Company Quick10K Filing
Quick10K
Regal Beloit
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$81.51 43 $3,490
10-Q 2019-03-30 Quarter: 2019-03-30
10-K 2018-12-29 Annual: 2018-12-29
10-Q 2018-09-29 Quarter: 2018-09-29
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-30 Annual: 2017-12-30
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-07-01 Quarter: 2017-07-01
10-Q 2017-04-01 Quarter: 2017-04-01
10-K 2017-01-07 Annual: 2017-01-07
10-Q 2016-10-01 Quarter: 2016-10-01
10-Q 2016-07-02 Quarter: 2016-07-02
10-Q 2016-04-02 Quarter: 2016-04-02
10-K 2016-01-02 Annual: 2016-01-02
10-Q 2015-10-03 Quarter: 2015-10-03
10-Q 2015-07-04 Quarter: 2015-07-04
10-Q 2015-04-04 Quarter: 2015-04-04
10-K 2015-01-03 Annual: 2015-01-03
10-Q 2014-09-27 Quarter: 2014-09-27
10-Q 2014-06-28 Quarter: 2014-06-28
10-Q 2014-03-29 Quarter: 2014-03-29
10-K 2013-12-28 Annual: 2013-12-28
8-K 2019-06-14 Officers, Exhibits
8-K 2019-05-06 Earnings, Regulation FD, Exhibits
8-K 2019-04-30 Officers, Shareholder Vote
8-K 2019-03-11 Officers, Amend Bylaw, Exhibits
8-K 2019-02-04 Earnings, Regulation FD, Exhibits
8-K 2018-11-05 Earnings, Regulation FD, Exhibits
8-K 2018-10-15 Officers
8-K 2018-10-10 Officers
8-K 2018-09-23 Officers
8-K 2018-08-27 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2018-08-06 Earnings, Regulation FD, Exhibits
8-K 2018-06-14 Officers, Exhibits
8-K 2018-05-24 Officers
8-K 2018-05-07 Earnings, Regulation FD, Exhibits
8-K 2018-04-30 Officers, Shareholder Vote, Exhibits
8-K 2018-03-31 Officers, Exhibits
8-K 2018-03-26 Regulation FD, Exhibits
8-K 2018-02-05 Earnings, Regulation FD, Exhibits
PFE Pfizer 225,630
OLLI Ollie's Bargain Outlet 6,240
PSXP Phillips 66 Partners 6,130
AAXN Axon Enterprise 3,940
NP Neenah 1,060
WTRE Watford Holdings 564
FXF Invesco Currencyshares Swiss Franc Trust 0
ACHI Achison 0
EMYB Embassy Bancorp 0
ESND Essendant 0
RBC 2019-03-30
Part I-Financial Information
Item 1. Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii-Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 rbc-2019330xex311.htm
EX-31.2 rbc-2019330xex312.htm
EX-32.1 rbc-2019330xex321.htm

Regal Beloit Earnings 2019-03-30

RBC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 rbc-2019330x10q.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 FORM 10-Q 
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended March 30, 2019 or 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-07283
 
 
REGAL BELOIT CORPORATION
(Exact name of registrant as specified in its charter)
 
 
Wisconsin
 
39-0875718
(State of 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
RBC
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  ý    NO  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files).     YES  ý    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
 
ý
 
Accelerated Filer
 
¨
Non-accelerated filer
o 
 
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  ý
On May 3, 2019 the registrant had outstanding 42,817,814 shares of common stock, $0.01 par value per share.





REGAL BELOIT CORPORATION
INDEX
 
 
Page
 
Item 1 —
 
 
 
 
 
 
 
Item 2 —
Item 3 —
Item 4 —
 
 
 
 
Item 1 —
Item 1A —
Item 2 —
Item 6 —
 
 
 


3



CAUTIONARY STATEMENT

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s expectations, beliefs, current assumptions, and projections. When used in this Quarterly Report on Form 10-Q, words such as “may,” “will,” “expect,” “intend,” “estimate,” “forecast,” “anticipate,” “believe,” “should,” “project” or “plan” or the negative thereof or similar words are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Those factors include, but are not limited to:

uncertainties regarding our ability to execute our restructuring plans within expected costs and timing;
actions taken by our competitors and our ability to effectively compete in the increasingly competitive global electric motor, drives and controls, power generation and power transmission industries;
our 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 certain geographic locations in which we do business;
fluctuations in commodity prices and raw material costs;
our dependence on significant customers;
risks associated with global manufacturing;
issues and costs arising from the integration of acquired companies and businesses and the timing and impact of purchase accounting adjustments;
our overall debt levels and our ability to repay principal and interest on our outstanding debt;
prolonged declines or disruption in one or more markets we serve, such as heating, ventilation, air conditioning ("HVAC"), refrigeration, power generation, oil and gas, unit material handling or water heating;
economic changes in global markets where we do business, such as reduced demand for the products we sell, currency exchange rates, inflation rates, interest rates, recession, government policies, including policy changes affecting taxation, trade, tariffs, immigration, customs, border actions and the like, and other external factors that we cannot control;
product liability and other litigation, or claims by end users, government agencies or others that our products or our 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;
unanticipated costs or expenses we may incur related to product warranty issues;
our dependence on key suppliers and the potential effects of supply disruptions;
infringement of our intellectual property by third parties, challenges to our intellectual property and claims of infringement by us of third party technologies;
effects on earnings of any significant impairment of goodwill or intangible assets;
losses from failures, breaches, attacks or disclosures involving our information technology infrastructure and data;
cyclical downturns affecting the global market for capital goods; and
other risks and uncertainties including but not limited to those described in “Risk Factors” in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 26, 2019 and from time to time in other filed reports.

Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report, and we undertake no obligation to update these statements to reflect subsequent events or circumstances. Additional information regarding these and other risks and uncertainties is included in Part I - Item 1A - Risk Factors in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2019.


4



PART I—FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

REGAL BELOIT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in Millions, Except Per Share Data)
 
 
Three Months Ended
 
March 30,
2019
 
March 31,
2018
Net Sales
$
853.8

 
$
878.8

Cost of Sales
619.2

 
643.9

Gross Profit
234.6

 
234.9

Operating Expenses
145.2

 
146.7

Gain on Divestiture of Business
(41.2
)


Impairments
10.0

 

           Total Operating Expenses
114.0

 
146.7

Income From Operations
120.6

 
88.2

Other Expenses, net
0.1

 
0.4

Interest Expense
13.6

 
13.0

Interest Income
1.1

 
0.2

Income Before Taxes
108.0

 
75.0

Provision For Income Taxes
21.2

 
15.7

Net Income
86.8

 
59.3

Less: Net Income Attributable to Noncontrolling Interests
0.9

 
0.9

Net Income Attributable to Regal Beloit Corporation
$
85.9

 
$
58.4

Earnings Per Share Attributable to Regal Beloit Corporation:
 
 
 
Basic
$
2.01

 
$
1.32

Assuming Dilution
$
1.99

 
$
1.31

Weighted Average Number of Shares Outstanding:
 
 
 
Basic
42.8

 
44.2

Assuming Dilution
43.1

 
44.5


See accompanying Notes to Condensed Consolidated Financial Statements


5



REGAL BELOIT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in Millions)
 
 
Three Months Ended
 
March 30,
2019
 
March 31,
2018
Net Income
$
86.8

 
$
59.3

Other Comprehensive Income (Loss) Net of Tax:
 
