		0.1
Not Designated as Hedging Instruments:
Currency Contracts	0.8		—		0.1		—
Commodity Contracts	—		—		0.1		—
Total Derivatives	$	25.1	$	6.7	$	5.9	$	0.2


	December 31, 2022
	Prepaid Expenses and Other Current Assets		Other Noncurrent Assets		Other Accrued Expenses		Other Noncurrent Liabilities
Designated as Hedging Instruments:
Interest Rate Swap Contracts	$	—	$	7.9	$	—	$	—
Currency Contracts	12.3		0.9		4.8		—
Commodity Contracts	0.9		0.3		10.2		—
Not Designated as Hedging Instruments:
Currency Contracts	0.7		—		—		—
Commodity Contracts	—		—		0.4		—
Total Derivatives	$	13.9	$	9.1	$	15.4	$	—

Derivatives Designated as Cash Flow Hedging Instruments

The ~~following table presents the~~ effect of derivative instruments designated as cash flow hedges on the Condensed Consolidated Statements of Income and Condensed Consolidated ~~Statement~~Statements of Comprehensive Income ~~(pre-tax) (in millions):~~were:

~~Derivatives Designated as Cash Flow Hedging Instruments~~


	Three Months Ended
	March 31, 2023								March 31, 2022
	Commodity Forwards		Currency Forwards		Interest Rate Swaps		Total		Commodity Forwards		Currency Forwards		Interest Rate Swaps		Total
Gain (Loss) Recognized in Other Comprehensive Income (Loss)	$	5.5	$	20.3	$	(3.7)	$	22.1	$	13.4	$	10.4	$	10.6	$	34.4
Amounts Reclassified from Other Comprehensive Income (Loss):
Gain recognized in Net Sales	—		—		—		—		—		0.1		—		0.1
(Loss) Gain Recognized in Cost of Sales	(5.0)		2.0		—		(3.0)		5.2		3.0		—		8.2

Gain (Loss) Recognized in Interest Expense	—		—		1.3		1.3		—		—		(0.3)		(0.3)

Three Months Ended
June 30, 2022 July 3, 2021
Commodity Forwards Currency Forwards Interest Rate Swaps Total Commodity Forwards Currency Forwards Interest Rate Swaps Total
(Loss) Gain Recognized in Other Comprehensive Income (Loss) $ (35.6) $ (6.0) $ (1.8) $ (43.4) $ 10.9 $ 7.5 $ (0.9) $ 17.5
Amounts Reclassified from Other Comprehensive Income (Loss):
Gain Recognized in Cost of Sales 4.4 2.4 — 6.8 8.6 4.0 — 12.6
Loss Recognized in Operating Expenses — — — — — (1.3) — (1.3)
Six Months Ended
June 30, 2022 July 3, 2021
Commodity Forwards Currency Forwards Interest Rate Swaps Total Commodity Forwards Currency Forwards Interest Rate Swaps Total
(Loss) Gain Recognized in Other Comprehensive Income (Loss) $ (22.2) $ 4.4 $ 8.8 $ (9.0) $ 25.0 $ 7.7 $ 4.0 $ 36.7
Amounts Reclassified from Other Comprehensive Income (Loss):
Gain Recognized in Net Sales — 0.1 — 0.1 — 0.1 — 0.1
Gain Recognized in Cost of Sales 9.6 5.4 — 15.0 13.8 6.6 — 20.4
Gain Recognized in Operating Expenses — — — — — 2.2 — 2.2
(Loss) Gain Recognized in Interest Expense — — (0.3) (0.3) — — 0.1 0.1

Derivatives Not Designated as Cash Flow Hedging ~~Instruments (in millions):~~

Three Months Ended
June 30, 2022 July 3, 2021
Commodity Forwards Currency Forwards Commodity Forwards Currency Forwards
(Loss) Gain recognized in Cost of Sales $ (1.2) $ — $ 0.2 $ —
Gain (Loss) recognized in Operating Expenses — 3.5 — (3.7)
Six Months Ended
June 30, 2022 July 3, 2021
Commodity Forwards Currency Forwards Commodity Forwards Currency Forwards
(Loss) Gain recognized in Cost of Sales $ (0.6) $ — $ 0.4 $ —
Gain recognized in Operating Expenses — 5.0 — 2.1
Instruments:

The effect of derivative instruments not designated as cash flow hedges on the Condensed Consolidated Statements of Income were:


	Three Months Ended
	March 31, 2023				March 31, 2022
	Commodity Forwards		Currency Forwards		Commodity Forwards		Currency Forwards
Gain recognized in Cost of Sales	$	0.2	$	—	$	0.6	$	—
Gain recognized in Operating Expenses	—		1.9		—		1.5

The ~~net~~ AOCI balance related to hedging ~~component balance~~activities of a ~~$2.9~~$35.4 million gain ~~at June 30, 2022~~net of tax as of March 31, 2023 includes ~~$(2.1)~~$24.2 million of net current deferred ~~losses~~gains expected to be ~~realized~~reclassified to the Consolidated Statement of Comprehensive Income in the next twelve months. ~~The gain/loss~~There were no gains or losses reclassified from AOCI ~~into~~to earnings based on ~~such derivatives will be recognized in~~ the ~~same period in which~~probability that the ~~related item affects earnings.~~forecasted transaction would not occur.

The Company's commodity and currency derivative contracts are subject to master netting agreements with the respective counterparties which allow the Company to net settle transactions with a single net amount payable by one party to another party. The Company has elected to present the derivative assets and derivative liabilities on the Condensed Consolidated Balance Sheets on a gross basis ~~for the periods ended June 30, 2022~~as of March 31, 2023 and ~~January 1,~~December 31, 2022.

The following table presents the derivative assets and derivative liabilities presented on a net basis under enforceable master netting ~~agreements (in millions):~~agreements:


		June 30, 2022							March 31, 2023
		Gross Amounts as Presented in the Condensed Consolidated Balance Sheet		Derivative Contract Amounts Subject to Right of Offset		Derivative Contracts as Presented on a Net Basis			Gross Amounts as Presented in the Condensed Consolidated Balance Sheet		Derivative Contract Amounts Subject to Right of Offset		Derivative Contracts as Presented on a Net Basis
Prepaid Expenses and Other Current Assets:	Prepaid Expenses and Other Current Assets:							Prepaid Expenses and Other Current Assets:
Derivative Currency Contracts	Derivative Currency Contracts	$	9.0	$	(2.3)	$	6.7	Derivative Currency Contracts	$	22.8	$	(1.9)	$	20.9
Derivative Commodity Contracts	Derivative Commodity Contracts	0.5		(0.5)		—		Derivative Commodity Contracts	2.3		(2.0)		0.3
Other Noncurrent Assets:	Other Noncurrent Assets:							Other Noncurrent Assets:
Derivative Currency Contracts	Derivative Currency Contracts	0.8		—		0.8		Derivative Currency Contracts	2.0		—		2.0

Derivative Commodity Contracts								Derivative Commodity Contracts	0.4		(0.1)		0.3
Other Accrued Expenses:	Other Accrued Expenses:							Other Accrued Expenses:

Derivative Currency Contracts	Derivative Currency Contracts	3.5		(2.3)		1.2		Derivative Currency Contracts	2.5		(1.9)		0.6
Derivative Commodity Contracts	Derivative Commodity Contracts	19.6		(0.5)		19.1		Derivative Commodity Contracts	3.4		(2.0)		1.4
Other Noncurrent Liabilities:	Other Noncurrent Liabilities:							Other Noncurrent Liabilities:
Derivative Currency Contracts	Derivative Currency Contracts	0.5		—		0.5		Derivative Currency Contracts	0.1		(0.1)		—
Derivative Commodity Contracts	Derivative Commodity Contracts	3.4		—		3.4		Derivative Commodity Contracts	0.1		—		0.1


		January 1, 2022							December 31, 2022
		Gross Amounts as Presented in the Condensed Consolidated Balance Sheet		Derivative Contract Amounts Subject to Right of Offset		Derivative Contracts as Presented on a Net Basis			Gross Amounts as Presented in the Condensed Consolidated Balance Sheet		Derivative Contract Amounts Subject to Right of Offset		Derivative Contracts as Presented on a Net Basis
Prepaid Expenses and Other Current Assets:	Prepaid Expenses and Other Current Assets:							Prepaid Expenses and Other Current Assets:
Derivative Currency Contracts	Derivative Currency Contracts	$	8.6	$	(1.7)	$	6.9	Derivative Currency Contracts	$	13.0	$	(2.5)	$	10.5
Derivative Commodity Contracts	Derivative Commodity Contracts	9.3		(1.2)		8.1		Derivative Commodity Contracts	0.9		(0.9)		—
Other Noncurrent Assets:	Other Noncurrent Assets:							Other Noncurrent Assets:
Derivative Currency Contracts	Derivative Currency Contracts	0.7		—		0.7		Derivative Currency Contracts	0.9		—		0.9
Derivative Commodity Contracts	Derivative Commodity Contracts	0.1		(0.1)		—		Derivative Commodity Contracts	0.3		—		0.3
Other Accrued Expenses:	Other Accrued Expenses:							Other Accrued Expenses:
Derivative Currency Contracts	Derivative Currency Contracts	1.7		(1.7)		—		Derivative Currency Contracts	4.8		(2.5)		2.3
Derivative Commodity Contracts	Derivative Commodity Contracts	1.2		(1.2)		—		Derivative Commodity Contracts	10.6		(0.9)		9.7
Other Noncurrent Liabilities:

