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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended March 31, 2024 or 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-07283

REGAL REXNORD CORPORATION
(Exact name of registrant as specified in its charter)
 
Wisconsin39-0875718
(State or other jurisdiction of
incorporation)
(IRS Employer
Identification No.)
111 West Michigan Street, Milwaukee, Wisconsin 53203
(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 classTrading SymbolName of each exchange on which registered
Common StockRRXNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
Accelerated Filer
Non-accelerated filer
Smaller Reporting Company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No  
On May 3, 2024 the registrant had outstanding 66,518,762 shares of common stock, $0.01 par value per share.




REGAL REXNORD CORPORATION
INDEX
 
 Page
Item 1 —
Item 2 —
Item 3 —
Item 4 —
Item 1 —
Item 1A —
Item 2 —
Item 5 —
Item 6 —
 



2


CAUTIONARY STATEMENT

All statements in this report, other than those relating to historical facts, are “forward-looking statements.” Forward-looking statements can generally be identified their use of terms such as “anticipate,” “believe,” “confident,” “estimate,” “expect,” “intend,” “plan,” “may,” “will,” “would,” “project,” “forecast,” “could,” “should,” and similar expressions including references to assumptions. Forward-looking statements are not guarantees of future performance and are subject to a number of assumptions, risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements. Forward-looking statements include, but are not limited to, statements about future strategic plans and future financial and operating results. Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements in this report include, without limitation:

the possibility that the Company may be unable to achieve expected benefits, synergies and operating efficiencies in connection with the sale of the Industrial Motors and Generators businesses, the acquisition of Altra Industrial Motion Corp. (the "Altra Transaction"), and the merger with the Rexnord Process & Motion Control business (the “Rexnord PMC business”) within the expected time-frames or at all and to successfully integrate Altra Industrial Motion Corp. (“Altra”) and the Rexnord PMC business;
the Company’s substantial indebtedness as a result of the Altra Transaction and the effects of such indebtedness on the Company’s financial flexibility;
the Company’s ability to achieve its objectives on reducing its indebtedness on the desired timeline;
dependence on key suppliers and the potential effects of supply disruptions;
fluctuations in commodity prices and raw material costs;
any unforeseen changes to or the effects on liabilities, future capital expenditures, revenue, expenses, synergies, indebtedness, financial condition, losses and future prospects;
unanticipated operating costs, customer loss and business disruption;
the Company's ability to retain key executives and employees;
uncertainties regarding the ability to execute restructuring plans within expected costs and timing;
challenges to the tax treatment that was elected with respect to the merger with the Rexnord PMC business and related transactions;
actions taken by competitors and their ability to effectively compete in the increasingly competitive global electric motor, drives and controls, power generation and power transmission industries;
the ability to develop new products based on technological innovation, such as the Internet of Things and artificial intelligence, and marketplace acceptance of new and existing products;
dependence on significant customers and distributors;
risks associated with climate change and uncertainty regarding our ability to deliver on our climate commitments and/or to meet related investor, customer and other third party expectations relating to our sustainability efforts;
risks associated with global manufacturing, including risks associated with public health crises and political, societal or economic instability, including instability caused by ongoing geopolitical conflicts;
issues and costs arising from the integration of acquired companies and businesses and the timing and impact of purchase accounting adjustments;
prolonged declines in one or more markets;
economic changes in global markets, such as reduced demand for products, 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 the Company cannot control;
product liability, asbestos and other litigation, or claims by end users, government agencies or others that products or customers' applications failed to perform as anticipated;
unanticipated liabilities of acquired businesses;
unanticipated adverse effects or liabilities from business exits or divestitures;
the Company's ability to identify and execute on future M&A opportunities, including significant M&A transactions;
the impact of any such M&A transactions on the Company's results, operations and financial condition, including the impact from costs to execute and finance any such transactions;


3


unanticipated costs or expenses that may be incurred related to product warranty issues;
infringement of intellectual property by third parties, challenges to intellectual property and claims of infringement on third party technologies;
effects on earnings of any significant impairment of goodwill;
losses from failures, breaches, attacks or disclosures involving information technology infrastructure and data;
costs and unanticipated liabilities arising from rapidly evolving laws and regulations;

and other factors that can be found in our filings with the Securities and Exchange Commission (the "SEC") including our most recent periodic reports filed on Form 10-K and Form 10-Q, which are available on our Investor Relations website. Forward-looking statements are given only as of the date of this report and we disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.