 
 
Foreign Currency Translation Adjustments
11.2

 
30.6

Reclassification of Foreign Currency Translation Adjustments included in Net Income, Net of $0 Million and $0 Million Tax Effects for the Three Months Ended March 30, 2019 and March 31, 2018, Respectively
2.2

 

Hedging Activities:
 
 
 
Increase in Fair Value of Hedging Activities, Net of Tax Effects of $4.4 Million and $3.7 Million for the Three Months Ended March 30, 2019 and March 31, 2018, Respectively
14.1

 
11.5

Reclassification of Losses (Gains) included in Net Income, Net of Tax Effects of $(0.1) Million and $(0.6) Million for the Three Months Ended March 30, 2019 and March 31, 2018, Respectively
0.3

 
(1.8
)
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 $0.2 Million for the Three Months Ended March 30, 2019 and March 31, 2018, Respectively
0.4

 
0.8

Other Comprehensive Income
28.2

 
41.1

Comprehensive Income
115.0

 
100.4

Less: Comprehensive Income Attributable to Noncontrolling Interests
1.4

 
1.9

Comprehensive Income Attributable to Regal Beloit Corporation
$
113.6

 
$
98.5

See accompanying Notes to Condensed Consolidated Financial Statements


6



REGAL BELOIT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Millions, Except Per Share Data)
 
 
March 30,
2019
 
December 29,
2018
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and Cash Equivalents
$
264.3

 
$
248.6

Trade Receivables, Less Allowances of $8.7 Million in 2019 and $13.3 Million in 2018
545.9

 
551.9

Inventories
803.8

 
767.2

Prepaid Expenses and Other Current Assets
172.0

 
157.9

Assets of Businesses Held for Sale
50.5

 
92.1

Total Current Assets
1,836.5

 
1,817.7

Net Property, Plant and Equipment
608.5

 
615.5

Operating Lease Assets
89.1

 

Goodwill
1,507.4

 
1,509.2

Intangible Assets, Net of Amortization
606.1

 
625.5

Deferred Income Tax Benefits
35.3

 
34.2

Other Noncurrent Assets
23.0

 
21.7

Total Assets
$
4,705.9

 
$
4,623.8

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Accounts Payable
$
429.6

 
$
424.8

Dividends Payable
12.0

 
12.0

Current Hedging Obligations
3.6

 
11.3

Accrued Compensation and Employee Benefits
66.9

 
81.9

Other Accrued Expenses
122.6

 
136.0

Liabilities of Businesses Held for Sale
13.7

 
17.0

Current Operating Lease Liabilities
26.0

 

Current Maturities of Long-Term Debt
2.1

 
0.5

Total Current Liabilities
676.5

 
683.5

Long-Term Debt
1,213.2

 
1,306.6

Deferred Income Taxes
155.9

 
148.3

Noncurrent Hedging Obligations
0.7

 
1.2

Pension and Other Post Retirement Benefits
96.5

 
96.2

Noncurrent Operating Lease Liabilities
65.1

 

Other Noncurrent Liabilities
54.0

 
49.5

Contingencies (see Note 13)

 

Equity:
 
 
 
Regal Beloit Corporation Shareholders' Equity:
 
 
 
Common Stock, $0.01 par value, 100.0 Million Shares Authorized, 42.8 Million Shares Issued and Outstanding in 2019 and 2018, Respectively
0.4

 
0.4

Additional Paid-In Capital
786.4

 
783.6

Retained Earnings
1,851.8

 
1,777.9

Accumulated Other Comprehensive Loss
(223.7
)
 
(251.4
)
Total Regal Beloit Corporation Shareholders' Equity
2,414.9

 
2,310.5

Noncontrolling Interests
29.1

 
28.0

Total Equity
2,444.0

 
2,338.5

Total Liabilities and Equity
$
4,705.9

 
$
4,623.8

See accompanying Notes to Condensed Consolidated Financial Statements.

7



REGAL BELOIT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(Dollars in Millions, Except Per Share Data)
 
 
Common
Stock
$0.01 Par
Value
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
Equity
Balance as of December 29, 2018
$
0.4

 
$
783.6

 
$
1,777.9

 
$
(251.4
)
 
$
28.0

 
$
2,338.5

Net Income

 

 
85.9

 

 
0.9

 
86.8

Other Comprehensive Income

 

 

 
27.7

 
0.5

 
28.2

Dividends Declared ($0.28 Per Share)

 

 
(12.0
)
 

 

 
(12.0
)
Stock Options Exercised

 
(1.5
)
 

 

 

 
(1.5
)
Dividends Declared to Noncontrolling Interests

 

 

 

 
(0.3
)
 
(0.3
)
Share-Based Compensation

 
4.3

 

 

 

 
4.3

Balance as of March 30, 2019
$
0.4

 
$
786.4

 
$
1,851.8

 
$
(223.7
)
 
$
29.1

 
$
2,444.0

 
 
Common
Stock
$0.01 Par
Value
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
Equity
Balance as of December 30, 2017
$
0.4

 
$
877.5

 
$
1,611.6

 
$
(164.0
)
 
$
29.2

 
$
2,354.7

Net Income

 

 
58.4

 

 
0.9

 
59.3

Other Comprehensive Income

 

 

 
40.1

 
1.0

 
41.1

Dividends Declared ($0.26 Per Share)

 

 
(11.4
)
 

 

 
(11.4
)
Stock Options Exercised

 
(0.9
)
 

 

 

 
(0.9
)
Stock Repurchase

 
(22.5
)
 
(3.5
)
 

 

 
(26.0
)
Share-Based Compensation

 
3.4

 

 

 

 
3.4

Balance as of March 31, 2018
$
0.4

 
$
857.5

 
$
1,655.1

 
$
(123.9
)
 
$
31.1

 
$
2,420.2

See accompanying Notes to Condensed Consolidated Financial Statements.

8



REGAL BELOIT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Millions)
 
Three Months Ended
 
March 30,
2019
 
March 31,
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net Income
$
86.8

 
$
59.3

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities (Net of Acquisitions and Divestitures):
 
 
 
Depreciation and Amortization
34.3

 
34.8

Impairments
10.0

 

Noncash Lease Expense
3.9

 

Loss on Sale or Disposition of Assets, Net
0.1

 
0.2

Share-Based Compensation Expense
4.3

 
3.4

Gain on Divestiture of Business
(41.2
)
 

Change in Operating Assets and Liabilities
(79.9
)
 
(55.2
)
Net Cash Provided By Operating Activities
18.3

 
42.5

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Additions to Property, Plant and Equipment
(20.2
)
 
(19.3
)
Sales of Investment Securities

 
0.5

Proceeds from Divestiture of Businesses
119.4

 

Proceeds from Sale of Assets

 
0.3

Net Cash Provided by (Used In) Investing Activities
99.2

 
(18.5
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Borrowings Under Revolving Credit Facility
302.7

 
307.5

Repayments Under Revolving Credit Facility
(372.3
)
 
(266.5
)
Proceeds from Short-Term Borrowings
13.2

 
0.7

Repayments of Short-Term Borrowings
(11.6
)
 
(1.1
)
Repayments of Long-Term Borrowings
(24.1
)
 
(0.1
)
Dividends Paid to Shareholders
(12.0
)
 
(11.5
)
Shares Surrendered for Taxes
(1.6
)
 
(0.9
)
Repurchase of Common Stock

 
(26.0
)
Distributions to Noncontrolling Interests
(0.3
)
 

Net Cash (Used In) Provided By Financing Activities
(106.0
)
 
2.1

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS
4.2

 
4.2

Net Increase in Cash and Cash Equivalents
15.7

 
30.3

Cash and Cash Equivalents at Beginning of Period
248.6

 
139.6

Cash and Cash Equivalents at End of Period
$
264.3

 
$
169.9

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 
 
 
Cash Paid For:
 
 
 
 Interest
$
18.1

 
$
18.2

 Income taxes
$
7.0

 
$
16.3


See accompanying Notes to Condensed Consolidated Financial Statements.