Derivative Commodity Contracts		0.6		(0.1)		0.5

14. FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:


Level 1			Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2			Unadjusted quoted prices in active markets for similar assets or liabilities, or
			Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or
			Inputs other than quoted prices that are observable for the asset or liability
Level 3			Unobservable inputs for the asset or liability

The Company uses the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The fair values of cash equivalents and short-term deposits approximate their carrying values as of ~~June 30, 2022~~March 31, 2023 and ~~January 1,~~December 31, 2022, due to the short period of time to maturity and are classified using Level 1 inputs. The fair values of trade receivables and accounts payable approximate the carrying values due to the short period of time to maturity. See Note 7 - Debt and Bank Credit Facilities for disclosure of the approximate fair value of the Company's debt ~~at June 30, 2022~~as of March 31, 2023 and ~~January 1,~~December 31, 2022.

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of ~~June 30, 2022~~March 31, 2023 and ~~January 1, 2022 (in millions):~~December 31, 2022:

June 30, 2022

January 1, 2022

Classification

March 31, 2023

December 31, 2022

Classification

Assets:

Prepaid Expenses and Other Current Assets:

Derivative Currency Contracts

9.0

8.6

Level 2

Derivative Currency Contracts

22.8

13.0

Level 2

Derivative Commodity Contracts

0.5

9.3

Level 2

Derivative Commodity Contracts

2.3

0.9

Level 2

Other Noncurrent Assets:

Assets Held in Rabbi Trust

6.4

6.8

Level 1

Assets Held in Rabbi Trust

12.1

6.4

Level 1

Derivative Currency Contracts

0.8

0.7

Level 2

Derivative Currency Contracts

2.0

0.9

Level 2

Derivative Commodity Contracts

—

0.1

Level 2

Derivative Commodity Contracts

0.4

0.3

Level 2

Interest Rate Swap

—

5.3

Level 2

Interest Rate Swap

4.3

7.9

Level 2

Liabilities:

Other Accrued Expenses:

Derivative Currency Contracts

3.5

1.7

Level 2

Derivative Currency Contracts

2.5

4.8

Level 2

Derivative Commodity Contracts

19.6

1.2

Level 2

Derivative Commodity Contracts

3.4

10.6

Level 2

Other Noncurrent Liabilities:

Interest Rate Swap

1.8

—

Level 2

Derivative Currency Contracts

0.5

—

Level 2

Derivative Currency Contracts

0.1

—

Level 2

Derivative Commodity Contracts

3.4

0.6

Level 2

Derivative Commodity Contracts

0.1

—

Level 2

Level 1 fair value measurements for assets held in a Rabbi Trust are unadjusted quoted prices.

Level 2 fair value measurements for derivative assets and liabilities are measured using quoted prices in active markets for similar assets and liabilities. Interest rate swaps are valued based on the discounted cash flows ~~for~~using the SOFR forward yield curve for ~~a swap~~an instrument with similar contractual terms. Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments. Commodity forwards are valued based on observable market transactions of forward commodity prices. Debt instruments are valued based on quoted prices in active markets for instruments with similar contractual terms.

3530

15. RESTRUCTURING ACTIVITIES

The Company incurred restructuring and restructuring-related costs on projects during ~~fiscal 2022~~three months ended March 31, 2023 and ~~2021. In conjunction with the Rexnord Transaction, the~~March 31, 2022. The Company has initiated a restructuring ~~plan~~plans to achieve cost synergies from procurement, distribution efficiencies, footprint rationalization and other general cost savings measures. Restructuring costs include employee termination and plant relocation costs. Restructuring-related costs also include costs directly associated with actions resulting from the Company's simplification initiatives, such as asset write-downs or accelerated depreciation due to shortened useful lives in connection with site closures, discretionary employment benefit costs and other facility rationalization costs. Restructuring costs for employee termination expenses are generally recognized when the severance liability is determined to be probable of being paid and reasonably estimable while plant relocation costs and related costs are generally required to be expensed as incurred.

The following table presents a reconciliation of provisions and payments for the restructuring projects for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~July 3, 2021 (in millions):~~March 31, 2022:


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30, 2022		July 3, 2021		June 30, 2022		July 3, 2021			March 31, 2023		March 31, 2022
Beginning Balance	Beginning Balance	$	14.5	$	2.7	$	5.0	$	2.0	Beginning Balance	$	15.1	$	5.0
Acquisition(1)										Acquisition(1)	0.2		—
Provision	Provision	(1.0)		1.5		15.8		3.2		Provision	5.0		16.8
Less: Payments/ Other	Less: Payments/ Other	7.1		1.7		14.4		2.7		Less: Payments/ Other	10.2		7.3
Ending Balance	Ending Balance	$	6.4	$	2.5	$	6.4	$	2.5	Ending Balance	$	10.1	$	14.5

(1) Excludes $12.4 million of severance related to the Altra Transaction, which will be paid in the second quarter 2023.

The following table presents a reconciliation of restructuring and restructuring-related costs for restructuring projects for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and March 31, 2022, ~~and July 3, 2021, respectively (in millions):~~respectively:

Three Months Ended
June 30, 2022 July 3, 2021
Restructuring Costs: Cost of Sales Operating Expenses Total Cost of Sales Operating Expenses Total
Employee Termination Expenses $ 1.4 $ (1.0) $ 0.4 $ 0.2 $ 0.2 $ 0.4
Facility Related Costs (2.0) 0.1 (1.9) 0.8 0.1 0.9
Other Expenses 0.1 0.4 0.5 0.2 — 0.2
Total Restructuring Costs $ (0.5) $ (0.5) $ (1.0) $ 1.2 $ 0.3 $ 1.5
Six Months Ended
June 30, 2022 July 3, 2021
Restructuring Costs: Cost of Sales Operating Expenses Total Cost of Sales Operating Expenses Total
Employee Termination Expenses $ 6.2 $ 2.6 $ 8.8 $ 0.4 $ 0.6 $ 1.0
Facility Related Costs 6.0 0.5 6.5 1.6 0.3 1.9
Other Expenses 0.1 0.4 0.5 0.3 — 0.3
Total Restructuring Costs $ 12.3 $ 3.5 $ 15.8 $ 2.3 $ 0.9 $ 3.2


	Three Months Ended
	March 31, 2023						March 31, 2022
Restructuring Costs:	Cost of Sales		Operating Expenses		Total		Cost of Sales		Operating Expenses		Total
Employee Termination Expenses	$	2.3	$	0.6	$	2.9	$	4.8	$	3.6	$	8.4
Facility Related Costs	0.9		—		0.9		8.0		0.4		8.4
Other Expenses	1.2		—		1.2		—		—		—
Total Restructuring Costs	$	4.4	$	0.6	$	5.0	$	12.8	$	4.0	$	16.8

The following table presents the allocation of restructuring and restructuring-related costs by segment for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~July 3, 2021 (in millions):~~March 31, 2022:

Restructuring Costs - Three Months Ended Total Commercial Systems Industrial Systems Climate Solutions Motion Control Solutions
June 30, 2022 $ (1.0) $ 0.3 $ 0.3 $ 0.4 $ (2.0)
July 3, 2021 $ 1.5 $ 0.1 $ 0.3 $ 0.3 $ 0.8
Restructuring Costs - Six Months Ended Total Commercial Systems Industrial Systems Climate Solutions Motion Control Solutions
June 30, 2022 $ 15.8 $ 1.0 $ 0.3 $ 0.7 $ 13.8
July 3, 2021 $ 3.2 $ 0.3 $ 0.8 $ 0.6 $ 1.5


Restructuring Costs - Three Months Ended	Total		Industrial Powertrain Solutions		Power Efficiency Solutions		Automation & Motion Control		Industrial Systems
March 31, 2023	$	5.0	$	(0.4)	$	4.7	$	0.5	$	0.2
March 31, 2022	$	16.8	$	14.3	$	1.0	$	1.5	$	—

The Company's current restructuring activities are expected to continue through 2023. The Company expects to record aggregate future charges of approximately ~~$45.7~~$60 million in ~~2022.~~2023. The Company continues to evaluate operating efficiencies and anticipates incurring additional costs in future periods in connection with these activities.

