REGAL REXNORD CORP

Previous wording

As of June 30, 2024, our company is comprised of three operating segments: Industrial Powertrain Solutions ("IPS"), Power Efficiency Solutions ("PES") and Automation & Motion Control ("AMC").

Current wording

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

Previous wording

The Company has updated its annual guidance for diluted earnings per share to a range of $3.70 to $4.10. The change reflects a more measured recovery in discrete factory automation markets, weaker mix in PES motors, and modestly higher interest costs.

Current wording

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

Previous wording

Net sales decreased $221.0 million or 12.5% for the second quarter of 2024 compared to the second quarter of 2023. The decrease consisted of an organic sales decline of 6.9% and a negative foreign currency translation impact of 0.6%. In addition, the $221.0 million decrease includes an impact worth $94.9 million related to the sale of the industrial motors and generators businesses, which closed on April 30, 2024. The organic sales decline was driven by a decrease of $19.6 million within IPS, $46.7 million within PES, $47.3 million within AMC and $2.3 million within Industrial Systems during its one month of ownership in the second quarter. Gross profit increased $7.2 million or 1.3% for the second quarter of 2024 as compared to the second quarter of 2023 primarily driven by an increase in gross profit of $46.1 million within IPS, partially offset by a decrease of $19.3 million due to the divestiture of the industrial motors and generators businesses and decreases at AMC and PES. The gross profit increase of $7.2 million includes the absence of $44.1 million of acquisition-related inventory step-up amortization at IPS and AMC in the second quarter of 2024. Total operating expenses for the second quarter of 2024 decreased $35.1 million or 8.5% as compared to the second quarter of 2023 primarily driven by a reduction of $16.3 million from the divestiture of the industrial motors and generators businesses and a $17.2 million gain on sale of those businesses.

Current wording

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

Previous wording

AMC net sales were $422.2 million, a decrease of $50.9 million or 10.8% as compared to the second quarter of 2023. The decrease consisted of an organic sales decline of 10.0% and a negative foreign currency translation impact of 0.8%. The decrease in organic sales was primarily driven by $53.4 million from lower sales volumes due to weakness in discrete factory automation, partially offset by strength in the aerospace, data center and medical markets. Gross profit decreased $7.0 million or 4.0% compared to the second quarter of 2023 primarily driven by the decline in sales, partially offset by the absence of $12.5 million of acquisition-related inventory step-up amortization in the second quarter of 2024, and acquisition-related cost synergies. Total operating expenses for the second quarter of 2024 are relatively consistent with the second quarter of 2023.

Current wording

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

Previous wording

The effective tax rate for the three months ended June 30, 2024 was 35.0% versus 22.9% for the three months ended June 30, 2023 due to the sale of the industrial motors and generators businesses.

Current wording

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

Previous wording

Net sales increased $102.6 million or 3.4% for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase consisted of acquisition growth of 14.8%, partially offset by an organic sales decline of 8.1% and a negative foreign currency translation impact of 0.4%. In addition, the $102.6 million increase reflects a negative impact of $94.9 million related to the sale of the industrial motors and generators businesses, which closed on April 30, 2024. The acquisition growth increase of $442.5 million was due to the acquisition of Altra. The organic sales decline was due to lower organic sales of $33.7 million within IPS, $130.2 million within PES, $50.4 million within AMC, and $19.6 million within Industrial Systems. Gross profit increased $162.2 million or 16.9% for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 primarily driven by $175.2 million from the acquisition of Altra, the absence of $44.1 million of acquisition-related inventory step-up amortization at IPS and AMC in 2024, and acquisition-related cost synergies, partially offset by a $31.0 million decrease within PES and a decrease of $19.3 million due to the divestiture of the industrial motors and generated business. Total operating expenses for the six months ended June 30, 2024 increased $54.9 million or 7.4% as compared to the six months ended June 30, 2023 primarily driven by $122.0 million from the acquisition of Altra and a $4.3 million loss on sale of businesses, partially offset by a decrease in transaction and integration costs of $65.4 million and a decrease of $16.3 million in operating expenses driven by the divestiture of the industrial motors and generators businesses.

Current wording

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

Previous wording

PES net sales for the six months ended June 30, 2024 were $796.2 million, a decrease of $133.4 million or 14.4% as compared to the six months ended June 30, 2023. The decrease primarily consisted of an organic sales decline of 14.0% and a negative foreign currency translation impact of 0.3%. The decrease in organic sales was primarily due to lower sales volumes due to weakness in North American residential HVAC markets as well as the European and Asian commercial HVAC markets. Gross profit decreased $31.0 million or 12.3% as compared to the six months ended June 30, 2023 primarily driven by lower sales volumes partially offset by management's control over discretionary spending and lower freight costs. Total operating expenses for the six months ended June 30, 2024 are relatively consistent with the six months ended June 30, 2023.