9



REGAL BELOIT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 30, 2019
(Unaudited)

1. BASIS OF PRESENTATION
The accompanying (a) Condensed Consolidated Balance Sheet of Regal Beloit Corporation (the “Company”) as of December 29, 2018, which has been derived from audited Consolidated Financial Statements, and (b) unaudited interim Condensed Consolidated Financial Statements as of March 30, 2019 and for the three months ended March 30, 2019 and March 31, 2018, 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 2018 Annual Report on Form 10-K filed on February 26, 2019.
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 months ended March 30, 2019 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 28, 2019.
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; 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.
The Company operates on a 52/53 week fiscal year ending on the Saturday closest to December 31.
New Accounting Standards
In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20). The ASU addresses modifications to the disclosure requirements for Defined Benefit Plans. Under ASU 2018-14 the disclosure requirements that can be removed are amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, amount and timing of plan assets expected to be returned to the employer, and the effects of a one-percentage-point change in assumed health care cost trend rates on the aggregate of the service and interest cost components of net periodic benefit costs and benefit obligations for postretirement health care benefits. Additional disclosures are required for the weighted -average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and an explanation for significant gains and losses related to the changes in the benefit obligation for the period. If a defined benefit pension plan has a projected benefit obligation greater than plan assets the projected benefit obligation and fair value of plan assets should be disclosed. This additional disclosure is also required when comparing the accumulated benefit obligation to plan assets. This ASU becomes effective for fiscal years ending after December 15, 2020 on a retrospective basis for all years presented. Early adoption is permitted. The Company is evaluating the effect of adopting this new accounting guidance.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU focuses on updates around disclosures of Level 3 fair value measurements and it presents modifications to current disclosure requirements. The additional requirements under this ASU include disclosure for the changes in unrealized gains and losses included in other comprehensive income ("OCI") held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs. The ASU is also eliminating the disclosure requirement for the amount and reason for transfers between Level 1 and Level 2 fair value measurement, valuation processes for Level 3 measurements, and policy for timing of transfers between levels of the fair value hierarchy. In addition, the ASU is modifying the disclosure requirements for investments in certain entities that calculate net asset value, the Company is required to disclosure the timing of liquidation of an investee's assets when a net asset value calculation is used and the date when the restrictions from redemption might lapse only when it has been announced within the Company or publicly. The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the

10



reporting date. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The ASU requires prospective application for only the most recent interim or annual period presented in the year of adoption for changes in unrealized gains and losses included in OCI, the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the narrative description of measurement uncertainty. All other amendments described in this ASU must be applied retrospectively to all periods presented. The Company is evaluating the effect of adopting this new accounting guidance, but does not anticipate a material impact on the financial statement disclosures.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities. The amendments in this update better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The Company adopted this ASU as of December 30, 2018, the beginning of fiscal 2019, with no material impact on the Company's Condensed Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, Leases. The core principle of ASU 2016-02 is that an entity should recognize assets and liabilities arising from an operating lease on its Balance Sheet. In accordance with that principle, ASU 2016-02 requires that a lessee recognize a liability to make lease payments, the lease liability, and a right-of-use asset representing its right to use the underlying leased asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on the lease classification as a finance or operating lease. In July 2018, the FASB amended its guidance by issuing ASU 2018-11 to provide an additional transition method, allowing a cumulative effect adjustment to the opening balance of Retained Earnings during the period of adoption. The Company adopted the standard as of December 30, 2018, the beginning of fiscal 2019, under the modified retrospective method. Comparative periods presented in the Condensed Consolidated Financial Statements continue to be presented as previously filed.

The Company elected the package of practical expedients permitted under the relief package within the new standard allows the Company to carryforward the historical lease accounting of expired or existing leases with respect to lease identification, lease classification and accounting treatment for initial direct costs as of the adoption date. The Company also elected the practical expedient related to lease versus non-lease components, allowing the Company to recognize lease and non-lease components as a single lease.

Adoption of the new standard resulted in the recording of right-of-use assets and lease liabilities of $93.0 million as of December 30, 2018. No cumulative effect adjustment to Retained Earnings was recognized upon adoption of the new standard. The standard did not materially impact the Company's consolidated net income and had no impact on cash flows. See Note 9 for additional disclosures.


2. OTHER FINANCIAL INFORMATION
Inventories
The following table presents approximate percentage distribution between major classes of inventories:
 
March 30,
2019
 
December 29,
2018
Raw Material and Work in Process
45%
 
45%
Finished Goods and Purchased Parts
55%
 
55%

Inventories are stated at cost, which is not in excess of market. Cost for approximately 56% of the Company's inventory at March 30, 2019, and 54% at December 29, 2018 was determined using the last-in, first-out ("LIFO") method.


11



Assets Held for Sale

In December 2018, the Company signed an agreement to sell its engineered drives and controls systems business included in the Company's Commercial and Industrial Systems segment. This transaction closed in January 2019.

Also in January 2019, the Company signed an agreement to sell its capacitors business which had been included in the Company's Climate Solutions segment. This transaction closed in April 2019.

In April 2019, the Company signed an agreement to sell its custom marine and industrial transmissions business included in the Company's Power Transmissions Solutions segment. This transaction closed in April 2019.

As of March 30, 2019 and December 29, 2018, the Company has presented assets and liabilities of certain businesses held for sale as the Company has both the intent and ability to sell these businesses.

These businesses are being divested as they are considered non-core to the Company's operations. The table below presents the balances that were classified as Assets of Businesses Held for Sale and Liabilities of Businesses Held for Sale as of March 30, 2019 and December 29, 2018 (in millions):


March 30, 2019
 
December 29, 2018
Trade Receivables
$
15.1

 
$
19.2

Inventories
21.9

 
34.7

Prepaid Expenses and Other Current Assets
1.6

 
5.0

Property, Plant and Equipment
7.8

 
19.9

Intangible Assets

 
12.0

Goodwill
1.3

 
1.3

Other Noncurrent Assets
2.8

 

Assets of Businesses Held for Sale
$
50.5

 
$
92.1

 
 
 
 
Accounts Payable
$
6.3

 
$
8.1

Accrued Compensation and Employee Benefits
0.4

 
0.5

Other Accrued Expenses
6.0

 
7.3

Other Noncurrent Liabilities
1.0

 
1.1

Liabilities of Businesses Held for Sale
$
13.7

 
$
17.0


The businesses classified as held for sale at March 30, 2019 had First Quarter 2019, Net Sales and Income from Operations of $20.7 million and $2.1 million, respectively. Net Sales and Loss from Operations of $17.1 million and $(0.5) million, respectively for the three months ended March 31, 2018. The businesses classified as held for sale at December 29, 2018 had Fiscal 2018, Net Sales and Income from Operations of $138.9 million and $15.7 million, respectively.