~~16.~~
~~SUBSEQUENT EVENT~~

~~The Company has evaluated subsequent events since June 30, 2022, the date of these financial statements, and is not aware of any events to disclose.~~

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars In Millions Except Per Share Data, Unless ~~the context requires otherwise, references in this Item 2 to “we,” “us,” “our” or the “Company” refer collectively to Regal Rexnord Corporation and its subsidiaries.~~Otherwise Noted)

Overview

Regal Rexnord Corporation (NYSE: RRX)~~, based in Beloit, Wisconsin (USA),~~ (“we,” “us,” “our” or the “Company”) is a global leader in the engineering and manufacturing of factory automation sub-systems, industrial powertrain solutions, automation and mechanical power transmission components, ~~electrical~~electric motors and electronic controls, air moving products, and specialty electrical components and systems, serving customers around the world. Through longstanding technology leadership and an intentional focus on producing more energy-efficient products and systems, we help create a better tomorrow – for our customers and for the planet.

~~Operating Segments~~ We are headquartered in Beloit, Wisconsin and have manufacturing, sales and service facilities worldwide.

Our company is comprised of four operating segments: ~~Commercial Systems,~~ Industrial ~~Systems, Climate~~Powertrain Solutions ~~and~~(IPS), Power Efficiency Solutions (PES), Automation & Motion Control ~~Solutions.~~(AMC) and Industrial Systems. Effective during the first quarter of 2023, in conjunction with the Altra Transaction (as defined in Note 3 - Acquisitions and Divestitures), we realigned our four operating segments with the change to our management structure and operating model. See Note 6 - Segment Information of the Notes to the Condensed Consolidated Financial Statements for further information.

A description of our four operating segments is as follows:

•IPS consists of the majority of our previous Motion Control Solutions (MCS) segment, excluding the conveying and aerospace business units, plus Altra's Power Transmission Technologies segment. The IPS segment designs, produces and services mounted and unmounted bearings, couplings, mechanical power transmission drives and components, gearboxes and gear motors, clutches, brakes, special components products and industrial powertrain components and solutions serving a broad range of markets including food and beverage, bulk handling, eCommerce/warehouse distribution, energy, agriculture machinery, turf & garden and general industrial.

•PES consists of our previous Climate Solutions and Commercial Systems segments. The PES segment designs and produces fractional to approximately 5 horsepower AC and DC motors, electronic variable speed controls, fans, and blowers for commercial ~~applications. These products serve~~applications and small motors, electronic variable speed controls and air moving solutions serving markets including residential and light commercial HVAC, water heaters, commercial refrigeration, commercial building ventilation, ~~and HVAC,~~ pool and spa, irrigation, dewatering, agriculture, and general commercial ~~equipment.~~equipment

•AMC consists of our previous MCS aerospace and conveying business units, Altra's Automation & Specialty segment and the Thomson Power Systems business that was previously in our Industrial Systems segment. The AMC segment designs, produces and services conveyor products, conveying automation subsystems, aerospace components, rotary precision motion solutions, high-efficiency miniature motors and motion control products, automatic transfer switches, switchgear for industrial applications and automation systems that enable and control the transition of rotary motion to linear motion. These products are used in advanced material handling, aerospace and defense, factory automation, data centers, medical device, packaging, printing, semiconductor, robotic, industrial power tool, mobile off-highway, food & beverage processing and other applications.

•Industrial Systems consists of our previous Industrial Systems segment excluding the Thomson Power Systems business. The Industrial Systems segment designs and produces integral motors, ~~automatic transfer switches,~~ alternators ~~and switchgear~~ for industrial applications, along with aftermarket parts and kits to support such products. These products serve markets including agriculture, marine, mining, oil and gas, food and beverage, data centers, ~~healthcare,~~ prime and standby power, and general industrial equipment.

As previously disclosed, we are considering a full range of strategic alternatives for the Industrial Systems operating segment. Our ongoing strategic review may or may not lead to a decision to divest this business.

•Climate Solutions segment designs and produces small motors, electronic variable speed controls and air moving solutions serving markets including residential and light commercial HVAC, water heaters and commercial refrigeration.

•Motion Control Solutions segment designs, produces and services mounted and unmounted bearings, conveyor products, conveying automation solutions, couplings, mechanical power transmission drives and components, gearboxes and gear motors, aerospace components, special components products and industrial powertrain components and solutions serving a broad range of markets including food and beverage, bulk handling, eCommerce/warehouse distribution, energy, aerospace and general industrial.

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 ~~the~~ levels of revenue concentration ~~of revenues~~by customer varying ~~from~~widely across our business ~~unit to business unit.~~units.

Our level of net sales for any given period is dependent upon a number of factors, including (i) the demand for our ~~products;~~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 ~~ability to timely meet customer demands;~~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 ~~(vi)~~(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 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 increase 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. For example, a portion of our ~~Climate Solutions~~PES segment manufactures products that are used in air conditioning applications. As a result, our sales for that business tend to be lower in the first and fourth quarters and higher in the second and third quarters. In contrast, a portion of our ~~Commercial Systems~~PES segment, IPS segment, AMC segment and Industrial Systems segment and ~~Motion Control Solutions segment~~ have a broad customer base and a variety of applications, thereby helping to mitigate large quarter-to-quarter fluctuations outside of general economic conditions.

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 in those three segments is energy efficiency, which generally means using less electrical power to produce more mechanical power.

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

~~Restructuring and Restructuring Related Costs~~. We incurred restructuring-related costs on employee termination and plant relocation costs including cost synergies related to the Rexnord Transaction. Restructuring related costs includes costs directly associated with actions resulting from our simplification initiatives, such as asset write-downs or accelerated depreciation due to shortened useful lives in connection with site closures, discretionary employment benefit costs and other facility rationalization costs. Restructuring costs for employee termination expenses are generally recognized when the severance liability is determined to be probable of being paid and reasonably estimable while plant relocation costs and related costs are generally required to be expensed as incurred.

~~COVID-19 Pandemic~~

COVID-19 evolved during 2020 into a global pandemic, resulting in a severe global health crisis that drove a dramatic slowdown in global economic and social activity. As the COVID-19 pandemic continues, health risks remain.

In the face of this global crisis, our first priority has been the health and safety of our associates. In response, we implemented a host of measures to help our associates stay safe, measures that have been enhanced and refined as impacts from COVID-19 evolved, and as our knowledge about how to enhance their effectiveness improved.

Factors deriving from the COVID-19 response that have or may negatively impact sales and operating profit in the future include, but are not limited to: limitations on the ability of our suppliers to manufacture, or procure from manufacturers, components and raw materials used in our products, or to meet delivery requirements and commitments; limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring employees to remain at home; inconsistent criteria in certain international jurisdictions for establishing the essentiality of our business; limitations on the ability of carriers to deliver our products to customers; limitations on the ability of our customers to conduct their business and purchase our products and services; reductions in demands of our customers; and limitations on the ability of our customers to pay us on a timely basis.

~~We continue to monitor the pandemic and make adjustments to the business as necessary to address any limitations or negative impacts.~~

~~Rexnord and Arrowhead Transactions~~

Altra Transaction

On ~~October 4, 2021,~~March 27, 2023, in accordance with the terms and conditions of the Altra Merger Agreement, by and ~~Plan of~~among us, Altra, and Merger dated February 15, 2021 (the “Merger Agreement”), we completed our combination with 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”). PursuantSub, pursuant to the ~~Rexnord Transaction, (1) Zurn transferred to its then-subsidiary Land Newco, Inc. (“Land”) substantially all~~satisfaction of the assets, and Land assumed substantially all of the liabilities, of the Rexnord PMC business (the “Reorganization”), (2) 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 (3) immediately after the Spin-Off, one of our subsidiaries (“~~specified conditions, Merger ~~Sub”)~~Sub merged with and into ~~Land (the “Merger”) and all shares of Land common stock (other than those held by Zurn, Land,~~Altra, with Altra surviving the ~~Company,~~Altra Merger ~~Sub or their respective subsidiaries) were converted into the right to receive 0.22296103 shares of our common stock, $0.01 par value per share(“Company common stock”),~~ as ~~calculated in the Merger Agreement. When the Merger was completed, Land which held the Rexnord PMC business, became~~ our wholly owned subsidiary.

~~Pursuant~~ See Note 3 - Acquisitions and Divestitures of the Notes to the ~~Merger, we issued 27,055,945 shares of common stock to holders of Land common stock, which represented approximately 39.9% of~~Condensed Consolidated Financial Statements for further information regarding the ~~67,756,732 outstanding shares of Company common stock immediately following the completion of the Merger.~~

In addition, shareholders of record as of October 1, 2021 received a special dividend of $6.99 per share (or approximately $284.4 million in aggregate) pursuant to a special dividend in connection with the RexnordAltra Transaction.