Current wording

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

Previous wording

AMC net sales were $822.4 million, an increase of $146.1 million or 21.6% as compared to the six months ended June 30, 2023. The increase consisted of acquisition growth of 29.5%, offset by an organic sales decline of 7.5% and a negative foreign currency translation impact of 0.4%. The acquisition growth of $199.3 million was due to the acquisition of Altra. The $50.4 million decrease in organic sales was primarily driven by lower volumes due to weakness in discrete factory automation, partially offset by strength in the aerospace, data center and medical markets. Gross profit increased $77.5 million or 30.8% compared to the six months ended June 30, 2023 primarily driven by $82.8 million from the acquisition of Altra, the absence of $12.5 million of acquisition-related inventory step-up amortization in 2024 and acquisition-related cost synergies, partially offset by the decline in organic sales. Total operating expenses for the six months ended June 30, 2024 increased $38.9 million as compared to the six months ended June 30, 2023 primarily due to $62.0 million from the acquisition of Altra, partially offset by a decrease of $25.2 million of transaction and integration costs.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Cash flow provided by operating activities was $241.4 million for the six months ended June 30, 2024, a $85.9 million decrease from the six months ended June 30, 2023. This decrease was driven primarily by lower cash generated by working capital.

Current wording

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

Previous wording

Cash flow provided by investing activities was $325.2 million for the six months ended June 30, 2024 as compared to cash flow used in investing activities of $4,927.6 million for the six months ended June 30, 2023. The change was driven by the use of $4,870.2 of cash to acquire Altra during the prior year period and $374.8 million in proceeds received from the sale of the industrial motors and generators businesses in the current year.

Current wording

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

Previous wording

In fiscal 2024, we anticipate capital spending for property, plant and equipment to be approximately $140 million. We believe that our present manufacturing facilities will be sufficient to provide adequate capacity for our operations for the remainder of 2024. We anticipate funding remaining 2024 capital spending with operating cash flows.

Current wording

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

Previous wording

Cash flow used in financing activities was $672.5 million for the six months ended June 30, 2024, compared to $4,565.1 million provided by financing activities for the six months ended June 30, 2023. We had net debt payments of $618.4 million during the six months ended June 30, 2024, compared to net debt borrowings of $4,678.7 million during the six months ended June 30, 2023. The net debt payments in the current year primarily resulted from payments of $187.5 million on the term loan, $356.8 million on the land term loan and $72.1 million net repayments made on the revolver during the six months ended June 30, 2024. The net debt borrowings in the prior year were primarily the result of the $4.7 billion of Senior Notes issued in January 2023 and $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 and $314.0 million net repayments on the revolver. There were no share repurchases for the six months ended June 30, 2024 and June 30, 2023. There were $46.6 million of dividends paid for the six months ended June 30, 2024, compared to $46.4 million of dividends paid in the prior year. There were no financing fees paid in the six months ended June 30, 2024, compared to $51.1 million of fees paid in the prior year.

Current wording

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

Previous wording

Our working capital was $1,775.0 million as of June 30, 2024, compared to $2,057.6 million as of December 31, 2023. As of June 30, 2024 and December 31, 2023, our current ratio (which is the ratio of our current assets to current liabilities) was 2.4:1. Our working capital decreased primarily as a result of lower cash on hand, due to the Company prioritizing debt reduction and using excess cash to do so.

Current wording

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

Previous wording

As of June 30, 2024, $492.8 million of our cash was held by foreign subsidiaries and could be used in our domestic operations if necessary. We anticipate being able to support our liquidity and operating needs largely through cash generated from operations. We regularly assess our cash needs and the available sources to fund these needs which includes repatriation of foreign earnings which may be subject to withholding taxes. Under current law, we do not expect restrictions or taxes on repatriation of cash held outside of the United States to have a material effect on our overall liquidity, financial condition or the results of operations for the foreseeable future. As of June 30, 2024, we have repatriated approximately $491.7 million of foreign cash in 2024 to support the repayment of debt. We are continuing to evaluate opportunities to repatriate additional foreign cash in 2024.

Current wording

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

Previous wording

As of June 30, 2024, the Company had no standby letters of credit issued under the Multicurrency Revolver Facility, and $1,544.0 million of available borrowing capacity. For the three months ended June 30, 2024 and June 30, 2023 under the Multicurrency Revolving Facility, the average daily balance in borrowings was $67.4 million and $425.2 million, respectively, and the weighted average interest rate was 7.2% and 6.7%, respectively. For the six months ended June 30, 2024 and June 30, 2023 under the Multicurrency Revolving Facility, the average daily balance in borrowings was $83.0 million and $464.7 million, respectively, and the weighted average interest rate was 7.2% and 6.4%, respectively. The Company pays a non-use fee on the aggregate unused amount of the Multicurrency Revolving Facility at a rate determined by reference to its consolidated funded debt to consolidated EBITDA ratio.

Current wording

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

Previous wording

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

Current wording

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