12



Property, Plant and Equipment
The following table presents property, plant, and equipment by major classification (dollars in millions):
 
Useful Life in Years
 
March 30,
2019
 
December 29,
2018
Land and Improvements
 
 
$
82.8

 
$
82.1

Buildings and Improvements
3 - 50
 
303.4

 
302.8

Machinery and Equipment
3 - 15
 
960.6

 
971.9

Property, Plant and Equipment
 
 
1,346.8

 
1,356.8

Less: Accumulated Depreciation
 
 
(738.3
)
 
(741.3
)
Net Property, Plant and Equipment
 
 
$
608.5

 
$
615.5


For the three months ended March 30, 2019, the Company recognized $5.1 million of fixed 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 and power transmission products. 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’s customers. The Company reports in three operating segments: Commercial and Industrial Systems, Climate Solutions and Power Transmission 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 three 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 systems/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.

13



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 Sheet.
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):
Three Months Ended March 30, 2019
 
Commercial and Industrial Systems
 
Climate Solutions
 
Power Transmission Solutions
 
Total
North America
 
$
247.7

 
$
231.4


$
172.7

 
$
651.8

Asia
 
67.7

 
10.4

 
7.4

 
85.5

Europe
 
47.5

 
11.5

 
24.7

 
83.7

Rest-of-World
 
17.4

 
10.0

 
5.4

 
32.8

Total
 
$
380.3

 
$
263.3

 
$
210.2

 
$
853.8

 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
Commercial and Industrial Systems
 
Climate Solutions
 
Power Transmission Solutions
 
Total
North America
 
$
288.5

 
$
219.4

 
$
167.4

 
$
675.3

Asia
 
67.0

 
12.6

 
4.7

 
84.3

Europe
 
19.0

 
10.9

 
24.9

 
54.8

Rest-of-World
 
39.5

 
17.0

 
7.9

 
64.4

Total

$
414.0

 
$
259.9

 
$
204.9

 
$
878.8


14



Practical Expedients and Exemptions
The Company typically expenses incremental direct costs of obtaining a contract, primarily sales commissions, as incurred because the amortization period is expected to be 12 months or less. Contract costs are included in Operating Expenses on the accompanying Condensed Consolidated Statements of Income.
Due to the short nature of the Company’s contracts, the Company has adopted a practical expedient to not disclose revenue allocated to remaining performance obligations as substantially all of its contracts have original terms of 12 months or less.
The Company typically does not include in its transaction price any amounts collected from customers for sales taxes.
The Company has elected to account for shipping and handling costs as fulfillment activities and expense the costs as incurred as part of Cost of Sales.
Exit of Business

On July 31, 2018, the Company received notification from a customer of its Hermetic Climate business that it would wind down operations. The Hermetic Climate business accounted for sales of $52.6 million for the fiscal year ended 2018. $12.7 million of sales were recorded for the three months ended March 30, 2019 compared to $15.6 million for the three months ended March 31, 2018. As a result of this notification, the Company accelerated its plans to exit this business. The Company continues to wind down its operations and this is expected to be completed by the end of the third quarter in the current fiscal year. The Company recognized exit and exit related charges of $34.9 million during the third quarter of fiscal 2018. The charges included goodwill impairment of $9.5 million, customer relationship intangible asset impairment of $5.5 million, technology intangible asset impairment of $2.1 million and fixed asset impairment of $1.1 million. In addition to the impairments, the Company took charges on accounts receivable and inventory along with recognizing other expenses related to exiting the business.

3. ACQUISITIONS AND DIVESTITURES
The results of operations of acquired businesses are included in the Condensed Consolidated Financial Statements from the date of acquisition. There were no acquisition and acquisition related expenses for the three months ended March 30, 2019 and March 31, 2018, respectively.

2018 Acquisitions

Nicotra Gebhardt

On April 10, 2018, the Company acquired Nicotra Gebhardt S.p.A ("NG") for $161.5 million in cash, net of $8.5 million of cash acquired. NG is a leader in critical, energy-efficient systems for ventilation and air quality. NG manufactures, sells and services fans and blowers under the industry leading brands of Nicotra and Gebhardt. The financial results of NG have been included in the Company's Commercial & Industrial Systems segment from the date of acquisition.


15



The following table summarizes the fair value of assets acquired and liabilities assumed (in millions):

 
 
 
 
 
As of April 10, 2018
Other Current Assets
 
 
 
 
$
17.2

Trade Receivables
 
 
 
 
28.0

Inventories
 
 
 
 
22.1

Property, Plant and Equipment
 
 
 
 
44.6

Intangible Assets
 
 
 
 
37.8

Goodwill
 
 
 
 
58.7

Other Noncurrent Assets
 
 
 
 
2.5

Total Assets Acquired
 
 
 
 
210.9

Accounts Payable
 
 
 
 
16.7

Current Liabilities Assumed
 
 
 
 
14.2

Long-Term Liabilities Assumed
 
 
 
 
10.0

Net Assets Acquired
 
 
 
 
$
170.0


Other Disclosures

The Condensed Consolidated Statements of Income include the results of operations of NG since the date of acquisition, and such results are reflected in the Commercial and Industrial Systems segment. Results of operations since the date of acquisition and supplemental pro forma financial information have not been presented for the NG acquisition as such information is not material to the results of operations. No adjustments were made since the filing of the Company's 10-K on February 26, 2019.

South Africa

During the third quarter of fiscal year 2018 the Company purchased the remaining shares owned by the joint venture partner in a South African distribution business for a purchase price of $0.8 million. The purchase price of the South African distribution business is reflected as a component of equity.

2019 Divestitures

Regal Drive Technologies

On January 7, 2019, the Company sold its Regal Drive Technologies business and received proceeds of $119.4 million subject to customary finalization. Regal Drive Technologies was included in the Company's Commercial and Industrial Systems segment and considered a non-core business. The Company recognized a gain on sale of $41.2 million in the Condensed Consolidated Statements of Income.

4. ACCUMULATED OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments, hedging activities and pension and post retirement benefit adjustments are included in AOCI, a component of Total Equity.

16



The following table presents changes in AOCI by component for the three months ended March 30, 2019 and March 31, 2018 (in millions):
 
Three Months Ended
 
March 30, 2019
 
Hedging Activities
 
Pension and Post Retirement Benefit Adjustments
 
Foreign Currency Translation Adjustments
 
Total
Beginning Balance
$
(5.4
)
 
$
(38.2
)
 
$
(207.8
)
 
$
(251.4
)
Other Comprehensive Income (Loss) before Reclassifications
18.5

 
(0.2
)
 
10.9

 
29.2

Tax Impact
(4.4
)
 

 

 
(4.4
)
Amounts Reclassified from Accumulated Other Comprehensive Loss
0.4

 
0.5

 
2.2

 
3.1

Tax Impact
(0.1
)
 
(0.1
)
 

 
(0.2
)
Net Current Period Other Comprehensive Income
14.4

 
0.2

 
13.1

 
27.7

Ending Balance
$
9.0

 
$
(38.0
)
 
$
(194.7
)
 
$
(223.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
March 31, 2018
 
Hedging Activities
 
Pension and Post Retirement Benefit Adjustments
 
Foreign Currency Translation Adjustments
 
Total
Beginning Balance
$
8.6

 
$
(32.6
)
 
$
(140.0
)
 
$
(164.0
)
Other Comprehensive Income (Loss) before Reclassifications
15.2

 
(0.3
)
 
29.9

 
44.8

Tax Impact
(3.7
)
 

 

 
(3.7
)
Amounts Reclassified from Accumulated Other Comprehensive Loss
(2.4
)
 
1.0

 

 
(1.4
)
Tax Impact
0.6

 
(0.2
)
 

 
0.4

Net Current Period Other Comprehensive Income
9.7

 
0.5

 
29.9

 
40.1

Ending Balance
$
18.3

 
$
(32.1
)
 
$
(110.1
)
 
$
(123.9
)
 
 
 
 
 
 
 
 
The Condensed Consolidated Statements of Income line items affected by the hedging activities reclassified from AOCI in the tables above are disclosed in Note 14.
The reclassification amounts for pension and post retirement benefit adjustments in the tables above are part of net periodic benefit costs recorded in Operating Expenses (see also Note 8).