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

~~On November 23, 2021, we acquired Arrowhead Systems, LLC, ("Arrowhead") for $315.6 million~~2023 Outlook

We continue to expect a low single digit percentage decline in ~~cash,~~organic sales and earnings per share. We expect benefits from merger and acquisition synergies, improving new product mix, ongoing 80/20 initiatives and various productivity initiatives to be more than offset by headwinds from lower volumes, material and non-material inflation, strategic growth investments, a higher tax rate and higher net of $1.1 million of cash acquired (the "Arrowhead Transaction"). 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 a division of our Motion Control Solutions segment, and its financials have been included in results for that segment from the date of acquisition.interest expense.

~~Change in Fiscal Year End~~

At a meeting of the Board of Directors of Regal Rexnord Corporation on October 26, 2021, the Board approved a change in the fiscal year end from a 52-53 week year ending on the Saturday closest to December 31 to a calendar year ending on December 31, effective beginning with fiscal year 2022. We made the fiscal year change on a prospective basis and will not adjust operating results for prior periods. However, the change will impact the prior year comparability of each of the fiscal quarters and the annual period in 2022 and in future filings. We believe this change will provide numerous benefits, including aligning its reporting periods to be more consistent with peer companies.34

~~Change in Accounting Principle~~

As of January 2, 2022, we changed our methodology for valuing certain inventories to the first-in, first-out ("FIFO") cost method from the last-in, first-out ("LIFO") cost method. The effects of this change have been retrospectively applied to all periods presented.

~~Outlook~~

~~We are forecasting high single digit organic sales growth. We expect to see positive impacts from our transactions, price realization and from our new products and other growth initiatives.~~

Results of Operations


	Three Months Ended
	March 31, 2023			March 31, 2022
Net Sales:
Industrial Powertrain Solutions	$	414.4		$	416.3
Power Efficiency Solutions	469.5			567.2
Automation & Motion Control	203.2			184.3
Industrial Systems	137.0			130.7
Consolidated	$	1,224.1		$	1,298.5

Gross Profit as a Percent of Net Sales:
Industrial Powertrain Solutions	42.8		%	37.1		%
Power Efficiency Solutions	25.1		%	31.3		%
Automation & Motion Control	37.1		%	34.2		%
Industrial Systems	20.1		%	20.7		%
Consolidated	32.5		%	32.5		%

Operating Expenses as a Percent of Net Sales:
Industrial Powertrain Solutions	36.6		%	25.9		%
Power Efficiency Solutions	15.4		%	12.9		%
Automation & Motion Control	39.7		%	27.5		%
Industrial Systems	18.1		%	15.5		%
Consolidated	26.9		%	19.4		%

Income (Loss) from Operations as a Percent of Net Sales:
Industrial Powertrain Solutions	6.3		%	11.1		%
Power Efficiency Solutions	9.7		%	18.4		%
Automation & Motion Control	(2.6)		%	6.7		%
Industrial Systems	2.0		%	5.3		%
Consolidated	5.6		%	13.1		%

Income from Operations	$	68.9		$	169.9

Interest Expense	95.4			9.0
Interest Income	(31.9)			(1.1)
Other Income, Net	(1.4)			(1.3)
Income before Taxes	6.8			163.3
Provision for Income Taxes	12.3			36.2
Net (Loss) Income	(5.5)			127.1
Less: Net Income Attributable to Noncontrolling Interests	0.4			1.5
Net (Loss) Income Attributable to Regal Rexnord Corporation	$	(5.9)		$	125.6

Three Months Ended ~~June 30, 2022~~March 31, 2023 Compared to ~~July 3, 2021~~March 31, 2022

Net sales ~~increased $462.5~~decreased $74.4 million or ~~52.1%~~5.7% for the ~~second~~first quarter ~~2022~~2023 compared to the ~~second~~first quarter ~~2021.~~2022. The ~~increase~~decrease consisted of ~~positive impact from acquisitions of 42.2% and positive~~negative organic sales of ~~11.8% offset by~~4.1% and negative foreign currency translation of ~~1.9%~~1.6%. The decrease was primarily driven by sales decreases in North American markets, partially offset by price realization. Gross profit decreased $23.8 million or 5.6% for the first quarter 2023 as compared to the first quarter 2022. The decrease in gross profit was driven by lower volumes and increased material costs partially offset by lower freight costs and lower restructuring costs. Total operating expenses for the first quarter

2023 increased $77.2 million or 30.6% as compared to the first quarter 2022. The increase was primarily driven by higher acquisition costs from the Altra Transaction and employee compensation costs, partially offset by lower restructuring costs.

Industrial Powertrain Solutions segment net sales ~~increases in North American markets and~~for the ~~acquisitions~~first quarter 2023 were $414.4 million, a decrease of ~~the Rexnord PMC and Arrowhead businesses. Gross profit increased $175.8~~$1.9 million or ~~68.2% for the second quarter 2022~~0.5% as compared to the ~~second~~first quarter ~~2021.~~2022. The decrease consisted of negative foreign currency translation of 1.8% offset by positive organic sales of 1.3%. The decrease was primarily driven by the North America general industrial market. Gross profit increased $23.1 million or 15.0% as compared to the first quarter 2022. The increased gross profit was primarily driven by lower freight and material costs and lower restructuring expense. Total operating expenses for the first quarter 2023 were $151.5 million compared to $108.0 million in the first quarter 2022. The $43.5 million or 40.3% increase was primarily driven by higher acquisition costs from the Altra Transaction and increased employee compensation costs partially offset by lower restructuring costs.

Power Efficiency Solutions segment net sales for the first quarter 2023 were $469.5 million, a decrease of $97.7 million or 17.2% as compared to the first quarter 2022. The decrease consisted of negative organic sales of 15.9% and negative foreign currency translation of 1.3%. The decrease was primarily driven by lower volumes resulting from slowing market demand in the North America pool pump and residential and light commercial HVAC markets and general industrial markets. Gross profit decreased $59.8 million or 33.7% as compared to the first quarter 2022. The decrease in gross profit was primarily driven by ~~increase in volume~~material inflation and ~~the acquisitions of the Rexnord PMC and Arrowhead businesses,~~lower volumes partially offset by ~~increased~~lower freight ~~and material~~ costs. Total operating expenses for the ~~second~~first quarter 2023 and 2022 ~~increased $96.1~~were $72.3 million and $73.1 million, respectively. The decrease in operating expenses was primarily driven by cost cutting measures.

Automation & Motion Control segment net sales were $203.2 million, an increase of $18.9 million or ~~67.4%~~10.3% as compared to the ~~second~~first quarter ~~2021. The increase was primarily driven by the acquisitions of the Rexnord PMC and Arrowhead businesses, higher employee related wage and benefit costs and transaction costs.~~

~~Commercial Systems segment net sales for the second quarter 2022 were $301.9 million, an increase of $32.6 million or 12.1% as compared to the second quarter 2021.~~2022. The increase consisted of positive organic sales of ~~14.6%~~11.7% offset by negative foreign currency translation of ~~2.4%~~1.4%. The increase was primarily ~~driven by strong growth~~due to price increases in ~~general industry~~conveying and share gains in ~~North America as well as solid growth in the pool pump business.~~aerospace. Gross profit increased ~~$12.6~~$12.4 million or ~~18.1% as~~19.7% compared to the ~~second~~first quarter

~~2021.~~ 2022. The increase in gross profit was primarily driven by ~~the increase in~~higher price ~~partially offset by higher material costs due to inflation.~~realization. Total operating expenses for the ~~second~~first quarter ~~2022~~2023 were ~~$40.4~~$80.6 million compared to ~~$42.1~~$50.7 million in the ~~second~~first quarter ~~2021.~~2022. The ~~$1.7 million or 4.0% decrease~~increase was primarily ~~driven by foreign exchange gains.~~due to higher acquisition costs from the Altra Transaction and employee compensation costs.

Industrial Systems segment net sales for the ~~second~~first quarter ~~2022~~2023 were ~~$154.7~~$137.0 million, an increase of ~~$9.5~~$6.3 million or ~~6.5% as~~4.8% compared to ~~the second~~first quarter ~~2021.~~2022 net sales of $130.7 million. The increase consisted of positive organic sales of ~~9.4%~~8.0% partially offset by negative foreign currency translation of ~~2.9%~~3.2%. The increase was primarily driven by ~~a higher~~strength in demand for ~~industrial motors and~~ generators in North ~~America.~~America and global industrial motors. Gross profit for the first quarter 2023 increased ~~$16.6~~$0.5 million or ~~60.6% as compared to the second quarter 2021.~~1.8%. The increase ~~in gross profit~~ was ~~primarily~~ driven by the increase in volume and price realization, partially offset by ~~material inflation.~~foreign exchange losses. Total operating expenses for the ~~second~~first quarter ~~2022 and 2021 were $22.8 million and $23.1 million, respectively. The slight decrease in operating expenses was primarily driven by foreign exchange gains.~~

Climate Solutions segment net sales were $293.5 million, an increase of $36.2 million or 14.1% as compared to the second quarter 2021. The increase consisted of positive organic sales of 14.8% offset by negative foreign currency translation of 0.7%. The increase was primarily due to continued strong demand in North American residential HVAC and combustion markets and recovering demand in EMEA. Gross profit decreased $0.9 million or 1.2% compared to the second quarter 2021. The decrease in gross profit was primarily driven by material and freight inflation, partially offset by2023 increased volume, favorable mix and 80/20 actions. Total operating expenses for the second quarter 2022 were $30.3 million compared to $27.5 million in the second quarter 2021. The slight increase was primarily due to higher expenses related to commissions (higher volume), travel, compensation and benefits.

Motion Control Solutions segment net sales for the second quarter 2022 were $599.3 million, an increase of $384.2 million or 178.6% compared to second quarter 2021 net sales of $215.1 million. The increase consisted of positive impact from acquisitions of 174.1% and positive organic sales of 6.4% offset by negative foreign currency of 1.9%. The increase was primarily driven by the acquisitions of the Rexnord PMC and Arrowhead businesses in addition to strength in alternative energy, the North America general industrial market, the conveying business, and improving demand in Europe in addition to meaningful share gains tied to our industrial powertrain offering. Gross profit for the second quarter 2022 increased $147.5 million or 172.9%. The increase was driven by the acquisitions of the Rexnord PMC and Arrowhead businesses, higher sales volume with favorable mix and lower overhead cost driven by cost reduction initiatives. Total operating expenses for the second quarter 2022 increased $95.3$4.6 million as compared to the ~~second~~first quarter ~~2021,~~2022, primarily due to ~~the acquisitions of the Rexnord PMC~~increased employee compensation, commissions and ~~Arrowhead businesses.~~

~~Six Months EndedJune 30, 2022 Compared to July 3, 2021~~

Net sales increased $946.9 million or 55.7% for the six months ended June 30, 2022 compared to the six months ended July 3, 2021. The increase consisted of positive impact of acquisitions of 43.6% and positive organic sales of 13.4% offset by negative foreign currency translation of 1.4%. The increase was primarily driven by sales increases in North American markets and the acquisitions of the Rexnord PMC and Arrowhead businesses. Gross profit increased $347.9 million or 68.6% for the six months ended June 30, 2022 as compared to the six months ended July 3, 2021. The increase in gross profit was driven by increase in volume, the acquisitions of the Rexnord PMC and Arrowhead businesses and 80/20 actions, partially offset by increased freight and material costs. Total operating expenses for the six months ended June 30, 2022 increased $199.8 million or 68.7% as compared to the six months ended July 3, 2021. The increase was primarily driven by the acquisitions of the Rexnord PMC and Arrowhead businesses, higher employee related wage and benefit costs and transaction costs.

Commercial Systems segment net sales for the six months ended June 30, 2022 were $595.2 million, an increase of $88.9 million or 17.6% as compared to the six months ended July 3, 2021. The increase consisted of positive organic sales of 19.4% and offset by negative foreign currency translation of 1.8%. The increase was primarily driven by strong growth in general industry in North America as well as solid gains in the pool pump business. Gross profit increased $40.1 million or 29.4% as compared to the six months ended July 3, 2021. The increase in gross profit was primarily driven by the increase in price partially offset by higher material costs due to inflation. Total operating expenses for the six months ended June 30, 2022 were $81.8 million compared to $80.1 million in the six months ended July 3, 2021. The $1.7 million or 2.1% increase was primarily driven by higher employee related wage and benefit costs partially offset by foreign exchange ~~gains.~~

Industrial Systems segment net sales for the six months ended June 30, 2022 were $299.4 million, an increase of $17.8 million or 6.3% as compared to the six months ended July 3, 2021. The increase consisted of positive organic sales of 8.3% and offset by negative foreign currency translation of 2.0%. The increase was primarily driven by strength in the data center market for generators and demand for industrial motors in North America. Gross profit increased $19.9 million or 35.9% for the six months ended June 30, 2022 as compared to the six months ended July 3, 2021. The increase in gross profit was primarily driven by the increase in volume and price realization, partially offset by material inflation. Total operating expenses for the six months ended June 30, 2022 and July 3, 2021 were $46.2 million and $46.2 million, respectively.

Climate Solutions segment net sales were $567.4 million, an increase of $71.0 million or 14.3% as compared to the six months ended July 3, 2021. The increase consisted of positive organic sales of 14.8% offset by negative foreign currency translation of 0.5%. The increase was primarily due to continued strong demand in North American residential HVAC market and combustion markets and recovering demand in EMEA. Gross profit increased $6.9 million or 4.6% compared to the six months ended July 3, 2021. The increase in gross profit was primarily driven by increased volume, favorable mix and 80/20 actions, partially offset by material and freight inflation. Total operating expenses for the six months ended June 30, 2022 were $62.0 million compared to $58.2 million in the six months ended July 3, 2021. The increase was primarily due to higher expenses related to commissions (higher volume), travel, compensation and benefits.

Motion Control Solutions segment net sales for the six months ended June 30, 2022 were $1,185.9 million, an increase of $769.2 million or 184.6% compared to six months ended July 3, 2021 net sales of $416.7 million. The increase consisted of positive impact from acquisitions of 178.0% and positive organic sales of 8.1% offset by negative foreign currency of 1.4%. The increase was primarily driven by the acquisitions of the Rexnord PMC and Arrowhead businesses in addition to strength in alternative energy, the North America general industrial market, the conveying business, and improving demand in Europe in addition to meaningful share gains tied to our industrial powertrain offering. Gross profit for the six months ended June 30, 2022 increased $281.0 million or 170.4%. The increase was driven by the acquisitions of the Rexnord PMC and Arrowhead businesses, higher sales volume with favorable mix and lower overhead cost driven by cost reduction initiatives. Total operating expenses for the six months ended June 30, 2022 increased $194.3 million as compared to the six months ended July 3, 2021, primarily due to the acquisitions of the Rexnord PMC and Arrowhead businesses.

Three Months Ended Six Months Ended
June 30, 2022 July 3, 2021 June 30, 2022 July 3, 2021
(Dollars in Millions)
Net Sales:
  Commercial Systems $ 301.9 $ 269.3 $ 595.2 $ 506.3
  Industrial Systems 154.7 145.2 299.4 281.6
  Climate Solutions 293.5 257.3 567.4 496.4
  Motion Control Solutions 599.3 215.1 1,185.9 416.7
Consolidated $ 1,349.4 $ 886.9 $ 2,647.9 $ 1,701.0
Gross Profit as a Percent of Net Sales:
  Commercial Systems 27.2 % 25.8 % 29.6 % 26.9 %
  Industrial Systems 28.4 % 18.9 % 25.2 % 19.7 %
  Climate Solutions 25.4 % 29.3 % 27.8 % 30.4 %
  Motion Control Solutions 38.8 % 39.7 % 37.6 % 39.6 %
Consolidated 32.1 % 29.1 % 32.3 % 29.8 %
Operating Expenses as a Percent of Net Sales:
  Commercial Systems 13.4 % 15.0 % 13.7 % 15.5 %
  Industrial Systems 14.7 % 15.9 % 15.4 % 16.4 %
  Climate Solutions 10.3 % 10.5 % 10.9 % 11.6 %
  Motion Control Solutions 24.2 % 23.2 % 25.3 % 25.5 %
Consolidated 17.7 % 15.8 % 18.5 % 17.0 %
Income from Operations as a Percent of Net Sales:
  Commercial Systems 13.8 % 10.2 % 15.9 % 11.1 %
  Industrial Systems 13.7 % 3.0 % 9.7 % 3.3 %
  Climate Solutions 15.1 % 18.7 % 16.9 % 18.7 %
  Motion Control Solutions 14.6 % 16.5 % 12.3 % 14.1 %
Consolidated 14.4 % 13.0 % 13.8 % 12.7 %
Income from Operations $ 194.9 $ 115.2 $ 364.8 $ 216.7
Other Income, Net (1.5) (1.2) (2.8) (2.4)
Interest Expense 13.4 11.5 22.4 24.1
Interest Income (0.8) (1.7) (1.9) (3.2)
  Income before Taxes 183.8 106.6 347.1 198.2
Provision for Income Taxes 40.6 20.6 76.8 41.9
  Net Income 143.2 86.0 270.3 156.3
Less: Net Income Attributable to Noncontrolling Interests 1.2 1.6 2.7 3.0
  Net Income Attributable to Regal Rexnord Corporation $ 142.0 $ 84.4 $ 267.6 $ 153.3
losses.