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.

17



The following table presents changes to goodwill during the three months ended March 30, 2019 (in millions):
 
Total
 
Commercial and Industrial Systems
 
Climate Solutions
 
Power Transmission Solutions
Balance as of December 29, 2018
$
1,509.2

 
$
598.9

 
$
330.6

 
$
579.7

Translation Adjustments
(1.8
)
 
(0.3
)
 
0.2

 
(1.7
)
Balance as of March 30, 2019
$
1,507.4

 
$
598.6

 
$
330.8

 
$
578.0

 
 
 
 
 
 
 
 
Cumulative Goodwill Impairment Charges
$
285.2

 
$
244.8

 
$
17.2

 
$
23.2

Intangible Assets
The following table presents intangible assets (in millions):
 
 
 
 
March 30, 2019
 
December 29, 2018
 
 
Weighted Average Amortization Period (Years)
 
Gross Value
 
Accumulated
Amortization
 
Gross Value
 
Accumulated
Amortization
Amortizable Intangible Assets:
 
 
 
 
 
 
 
 
 
 
  Customer Relationships
 
17
 
$
694.6

 
$
274.3

 
$
708.8

 
$
272.4

  Technology
 
14
 
144.7

 
92.8

 
144.5

 
90.1

  Trademarks
 
14
 
36.1

 
23.9

 
37.0

 
24.2

  Patent and Engineering Drawings
 
5
 
16.6

 
16.6

 
16.6

 
16.6

  Non-Compete Agreements
 
8
 
7.3

 
7.3

 
7.2

 
7.2

 
 
 
 
899.3

 
414.9

 
914.1

 
410.5

Non-Amortizable Trade Names
 
 
 
121.7

 

 
121.9

 

 
 
 
 
$
1,021.0

 
$
414.9

 
$
1,036.0

 
$
410.5

 
 
 
 
 
 
 
 
 
 
 
Intangible Assets, Net of Amortization
 
 
 
$
606.1

 
 
 
$
625.5

 
 

Amortization expense recorded for the three months ended March 30, 2019 was $12.8 million. Amortization expense recorded for the three months ended March 31, 2018 was $13.6 million. Amortization expense for fiscal year 2019 is estimated to be $50.9 million. Amortization expense does not include any impairment recognized during the respective periods. The Company recognized impairment of its customer relationships intangible asset of $4.9 million related to the movement of assets to held for sale for the three months ended March 30, 2019.
The following table presents future annual amortization for intangible assets (in millions):

 Year
 
Estimated Amortization
2020
 
$
47.9

2021
 
42.7

2022
 
41.1

2023
 
41.0

2024
 
39.9




18



6. SEGMENT INFORMATION

The Company is comprised of three operating segments: Commercial and Industrial Systems, Climate Solutions, and Power Transmission Solutions.
Commercial and Industrial Systems produces medium and large motors, commercial and industrial equipment, alternators, motors and controls and air moving solutions. These products serve markets including commercial HVAC, pool and spa, standby and critical power and oil and gas systems.
Climate Solutions produces small motors, controls and air moving solutions serving markets including residential and light commercial HVAC, water heaters and commercial refrigeration.
Power Transmission Solutions manufactures, sells and services belt and chain drives, helical and worm gearing, mounted and unmounted bearings, couplings, modular plastic belts, conveying chains and components, hydraulic pump drives, large open gearing and specialty mechanical products serving markets including beverage, bulk handling, metals, special machinery, 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 for the three months ended March 30, 2019 and March 31, 2018 (in millions):
 
Commercial and Industrial Systems
 
Climate Solutions
 
Power Transmission Solutions
 
Eliminations
 
Total
Three Months Ended March 30, 2019
 
 
 
 
 
 
 
 
 
External Sales
$
380.3

 
$
263.3

 
$
210.2

 
$

 
$
853.8

Intersegment Sales
14.3

 
4.5

 
5.9

 
(24.7
)
 

  Total Sales
394.6

 
267.8

 
216.1

 
(24.7
)
 
853.8

Gross Profit
89.4

 
70.7

 
74.5

 

 
234.6

Operating Expenses
69.5

 
30.5

 
45.2

 

 
145.2

Gain on Divestiture of Business
(41.2
)
 

 

 

 
(41.2
)
Impairments
7.6

 
1.3

 
1.1

 

 
10.0

Income From Operations
53.5

 
38.9

 
28.2

 

 
120.6

Depreciation and Amortization
15.5

 
4.9

 
13.9

 

 
34.3

Capital Expenditures
13.1

 
2.9

 
4.2

 

 
20.2

 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 
 
 
 
 
 
 
 
External Sales
$
414.0

 
$
259.9

 
$
204.9

 
$

 
$
878.8

Intersegment Sales
15.1

 
5.5

 
4.6

 
(25.2
)
 

  Total Sales
429.1

 
265.4

 
209.5

 
(25.2
)
 
878.8

Gross Profit
99.8

 
63.7

 
71.4

 

 
234.9

Operating Expenses
70.7

 
31.4

 
44.6

 

 
146.7

Income From Operations
29.1

 
32.3

 
26.8

 

 
88.2

Depreciation and Amortization
15.4

 
5.4

 
14.0

 

 
34.8

Capital Expenditures
11.0

 
4.5

 
3.8

 

 
19.3

 
 
 
 
 
 
 
 
 
 
The following table presents identifiable assets information attributable to the Company's operating segments as of March 30, 2019 and December 29, 2018 (in millions):

19



 
Commercial and Industrial Systems
 
Climate Solutions
 
Power Transmission Solutions
 
Total
Identifiable Assets as of March 30, 2019
$
2,128.9

 
$
966.3

 
$
1,610.7

 
$
4,705.9

Identifiable Assets as of December 29, 2018
$
2,108.0

 
$
907.7

 
$
1,608.1

 
$
4,623.8


7. DEBT AND BANK CREDIT FACILITIES
The following table presents the Company’s indebtedness as of March 30, 2019 and December 29, 2018 (in millions):
 
March 30,
2019
 
December 29,
2018
Term Facility
$
786.0

 
$
810.0

Senior Notes
400.0

 
400.0

Multicurrency Revolving Facility
28.8

 
98.4

Other
6.3

 
4.9

Less: Debt Issuance Costs
(5.8
)
 
(6.2
)
Total
1,215.3

 
1,307.1

Less: Current Maturities
2.1

 
0.5

Long-Term Debt
$
1,213.2

 
$
1,306.6

Credit Agreement
In connection with the Company's acquisition of the Power Transmission Solutions business of Emerson Electric Co. (the "PTS Acquisition") on January 30, 2015, the Company entered into a Credit Agreement (the “Prior Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent and the lenders named therein, providing for a (i) 5-year unsecured term loan facility in the principal amount of $1.25 billion (the “Prior Term Facility”) and (ii) a 5-year unsecured multicurrency revolving facility in the principal amount of $500.0 million (the “Prior Multicurrency Revolving Facility”), including a $100.0 million letter of credit sub facility, available for general corporate purposes. Borrowings under the Prior Credit Agreement bear interest at floating rates based upon indices determined by the currency of the borrowing, plus an applicable margin determined by reference to the Company's consolidated funded debt to consolidated EBITDA ratio or at an alternative base rate.
On August 27, 2018 the Company replaced the Prior Credit Agreement by entering into an Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent and the lenders named therein, providing for a (i) 5-year unsecured term loan facility in the principal amount of $900.0 million (the “Term Facility”) and (ii) a 5-year unsecured multicurrency revolving facility in the principal amount of $500.0 million (the “Multicurrency Revolving Facility”), including a $50.0 million letter of credit sub facility, available for general corporate purposes. Borrowings under the Credit Agreement bear interest at floating rates based upon indices determined by the currency of the borrowing, plus an applicable margin determined by reference to the Company's consolidated funded debt to consolidated EBITDA ratio or at an alternative base rate.
The Term Facility was drawn in full on August 27, 2018 with the proceeds settling the amounts owed under the Prior Term Facility and Prior Multicurrency Revolving Facility. The Term Facility requires quarterly amortization at a rate starting at 5.0% per annum, increasing to 7.5% per annum after three years and further increasing to 10.0% per annum for the last years of the Term Facility, unless previously prepaid. The weighted average interest rate on the Term Facility and Prior Term Facility was 3.9% and 3.1% for the three months ended March 30, 2019 and March 31, 2018, 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.
At March 30, 2019, the Company had borrowings under the Multicurrency Revolving Facility in the amount of $28.8 million, $0.4 million of standby letters of credit issued under the facility, and $470.8 million of available borrowing capacity. The average daily balance in borrowings under the Multicurrency Revolving Facility and Prior Multicurrency Revolving Facility was $64.3 million and $130.7 million, respectively, and the weighted average interest rate on the Multicurrency Revolving Facility and Prior Multicurrency Revolving Facility was 3.8% and 3.1% for the three months ended March 30, 2019 and March 31, 2018, 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.

20



Senior Notes
At March 30, 2019, the Company had $400.0 million of senior notes (the “Notes”) outstanding. The Notes consist of $400.0 million in senior notes in a private placement which were issued in five tranches with maturities from ten to twelve years and carry fixed interest rates. As of March 30, 2019, $400.0 million of the Notes are included in Long-Term Debt on the Condensed Consolidated Balance Sheets.
The following table presents details on the Notes at March 30, 2019 (in millions):
 
 
Principal
 
Interest Rate
 
Maturity
Fixed Rate Series 2011A
 
$
230.0

 
4.8 to 5.0%
 
July 14, 2021
Fixed Rate Series 2011A
 
170.0

 
4.9 to 5.1%
 
July 14, 2023
 
 
$
400.0

 
 
 
 


Compliance with Financial Covenants

The Credit Agreement and the Notes require the Company to meet specified financial ratios and to satisfy certain financial condition tests. The Company was in compliance with all financial covenants contained in the Notes and the Credit Agreement as of March 30, 2019.
 
Other Notes Payable

At March 30, 2019, other notes payable of approximately $6.3 million were outstanding with a weighted average interest rate of 4.5%. At December 29, 2018, other notes payable of approximately $4.9 million were outstanding with a weighted average rate of 5.0%.

Other Disclosures

Based on rates for instruments with comparable maturities and credit quality, which are classified as Level 2 inputs (see also Note 15), the approximate fair value of the Company's total debt was $1,234.3 million and $1,323.6 million as of March 30, 2019 and December 29, 2018, respectively.

8. RETIREMENT AND POST RETIREMENT HEALTH CARE PLANS
The following table presents the Company’s net periodic benefit cost components (in millions):
 
 
Three Months Ended
 
March 30,
2019
 
March 31,
2018
Service Cost
$
1.6

 
$
1.8

Interest Cost
2.7

 
2.4

Expected Return on Plan Assets
(3.1
)
 
(3.0
)
Amortization of Prior Service Cost and Net Actuarial Loss
0.5

 
1.0

Net Periodic Benefit Cost
$
1.7

 
$
2.2

The service cost component is included in Cost of Sales and Operating Expenses. All other components of net period benefit costs are included in Other Expenses, net on the Company's Condensed Consolidated Statements of Income.
The estimated net actuarial loss and prior service cost for post retirement plans that will be amortized from AOCI into net periodic benefit cost during the 2019 fiscal year are $1.8 million and $0.3 million, respectively.
For the three months ended March 30, 2019 and March 31, 2018, the Company contributed $0.8 million and $0.9 million, respectively, to post retirement plans. The Company expects to make total contributions of $11.1 million in 2019. The Company contributed a total of $11.5 million in fiscal 2018. The assumptions used in the valuation of the Company’s post retirement plans and in the target

21



investment allocation have remained the same as those disclosed in the Company’s 2018 Annual Report on Form 10-K filed on February 26, 2019.
9. LEASES

The Company leases certain manufacturing facilities, warehouses/distribution centers, office space, machinery, equipment, IT assets, and vehicles. If the contract provides the Company the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, it is considered to be or contain a lease. Right-of-use ("ROU") assets and lease liabilities are recognized at lease commencement date based on the present value of the future lease payments over the expected lease term.

As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The incremental borrowing rate is estimated based upon the sovereign treasury rate for the currency in which the lease liability is denominated when the Company takes possession of the leased asset, adjusted for various factors, such as term and internal credit spread. The ROU asset also includes any lease payments made and excludes lease incentive and initial direct costs incurred.

Leases entered into include one or more options to renew. The renewal terms can extend the lease term from one to twenty-five years. The exercise of lease renewal options is at the Company's sole discretion. Renewal option periods are included in the measurement of the ROU asset and lease liability when the exercise is reasonably certain to occur. Some leases include options to terminate the lease upon breach of contract and are remeasured at that point in time.

The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Some of the Company's lease agreements include rental payments adjusted periodically for inflation or are based on an index rate which are included as variable lease payments. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating leases are included in the following asset and liability accounts on the Company's Condensed Consolidated Balance Sheet: Operating Lease Assets, Current Operating Lease Liabilities, and Noncurrent Operating Lease Liabilities. ROU assets and liabilities arising from finance leases are included in the following asset and liability accounts on the Company's Condensed Consolidated Balance Sheet: Net Property, Plant and Equipment, Current Maturities of Long-Term Debt, and Long-Term Debt.