The effective tax rate for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~22.1%~~180.9% versus ~~19.3%~~22.2% for the three months ended ~~July 3, 2021. The effective tax rate for the six months ended June 30, 2022 was 22.1% versus 21.1% for the six months ended July 3, 2021.~~March 31, 2022. The effective tax rate for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 was higher than the same period in the prior fiscal year primarily driven by non-deductible transaction costs associated with the ~~jurisdictional mix~~Altra Transaction, and withholding tax costs resulting from the cash repatriation of ~~earnings related~~foreign earnings.

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-K, 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 ~~Rexnord transaction~~respective period's organic sales using the currency exchange rates that were in ~~fiscal 2021.~~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 March 31, 2023	$	414.4		$	469.5		$	203.2		$	137.0		$	1,224.1


Impact of Foreign Currency Translation	7.4			7.6			2.6			4.2			21.8
Organic Sales for Three Months ended March 31, 2023	$	421.8		$	477.1		$	205.8		$	141.2		$	1,245.9

Organic Sales Growth for Three Months ended March 31, 2023	1.3		%	(15.9)		%	11.7		%	8.0		%	(4.1)		%


Net Sales for Three Months ended March 31, 2022	$	416.3		$	567.2		$	184.3		$	130.7		$	1,298.5

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 ~~$104.9~~$106.2 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, a ~~$31.7~~$112.1 million ~~decrease~~increase from the ~~six~~three months ended ~~July 3, 2021. The change is a result of an~~March 31, 2022. This increase was driven primarily by improvements in cash flows related to working capital, ~~which is~~ partially offset by ~~proceeds received from~~payments for certain acquisition costs and lower net income excluding the ~~early termination~~impact of ~~interest rate swaps for the six months ended June 30, 2022 compared to the six months ended July 3, 2021.~~non-cash adjustments.

Cash flow used in investing activities was ~~$62.1~~$4,865.5 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 as compared to cash flow used in investing activities of ~~$26.3~~$47.0 million for the ~~six~~three months ended ~~July 3, 2021.~~March 31, 2022. The change was driven primarily by ~~higher cash used for capital purchases and business acquisitions~~the Altra Acquisitions in the current ~~year compared~~year.

In fiscal 2023, we anticipate capital spending for property, plant and equipment to ~~the prior year.~~be approximately $150 million. We believe that our present manufacturing facilities will be sufficient to provide adequate capacity for our operations in fiscal 2023. We anticipate funding fiscal 2023 capital spending with operating cash flows.

Cash flow provided by financing activities was ~~$10.2~~$5,203.6 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$102.1~~$3.7 million ~~used in~~provided by financing activities for the ~~six~~three months ended ~~July 3, 2021.~~March 31, 2022. We had net debt borrowings of ~~$249.7~~$5,284.1 million during the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to net debt ~~repayments~~borrowings of ~~$50.2~~$145.7 million during the ~~six~~three months ended ~~July 3, 2021.~~March 31, 2022. The increase was primarily driven by the $4.7 billion of Senior Notes issued in January 2023 and $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. There were ~~$184.0 million~~no share repurchases for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to no$114.2 million shares repurchases for the ~~six~~three months ended ~~July 3, 2021.~~March 31, 2022. There were ~~$44.3~~$23.2 million of dividends paid for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$24.4~~$22.3 million of dividends in the prior year. There were ~~$6.5~~$50.0 million in financing fees paid for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$17.0~~$4.5 million of fees in the prior year. There were no distributions paid to noncontrolling interests for the three months ended March 31, 2023 and March 31, 2022.

Our working capital was ~~$1,976.7~~$2,703.3 million ~~at June 30, 2022,~~(inclusive of assets and liabilities assumed from the Altra Transaction) as of March 31, 2023, compared to ~~$1,713.3~~$1,998.3 million ~~at January 1,~~as of December 31, 2022. ~~At June 30, 2022~~As of March 31, 2023 and ~~January 1,~~December 31, 2022, our current ratio (which is the ratio of our current assets to current liabilities) was ~~2.8:~~2.9:1 and ~~2.6:~~3.0:1, respectively. Our working capital increased primarily ~~due to~~as a result of assets and liabilities assumed as part of the ~~increase in cash, accounts receivables and inventory offset by an increase in accounts payable.~~Altra Transaction.

The following table presents selected financial information and statistics as of ~~June 30, 2022~~March 31, 2023 and ~~January 1, 2022 (in millions):~~December 31, 2022:

June 30, 2022 January 1, 2022
Cash and Cash Equivalents $ 702.5 $ 672.8
Trade Receivables, Net 854.8 785.8
Inventories 1,388.4 1,192.4
Working Capital 1,976.7 1,713.3
Current Ratio 2.8:1 2.6:1


	March 31, 2023		December 31, 2022
Cash and Cash Equivalents	$	1,143.3	$	688.5
Trade Receivables, Net	1,028.3		797.4
Inventories	1,732.5		1,336.9
Working Capital	2,703.3		1,998.3
Current Ratio	2.9:1		3.0:1

As of ~~June 30, 2022, $686.7~~March 31, 2023, $668.2 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 ~~short-term~~ liquidity and operating needs largely through cash generated from ~~operations.~~operations and the available capacity under the revolver. 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 March 31, 2023, we have repatriated approximately $420 million of foreign cash in fiscal 2023 to support the repayment of debt. We are continuing to evaluate opportunities to repatriate additional foreign cash in fiscal 2023.

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.

~~Credit~~Financing Agreement

OnDuring the three months ended March 28, 2022, we entered into a Second Amended and Restated Credit Agreement with our lenders (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent and the lenders named therein. The Credit Agreement (i) replaces in its entirety the Amended and Restated Credit Agreement, dated as of August 27, 2018, as amended by that First Amendment, dated March 17, 2021, among31, 2023, the Company ~~and other parties thereto and (ii) amends and restates~~made the following updates to its financing agreements primarily in ~~its entirety~~connection with the ~~Amended and Restated Credit Agreement, dated as of October 4, 2021, among Land and the other parties thereto (collectively, the “Former Credit Agreements”).~~

The Credit Agreement provides for, among other things, an extension of the maturity date of the revolving credit facility and term loans provided under the Former Credit Agreements. The credit facilities extended under the Credit Agreement consist of (i) an unsecured term loan facility in the initial principal amount of up to $550,000,000, maturing on March 28, 2027 (the "Term Facility"); (ii) an unsecured term loan facility in the initial principal amount of $486,827,669, under which Land remains the sole borrower, maturing on March 28, 2027 (the "Land Term Facility"); and (iii) an unsecured revolving loan in the initial principal amount of up to $1,000,000,000, maturing on March 28, 2027 (the "Multicurrency Revolving Facility"). Interest for benchmark rate loans is calculated based on a SOFR benchmark rate, plus a margin spread to be adjusted quarterly based on our funded debt to EBITDA ratio. The Credit Agreement is subject to customary and market provisions. Our subsidiaries that provide a guaranty of our and Land's obligations under the Former Credit Agreements also entered into subsidiary guaranty agreements with respect to the obligations under the Credit Agreement.Altra Transaction:

~~The Term Facility was drawn~~•Issued Senior Notes on January 24, 2023 and received $4,647.0 million in full on March 28, 2022 to refinance the Former Credit Agreements, pay fees, costs, and other expenses incurred therewith, to fund working capital needs and for our general corporate purposes. The Term Facility requires quarterly amortization at 5.0% per annum, unless previously prepaid. Per the terms of the Credit Agreement, prepayments can be made without penalty and be applied to the next payment due.net proceeds

~~The Credit Agreement requires that we prepay the~~•Incurred additional term loans under the Term Facility ~~with 100%~~ of $840.0 million on March 27, 2023

•Increased the ~~net cash proceeds received from specified asset sales and borrowed money indebtedness, subject to certain exceptions.~~

~~At June 30, 2022, we had $560.0 million of borrowings~~commitments under the Multicurrency Revolving Facility ~~$0.1~~by $570.0 million on March 27, 2023

•Assumed the Altra Notes of $18.1 million

•Repaid in full the Private Placement Notes of $500.0 million

The Company will incur significant incremental interest expense as a result of the debt issuances above. The Company plans to use cash generated from operations to fund its interest obligations and reduce the principal balance of its debt over time.