Short-term and variable lease expense was immaterial. The components of lease expense were as follows (in millions):


Three Months Ended

March 30, 2019
Operating Lease Cost
$
9.3

Finance Lease Cost:

   Amortization of ROU Assets
0.1

   Interest on Lease Liabilities
0.1

Total Lease Expense
$
9.5



22



Maturity of lease liabilities as of March 30, 2019 were as follows (in millions):

 
Operating Leases
 
Finance Leases
 
Total
Remainder of 2019
$
25.6

 
$
0.4

 
$
26.0

2020
28.4

 
0.5

 
28.9

2021
22.4

 
0.5

 
22.9

2022
13.5

 
0.6

 
14.1

2023
7.3

 
0.6

 
7.9

Thereafter
17.1

 
2.5

 
19.6

Total Lease Payments
$
114.3

 
$
5.1

 
$
119.4

Less: Interest
(23.2
)
 
(1.2
)
 

Present Value of Lease Liabilities
$
91.1

 
$
3.9

 

Future minimum lease payments under operating leases as of December 29, 2018 were as follows (in millions):
Year
 
Total
2019
 
$
30.8

2020
 
24.7

2021
 
19.2

2022
 
11.7

2023
 
6.5

Thereafter
 
16.2


Other information related to leases was as follows (in millions):
 
Three Months Ended
Supplemental Cash Flows Information
March 30, 2019
Cash Paid for Amounts Included in the Measurement of Lease Liabilities:

  Operating Cash Flows from Operating Leases
$
9.2

  Operating Cash Flows from Finance Leases
0.1

  Financing Cash Flows from Finance Leases
0.1

Leased Assets Obtained in Exchange for New Operating Lease Liabilities
3.2

Weighted Average Remaining Lease Term

Operating Leases
4.6 years

Finance Leases
9.0 years

Weighted Average Discount Rate

Operating Leases
8.4
%
Finance Leases
5.9
%

As of March 30, 2019, the Company has additional operating leases that have not yet commenced for future lease payments of $11.1 million. These operating leases will commence during fiscal year 2019 with lease terms of one to 10.5 years. The Company had no finance leases that had not yet commenced nor entered into during the quarter.


23



10. SHAREHOLDERS’ EQUITY
Repurchase of Common Stock

At a meeting of the Board of Directors on July 24, 2018, authorization was granted to purchase up to $250.0 million of shares. For the three months ended March 30, 2019, there were zero repurchases under this program. As of March 30, 2019, there was approximately $196.9 million in common stock available for repurchase under the program. For the three months ended March 31, 2018, the Company acquired and retired 351,000 shares of its common stock for a total cost of $26.0 million under a prior repurchase program.

Share-Based Compensation

The majority of the Company’s annual share-based incentive awards are granted in the second fiscal quarter.

The Company recognized approximately $4.3 million and $3.4 million in share-based compensation expense for the three months ended March 30, 2019 and March 31, 2018, respectively. The total income tax benefit recognized in the Condensed Consolidated Statements of Income for share-based compensation expense was $0.9 million and $0.8 million for the three months ended March 30, 2019 and March 31, 2018, 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. As of March 30, 2019, total unrecognized compensation cost related to share-based compensation awards was approximately $15.8 million, net of estimated forfeitures, which the Company expects to recognize over a weighted average period of approximately 1.6 years.

Approximately 2.6 million shares were available for future grant under the 2018 Equity Incentive Plan at March 30, 2019.

Stock Appreciation Rights
The Company uses stock settled stock appreciation rights (“SARs”) as a form of share-based incentive awards. SARs are the right to receive stock in an amount equal to the appreciation in value of a share of stock over the base price per share that generally vest over 5 years and expire 10 years from the grant date. All grants are made at prices equal to the fair market value of the stock on the grant date. For the three months ended March 30, 2019 and March 31, 2018, expired and canceled shares were immaterial.
The following table presents share-based compensation activity for the three months ended March 30, 2019 and March 31, 2018 (in millions):
 
 
March 30,
2019
 
March 31,
2018
Total Intrinsic Value of Share-Based Incentive Awards Exercised
 
3.7

 
$
0.5

Income Tax (Expense) Benefit from the Exercise of SARs
 
(0.2
)
 
0.1

Total Fair Value of Share-Based Incentive Awards Vested
 
0.3

 
0.4


The following table presents a summary of share-based incentive plan grant activity the three months ended March 30, 2019.
Number of Shares Under SARs
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (Years)
 
Aggregate Intrinsic Value (in millions)
Outstanding as of December 29, 2018
1,539,368

 
$
69.31

 
 
 
 
Exercised
(192,858
)
 
64.45

 
 
 
 
Forfeited
(6,990
)
 
75.48

 
 
 
 
Outstanding as of March 30, 2019
1,339,520

 
$
69.97

 
3.9
 
$
15.9

Exercisable as of March 30, 2019
764,670

 
$
67.42

 
3.9
 
$
11.0


Compensation expense recognized related to SARs was $0.8 million for the three months ended March 30, 2019.
As of March 30, 2019, there was $5.5 million of unrecognized compensation cost related to non-vested SARs that is expected to be recognized as a charge to earnings over a weighted average period of 2.9 years.

The number of SARs expected to vest is materially consistent with those outstanding and not yet exercisable.

24



Restricted Stock Awards and Restricted Stock Units
Restricted stock awards ("RSA") and restricted stock units ("RSU") consist of shares or the rights to shares of the Company's stock. The awards are restricted such that they are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer. As defined in the individual grant agreements, acceleration of vesting may occur under a change in control, death or disability.
The following table presents a summary of RSA award activity for the three months ended March 30, 2019:
 
 
Shares
 
Weighted Average Fair Value at Grant Date
 
Weighted Average Remaining Contractual Term (Years)
Unvested RSAs as of December 29, 2018
 
15,660

 
$
74.38

 
0.4
Unvested RSAs as of March 30, 2019
 
15,660

 
$
74.38

 
0.1

RSAs vest on the first anniversary of the grant date, provided the holder of the shares is continuously employed by or in the service of the Company until the vesting date. Compensation expense recognized related to the RSAs was $0.3 million for the three months ended March 30, 2019.
As of March 30, 2019, there was $0.1 million of unrecognized compensation cost related to non-vested RSAs that is expected to be recognized as a charge to earnings over a weighted average period of 0.1 years.
The following table presents a summary of RSU award activity for the three months ended March 30, 2019:
 
 
 
 
Shares
 
Weighted Average Fair Value at Grant Date
 
Weighted Average Remaining Contractual Term (Years)
Unvested RSUs as of December 29, 2018
 
234,824

 
$
69.78

 
1.6
Vested
 
(12,131
)
 
70.42

 
 
Forfeited
 
(2,650
)
 
71.18

 
 
Unvested RSUs as of March 30, 2019
 
220,043

 
$
69.72

 
1.4
RSUs vest on the third anniversary of the grant date, provided the holder of the RSUs is continuously employed by the Company until the vesting date. Compensation expense recognized related to the RSUs was $2.0 million for the three months ended March 30, 2019.
As of March 30, 2019, there was $5.5 million of unrecognized compensation cost related to non-vested RSUs that is expected to be recognized as a charge to earnings over a weighted average period of 1.4 years.
Performance Share Units
Performance share units ("PSU") consist of shares or the rights to shares of the Company's stock which are awarded to employees of the Company. These shares are payable upon the determination that the Company achieved certain established performance targets and can range from 0% to 200% of the targeted payout based on the actual results. PSUs have a performance period of 3 years and vest 3 years from the grant date. The PSUs have performance criteria based on a return on invested capital metric or they have performance criteria using returns relative to the Company's peer group. As set forth in the individual award agreements, acceleration of vesting may occur under a change in control, death or disability. There are no voting rights associated with PSUs until vesting occurs and a share of stock is issued. Some of the PSU awards are valued using a Monte Carlo simulation method as of the grant date while others are valued using the closing market price as of the grant date depending on the performance criteria for the award.