As of March 31, 2023, the Company had no standby letters of credit issued under the ~~facility,~~Multicurrency Revolver Facility, and ~~$439.8~~$870.0 million of available borrowing capacity. For the three months ended ~~June 30,~~March 31, 2023 and March 31, 2022 ~~and July 3, 2021~~ under the Multicurrency Revolving Facility, the average daily balance in borrowings was ~~$730.0~~$580.6 million and ~~$2.4~~$773.7 million, respectively, and the weighted average interest rate was ~~2.1%~~5.8% and ~~1.4%~~1.7%, respectively. For the six months ended June 30, 2022 and July 3, 2021 under the Multicurrency Revolving Facility, the average daily balance in borrowings was $765.2 million and $4.9 million, respectively, and the weighted average interest rate was 1.7% and 1.4%, respectively. We payThe 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.

As of June 30, 2022, we had $486.8 million of borrowings under the Land Term Facility. The Land Term Facility has no required amortization. The weighted average interest rate on the Land Term Facility for three months ended June 30, 2022 was 2.1%. The weighted average interest rate on the Land Term Facility for six months ended June 30, 2022 was 1.7%.

~~In connection with the Rexnord Transaction, on February 15, 2021, we entered into a debt commitment letter (the “Bridge Commitment Letter”)~~See Note 7 - Debt and ~~related fee letters with Barclays~~ Bank PLC (“Barclays”), pursuant to which, and subject to the terms and conditions set forth therein, Barclays committed to provide approximately $2.1 billion in an aggregate principal amount of senior bridge loans under a 364-day senior bridge loan credit facility (the “Bridge Facility”). As the Rexnord Transaction was consummated and the payments of amounts in connection therewith occurred without the use of the Bridge Facility, the commitments under the Bridge Commitment Letter were terminated in connection with the closing of the Rexnord Transaction.

~~Senior Notes~~

On April 7, 2022, we entered into a Note Purchase Agreement with certain institutional accredited investors (the "Note Purchase Agreement") for the issuance and sale of $500,000,000 aggregate principal amount of 3.90% senior notes due April 7, 2032 (the "Senior Notes"), in an offering exempt from the registration requirements of the Securities Act of 1933, as amended. We expect to use the net proceeds from the offering for general corporate purposes.

~~The Note Purchase Agreement is subject to customary and market provisions. Our subsidiaries that provided a guaranty of the obligations under the~~ Credit Agreement also entered into subsidiary guaranty agreements with respect to the obligations under the Note Purchase Agreement. We may, at our option, prepay at any time all, or from time to time any part of, the Senior Notes, subject to a make-whole amount and certain other restrictions set forth in the Note Purchase Agreement.

~~Compliance with Financial Covenants~~

The Credit Agreement require us to meet specified financial ratios and to satisfy certain financial condition tests. The Note Purchase Agreement contains financial covenants consistent with the financial covenants in the Credit Agreement. We were in compliance with all financial covenants contained in the Credit AgreementFacilities and Note ~~Purchase Agreement as of June 30, 2022.~~

~~Other Notes Payable~~

At June 30, 2022, other notes payable of approximately $75.2 million were outstanding with a weighted average interest rate of 5.1%. At January 1, 2022, other notes payable of approximately $78.7 million were outstanding with a weighted average rate of 5.2%.

~~Other Disclosures~~

~~Based on rates~~3 – Acquisitions and Divestitures for instruments with comparable maturities and credit quality, which are classified as Level 2 inputs (see also Note 14 of Notes to the Condensed Consolidated Financial Statements), the approximate fair value of our total debt was $2,125.9 million and $1,918.5 million as of June 30, 2022 and January 1, 2022, respectively.more information.

Critical Accounting ~~Policies~~Estimates

Our ~~disclosures of~~ critical accounting policies and estimates, which are ~~contained~~discussed in our Annual Report on Form 10-K for the year ended ~~January 1,~~December 31, 2022, have not materially changed since that report was filed.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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. ~~At June 30, 2022,~~As of March 31, 2023, excluding the impact of interest rate swaps, we had ~~$575.3~~$4,800.3 million of fixed rate debt and ~~$1,596.7~~$2,545.8 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.

We have floating rate borrowings, which expose us to variability in interest payments due to changes in interest rates. A hypothetical 10% change in our weighted average borrowing rate on outstanding variable rate debt ~~at June 30, 2022~~as of March 31, 2023 would result in a ~~$2.0~~$14.7 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 floating 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 ~~will be~~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 floating 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 ~~June 30, 2022~~March 31, 2023 are as ~~follows (in millions):~~follows:

Instrument

Notional Amount

Maturity

Rate Paid

Rate Received

Fair Value

Instrument

Notional Amount

Maturity

Rate Paid

Rate Received

Fair Value

Swap

$250.0

March 2027

3.0%

SOFR (3 month)

(1.8)

Swap

$250.0

March 2027

3.0%

SOFR (3 Month)

4.3

As of ~~June 30, 2022, the $1.8 million interest rate swap liability was included in Other Noncurrent Liabilities. At January 1,~~March 31, 2023 and December 31, 2022, a ~~$5.3~~$4.3 million and $7.9 million interest rate swap asset was included in Other Noncurrent ~~Assets.~~Assets, respectively. There was an unrealized gain of ~~$11.0~~$13.2 million (a ~~$12.3~~$10.0 million gain on the terminated swaps and a ~~$1.3~~$3.2 million ~~loss~~gain on the active swaps) and ~~$4.0~~$17.0 million, net of tax, atas of ~~June 30, 2022~~March 31, 2023 and ~~January 1,~~December 31, 2022, 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 ~~June 30, 2022~~March 31, 2023, derivative currency assets (liabilities) of ~~$9.0~~$22.8 million, ~~$0.8~~$2.0 million, ~~$(3.5)~~$(2.5) million and ~~$(0.5)~~$(0.1) million are recorded in Prepaid Expenses and Other Current Assets, Other Noncurrent Assets, Other Accrued Expenses and Other Noncurrent Liabilities, respectively. As of ~~January 1,~~December 31, 2022, derivative currency assets (liabilities) of ~~$8.6~~$13.0 million, ~~$0.7~~$0.9 million and ~~$(1.7)~~$(4.8) million, are recorded in Prepaid Expenses and Other Current Assets, Other Noncurrent Assets and Other Accrued Expenses, respectively. The unrealized gains on the effective portions of the hedges of ~~$4.4~~$16.4 million net of tax, and ~~$5.8~~$6.3 million net of tax, as of ~~June 30, 2022~~March 31, 2023 and ~~January 1,~~December 31, 2022 respectively, were recorded in AOCI. AtAs of ~~June 30,~~March 31, 2023 and December 31, 2022,, we had ~~$2.4~~$9.1 million and $5.3 million, respectively, net of tax, of ~~derivative~~ currency gains on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings. ~~At January 1, 2022, we had $1.9 million, 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 ~~June 30, 2022~~March 31, 2023 ~~(in millions)~~:


						Gain (Loss) From									Gain (Loss) From
Currency	Currency	Notional Amount		Fair Value		10% Appreciation of Counter Currency		10% Depreciation of Counter Currency		Currency	Notional Amount		Fair Value		10% Appreciation of Counter Currency		10% Depreciation of Counter Currency
Chinese Renminbi	Chinese Renminbi	$	249.5	$	(1.4)	$	25.0	$	(25.0)	Chinese Renminbi	$	251.4	$	(1.1)	$	25.1	$	(25.1)
Mexican Peso	Mexican Peso	204.1		8.3		20.4		(20.4)		Mexican Peso	189.1		23.2		18.9		(18.9)
Euro	Euro	208.7		0.2		20.9		(20.9)		Euro	342.3		0.8		34.2		(34.2)
Indian Rupee	Indian Rupee	79.4		(1.1)		7.9		(7.9)		Indian Rupee	44.2		(0.6)		4.4		(4.4)

Australian Dollar		14.1		(0.2)		1.4		(1.4)

British Pound	British Pound	1.8		—		0.2		(0.2)		British Pound	6.0		—		0.6		(0.6)
Thai Baht		0.5		—		0.1		(0.1)

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 ~~$0.5~~$2.3 million, ~~$(19.6)~~$0.4 million, $(3.4) million and ~~$(3.4) million were recorded in Prepaid Expenses and Other Current Assets, Other Accrued Expenses and Other Noncurrent Liabilities at~~ ~~June 30, 2022. Derivative commodity assets of $9.3 million, $0.1 million, $(1.2) million and $(0.6)~~$(0.1) million were recorded in Prepaid Expenses and Other Current Assets, Other Noncurrent Assets, Other Accrued Expenses and Other Noncurrent Liabilities as of March 31, 2023. Derivative commodity assets (liabilities) of $0.9 million, $0.3 million and $(10.6) million were recorded in Prepaid Expenses and Other Current Assets, Other Noncurrent Assets and Other Accrued Expenses, respectively as of ~~at January 1,~~December 31, 2022. The unrealized loss on the effective portion of the hedges of ~~$(16.9)~~$0.6 million net of tax and the unrealized ~~gain~~loss on the effective portion of the hedges of ~~$5.6~~$6.9 million net of tax, as of ~~June 30, 2022~~March 31, 2023 and ~~January 1,~~December 31, 2022, respectively, was recorded in AOCI. AtAs of ~~June 30, 2022~~March 31, 2023, we had ~~$2.0~~$2.7 million, net of tax, of derivative commodity ~~gains~~losses on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings. ~~At January 1,~~As of December 31, 2022, there was an additional ~~$3.7~~$4.4 million, net of tax, of derivative commodity ~~gain~~loss on closed hedge instruments in AOCI that were realized ~~into~~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 ~~June 30, 2022~~March 31, 2023 ~~(in millions)~~:


						Gain (Loss) From									Gain (Loss) From
Commodity	Commodity	Notional Amount		Fair Value		10% Appreciation of Commodity Prices		10% Depreciation of Commodity Prices		Commodity	Notional Amount		Fair Value		10% Appreciation of Commodity Prices		10% Depreciation of Commodity Prices
Copper	Copper	$	145.3	$	(21.4)	$	14.5	$	(14.5)	Copper	$	67.4	$	(0.6)	$	6.7	$	(6.7)
Aluminum	Aluminum	7.1		(1.1)		0.7		(0.7)		Aluminum	2.3		(0.3)		0.2		(0.2)

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

The net AOCI hedging component balance of ~~$2.9~~$35.4 million of gains at ~~June 30, 2022~~as of March 31, 2023 includes ~~$(2.1)~~$24.2 million of net current deferred ~~losses~~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.

ITEM 4. CONTROLS AND PROCEDURES

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 fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As discusssed above, on March 27, 2023, we completed the Altra Transaction. As part of our ongoing integration of Altra, we continue to incorporate our controls and procedures into Altra operations and to expand our company-wide controls to reflect the risks inherent in an acquisition of this size and complexity.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material changes in the legal matters described in Part I, Item 3 in our Annual Report on Form 10-K for the year ended ~~January 1,~~December 31, 2022, which is incorporated herein by reference. See also Note 12 - Contingencies for more information.

ITEM 1A. RISK FACTORS

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 ~~January 1,~~December 31, 2022, ~~as supplemented~~which is incorporated herein by ~~Part II, Item 1A~~reference. For additional information regarding risks and uncertainties facing the Company, please also see the information provided under the header "Cautionary Statement" contained in ~~our~~this Quarterly Report on Form ~~10-Q for the quarter ended March 31, 2022, which are incorporated herein by reference.~~10-Q.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~The following table contains detail related to the repurchase of our common stock based on the date of trade during the quarter ended June 30, 2022.~~

2022 Fiscal Month Total Number of Shares Purchased Average Price Paid per Share Total Value of Shares Purchased as a Part of Publicly Announced Plans or Programs Maximum Value of Shares that May be Purchased Under the Plans or Programs
Apr 1 to Apr 30 — $ — $ — $ 319,982,853
May 1 to May 31 396,996 125.97 50,007,727 269,975,126
Jun 1 to Jun 30 178,046 110.75 19,717,824 250,257,302
575,042 $ 69,725,551

Under our equity incentive plans, participants may pay the exercise price or satisfy all or a portion of the federal, state and local withholding tax obligations arising in connection with plan awards by electing to (a) have the Company withhold shares of common stock otherwise issuable under the award, (b) tender back shares received in connection with such award or (c) deliver other previously owned shares of common stock, in each case having a value equal to the exercise price or the amount to be withheld. During the quarter ended ~~June 30, 2022,~~March 31, 2023, we ~~purchased 575,042~~did not acquire any shares ~~or $69.8 million~~ in ~~shares~~connection with transactions pursuant to ~~the October 26, 2021 repurchase authorization~~.equity incentive plans.

At a meeting of the Board of Directors on October 26, 2021, the Company's Board of Directors approved the authorization to purchase up to $500.0 million of shares under the Company's share repurchase program. The new authorization has no expiration date. There were no repurchases of common stock during the current quarter. The maximum value of shares of our common stock available to be purchased as of March 31, 2023 is $195.0 million.

ITEM 6. EXHIBITS


Exhibit Number						Exhibit Description
4.1						~~Note Purchase Agreement,~~Indenture, dated ~~April 7, 2022, among~~January 24, 2023, between Regal Rexnord Corporation, the Guarantors (as defined therein) and ~~each of the purchasers party thereto.~~U.S. Bank Trust Company, National Association, as trustee [Incorporated by reference to Exhibit ~~10.1~~4.1 to ~~Regal Rexnord Corporation’s~~the Company’s Current Report on Form 8-K filed with the SEC on ~~April 11, 2022]~~January 24, 2023].

4.2						Form of Note [Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on January 24, 2023].

4.3						Registration Rights Agreement, dated January 24, 2023, between Regal Rexnord Corporation, the Regal Guarantors (as defined therein) and J.P. Morgan Securities LLC as representative of the several initial purchasers listed in Schedule 1 to the purchase agreement relating to the Notes [Incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on January 24, 2023].

10.1						Altra Industrial Motion Corp. 2014 Omnibus Incentive Plan [Incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form S-8 filed with the SEC on March 27, 2023].

31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certifications of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

101.INS						XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).

~~SIGNATURE~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			REGAL REXNORD CORPORATION (Registrant)

			/s/ Robert J. Rehard
			Robert J. Rehard Executive Vice President Chief Financial Officer (Principal Financial Officer)




Date: May 9, 2023


			REGAL REXNORD CORPORATION (Registrant)

			/s/ Alexander P. Scarpelli
			Alexander P. Scarpelli Vice President Chief Accounting Officer ~~and~~ (Principal Accounting Officer)




Date: ~~August 5, 2022~~May 9, 2023

5143


	As Originally Reported		Effect of Change		As Adjusted
Condensed Consolidated Statement of Operations for the three months ended July 3, 2021
Cost of Sales	$	635.4	$	(6.2)	$	629.2
Provision for Income Taxes	$	19.2	$	1.4	$	20.6
Net income attributable to Regal Rexnord Corporation	$	79.6	$	4.8	$	84.4

Earnings Per Share Attributable to Regal Rexnord Corporation:
Basic	$	1.96	$	0.12	$	2.07
Assuming Dilution	$	1.94	$	0.12	$	2.06

Condensed Consolidated Statement of Operations for the six months ended July 3, 2021
Cost of Sales	$	1,204.1	$	(10.6)	$	1,193.5
Provision for Income Taxes	$	39.4	$	2.5	$	41.9
Net income attributable to Regal Rexnord Corporation	$	145.2	$	8.1	$	153.3

Earnings Per Share Attributable to Regal Rexnord Corporation:
Basic	$	3.57	$	0.21	$	3.78
Assuming Dilution	$	3.54	$	0.20	$	3.74

Condensed Consolidated Balance Sheet as of January 1, 2022
Inventories	$	1,106.6	$	85.8	$	1,192.4
Deferred Income Taxes	$	652.0	$	27.7	$	679.7
Retained Earnings	$	1,854.5	$	58.1	$	1,912.6

Condensed Consolidated Statement of Cash Flows for the six months ended July 3, 2021
Net Income	$	148.2	$	8.1	$	156.3
Change in Operating Assets and Liabilities	$	(105.5)	$	(8.1)	$	(113.6)

Condensed Consolidated Statement of Comprehensive Income for the three months ended July 3, 2021
Comprehensive income attributable to Regal Rexnord Corporation	$	94.0	$	4.8	$	98.8

Condensed Consolidated Statement of Comprehensive Income for the six months ended July 3, 2021
Comprehensive income attributable to Regal Rexnord Corporation	$	144.4	$	8.1	$	152.5


	As Reported as of January 1, 2022		Measurement period adjustments		As Reported as of June 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)
Preliminary purchase price	$	3,977.4	$	4.1	$	3,981.5


	As Reported as of January 1, 2022		Measurement period adjustments		as of June 30, 2022

Cash and Cash Equivalents	$	1.1	$	—	$	1.1
Trade Receivables	19.1		(0.3)		18.8
Inventories	12.8		—		12.8
Prepaid Expenses and Other Current Assets	7.6		—		7.6


Property, Plant and Equipment	3.7		—		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 Assets	172.0		(0.3)		171.7
Goodwill	143.6		0.3		143.9
Preliminary purchase price	$	315.6	$	—	$	315.6


2022 Fiscal Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Value of Shares Purchased as a Part of Publicly Announced Plans or Programs		Maximum Value of Shares that May be Purchased Under the Plans or Programs
Apr 1 to Apr 30	—	$	—	$	—	$	319,982,853
May 1 to May 31	396,996	125.97		50,007,727		269,975,126
Jun 1 to Jun 30	178,046	110.75		19,717,824		250,257,302
	575,042			$	69,725,551