25




The following table presents a summary of PSU activity for the three months ended March 30, 2019:
 
 
 
 
Shares
 
Weighted Average Fair Value at Grant Date
 
Weighted Average Remaining Contractual Term (Years)
Unvested PSUs as of December 29, 2018
 
167,840

 
$
71.71

 
1.8
Vested
 
(3,061
)
 
69.45

 
 
Forfeited
 
(6,298
)
 
75.04

 
 
Unvested PSUs as of March 30, 2019
 
158,481

 
$
71.63

 
1.7
Compensation expense for awards granted is recognized based on the grant issuance value or the expected payout ratio depending upon the performance criterion for the award, net of estimated forfeitures. Compensation expense recognized related to PSUs was $1.2 million for the three months ended March 30, 2019. Total unrecognized compensation expense for all PSUs granted as of March 30, 2019 is estimated to be $4.7 million which is expected to be recognized as a charge to earnings over a weighted average period of 1.7 years.

11. INCOME TAXES
The effective tax rate for the three months ended March 30, 2019 was 19.6% versus 21.0% for the three months ended March 31, 2018. The change in the effective tax rate for the three months ended March 30, 2019 was primarily driven by the gain on divestiture of business and the impairments recognized during the quarter.
As of March 30, 2019 and December 29, 2018, the Company had approximately $9.3 million and $6.5 million, respectively, 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.
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 2014, and the Company is no longer subject to non-US income tax examinations by tax authorities for years prior to 2012.

12. 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 0.5 million for the three months ended March 30, 2019 and 0.6 million for the three months ended March 31, 2018, respectively. The following table reconciles the basic and diluted shares used in earnings per share calculations for the three months ended March 30, 2019 and March 31, 2018 (in millions):
 
Three Months Ended
 
March 30,
2019
 
March 31,
2018
Denominator for Basic Earnings Per Share
42.8

 
44.2

Effect of Dilutive Securities
0.3

 
0.3

Denominator for Diluted Earnings Per Share
43.1

 
44.5



26



13. CONTINGENCIES
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.
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 months ended March 30, 2019 and March 31, 2018 (in millions):
 
Three Months Ended
 
March 30,
2019
 
March 31,
2018
Beginning Balance
$
14.8

 
$
16.0

Less: Payments
(3.7
)
 
(5.1
)
Provisions
5.3

 
4.7

Held for Sale
(0.4
)
 

Ending Balance
$
16.0

 
$
15.6

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

14. 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.

27



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 LIBOR-based interest payments. There were no significant collateral deposits on derivative financial instruments as of March 30, 2019 or March 31, 2018.
Cash Flow Hedges
For derivative instruments that are designated and qualify as a cash flow hedge, 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 March 30, 2019, the Company had $0.6 million, 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 December 29, 2018, the Company had $(2.1) million, net of tax, of derivative losses on closed hedge instruments in AOCI that was subsequently realized in earnings when the hedged items impacted earnings.
As of March 30, 2019, the Company had the following currency forward contracts outstanding (with maturities extending through April, 2021) to hedge forecasted foreign currency cash flows (in millions):
 
Notional
Amount (in US Dollars)
Chinese Renminbi
$
156.6

Mexican Peso
196.2

Euro
203.9

Indian Rupee
53.0

Canadian Dollar
7.1

Australian Dollar
12.0

Thai Baht
6.5

British Pound
20.1

As of March 30, 2019, the Company had the following commodity forward contracts outstanding (with maturities extending through June, 2020) to hedge forecasted purchases of commodities (notional amounts expressed in terms of the dollar value of the hedged item (in millions)):
 
Notional
Amount
Copper
$
91.1

Aluminum
10.0

As of March 30, 2019, the total notional amount of the Company's receive variable/pay-fixed interest rate swap was $88.4 million with a maturity of April 12, 2021.

28



The following table presents the fair values of derivative instruments as of March 30, 2019 and December 29, 2018 (in millions):
 
March 30, 2019
 
Prepaid
Expenses and Other Current Assets
 
Other
Noncurrent
Assets
 
Current Hedging
Obligations

 
Noncurrent Hedging
Obligations
Designated as Hedging Instruments:
 
 
 
 
 
 
 
Interest Rate Swap Contracts
$

 
$

 
$

 
$
0.4

Currency Contracts
8.1

 
9.6

 
2.0

 
0.3

Commodity Contracts
4.6

 
0.1

 
1.0

 

Not Designated as Hedging Instruments:
 
 
 
 
 
 
 
Currency Contracts
0.1

 

 
0.5

 

Commodity Contracts

 

 
0.1

 

Total Derivatives
$
12.8

 
$
9.7

 
$
3.6

 
$
0.7

 
December 29, 2018
 
Prepaid
Expenses and Other Current Assets
 
Other
Noncurrent
Assets
 
Current Hedging
Obligations
 
Noncurrent Hedging
Obligations
Designated as Hedging Instruments:
 
 
 
 
 
 
 
Currency Contracts
$
6.0

 
$
7.2

 
$
4.3

 
$
1.1

Commodity Contracts
0.1

 

 
6.0

 
0.1

Not Designated as Hedging Instruments:
 
 
 
 
 
 
 
Currency Contracts
0.6

 

 
0.7

 

Commodity Contracts

 

 
0.3

 

Total Derivatives
$
6.7

 
$
7.2

 
$
11.3

 
$
1.2

As of December 29, 2018, the Company's interest rate swap had an immaterial balance and is not presented in the fair value amounts above.

29



The following table presents the effect of derivative instruments on the Condensed Consolidated Statements of Income and Condensed Consolidated Statement of Comprehensive Income (pre-tax) (in millions):
Derivatives Designated as Cash Flow Hedging Instruments
 
Three Months Ended
 
March 30, 2019
 
March 31, 2018
 
Commodity
Forwards
 
Currency
Forwards
 
Interest
Rate
Swaps
 
Total
 
Commodity
Forwards
 
Currency
Forwards
 
Interest
Rate
Swaps
 
Total
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
$
8.1

 
$
10.2

 
$
0.2

 
$
18.5

 
$
(7.7
)
 
$
22.9

 
$

 
$
15.2

Amounts Reclassified from Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
 


 


 


 


Gain Recognized in Net Sales

 

 

 

 

 
0.2

 

 
0.2

Gain (Loss) Recognized in Cost of Sales
(2.2
)
 
(0.4
)
 

 
(2.6
)
 
4.0

 
(1.8
)
 

 
2.2

Gain recognized in Operating Expenses

 
1.5

 

 
1.5

 

 

 

 

Gain Recognized in Interest Expense

 

 
0.7

 
0.7

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives Not Designated as Cash Flow Hedging Instruments (in millions):
 
Three Months Ended
 
March 30, 2019
 
March 31, 2018
 
Commodity Forwards
 
Currency Forwards
 
Commodity Forwards
 
Currency Forwards
Gain (Loss) Recognized in Cost of Sales
$
0.2

 
$

 
$
(0.3
)
 
$

Gain (Loss) Recognized in Operating Expenses

 
(0.4