4


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

REGAL REXNORD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
(Amounts in Millions, Except Per Share Data)
 
 Three Months Ended
 March 31, 2024March 31, 2023
Net Sales$1,547.7 $1,224.1 
Cost of Sales994.6 826.0 
    Gross Profit553.1 398.1 
Operating Expenses397.7 329.2 
Loss on Assets Held for Sale21.5  
       Total Operating Expenses419.2 329.2 
Income from Operations133.9 68.9 
Interest Expense105.4 95.4 
Interest Income(3.1)(31.9)
Other Expense (Income), Net0.3 (1.4)
Income before Taxes31.3 6.8 
Provision for Income Taxes10.9 12.3 
Net Income (Loss)20.4 (5.5)
Less: Net Income Attributable to Noncontrolling Interests0.6 0.4 
Net Income (Loss) Attributable to Regal Rexnord Corporation$19.8 $(5.9)
Earnings (Loss) Per Share Attributable to Regal Rexnord Corporation:
Basic$0.30 $(0.09)
Assuming Dilution$0.30 $(0.09)
Weighted Average Number of Shares Outstanding:
Basic66.4 66.2 
Assuming Dilution66.8 66.6 

See Accompanying Notes to Condensed Consolidated Financial Statements



5


REGAL REXNORD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Dollars in Millions)
 
 Three Months Ended
 March 31, 2024March 31, 2023
Net Income (Loss)$20.4 $(5.5)
Other Comprehensive (Loss) Income Net of Tax:
Foreign Currency Translation Adjustments(87.5)34.5 
Hedging Activities:
Increase in Fair Value of Hedging Activities, Net of Tax Effects of $2.3 million and $5.3 million for the Three Months Ended March 31, 2024 and March 31, 2023, Respectively
7.1 16.8 
Reclassification of (Gains) Losses included in Net Income (Loss), Net of Tax Effects of $(2.4) million and $0.4 million for the Three Months Ended March 31, 2024 and March 31, 2023, Respectively
(7.5)1.3 
Pension and Post Retirement Plans:
Reclassification Adjustments for Pension and Post Retirement Benefits included in Net Income (Loss), Net of Tax Effects of zero and $(0.1) million for the Three Months Ended March 31, 2024 and March 31, 2023, Respectively
0.2 (0.4)
Other Comprehensive (Loss) Income(87.7)52.2 
Comprehensive (Loss) Income(67.3)46.7 
Less: Comprehensive Income Attributable to Noncontrolling Interests0.2 0.7 
Comprehensive (Loss) Income Attributable to Regal Rexnord Corporation$(67.5)$46.0 
        
See Accompanying Notes to Condensed Consolidated Financial Statements



6


REGAL REXNORD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Millions, Except Per Share Data)
 
March 31, 2024December 31, 2023
ASSETS
Current Assets:
Cash and Cash Equivalents$465.3 $574.0 
Trade Receivables, Less Allowances of $29.3 million and $30.3 million in 2024 and 2023, Respectively
828.1 921.6 
Inventories1,319.1 1,274.2 
Prepaid Expenses and Other Current Assets275.9 245.6 
Assets Held for Sale377.2 368.6 
Total Current Assets3,265.6 3,384.0 
Net Property, Plant and Equipment994.0 1,041.2 
Operating Lease Assets166.0 172.8 
Goodwill6,506.2 6,553.1 
Intangible Assets, Net of Amortization3,965.8 4,083.4 
Deferred Income Tax Benefits37.0 33.8 
Other Noncurrent Assets70.7 69.0 
Noncurrent Assets Held for Sale68.5 94.1 
Total Assets$15,073.8 $15,431.4 
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable$566.1 $549.4 
Dividends Payable23.3 23.2 
Accrued Compensation and Employee Benefits154.0 198.7 
Accrued Interest92.6 85.1 
Other Accrued Expenses282.6 325.2 
Current Operating Lease Liabilities36.1 37.2 
Current Maturities of Long-Term Debt3.9 3.9 
Liabilities Held for Sale89.9 103.7 
Total Current Liabilities1,248.5 1,326.4 
Long-Term Debt6,242.0 6,377.0 
Deferred Income Taxes966.9 1,012.7 
Pension and Other Post Retirement Benefits114.7 120.4 
Noncurrent Operating Lease Liabilities129.4 132.2 
Other Noncurrent Liabilities76.9 77.2 
Noncurrent Liabilities Held for Sale19.9 20.4 
Contingencies (see Note 12 - Contingencies)
Equity:
Regal Rexnord Corporation Shareholders' Equity:
Common Stock, $0.01 par value, 150.0 million Shares Authorized, 66.5 million and 66.3 million Shares Issued and Outstanding for 2024 and 2023, Respectively
0.7 0.7 
Additional Paid-In Capital4,647.2 4,646.2 
Retained Earnings1,976.3 1,979.8 
Accumulated Other Comprehensive Loss(369.7)(282.4)
Total Regal Rexnord Corporation Shareholders' Equity6,254.5 6,344.3 
Noncontrolling Interests21.0 20.8 
Total Equity6,275.5 6,365.1 
Total Liabilities and Equity$15,073.8 $15,431.4 
See Accompanying Notes to Condensed Consolidated Financial Statements.


7


REGAL REXNORD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(Dollars in Millions, Except Per Share Data)
 
Three Months Ended
Common Stock $0.01 Par Value
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Total Equity
December 31, 2023$0.7 $4,646.2 $1,979.8 $(282.4)$20.8 $6,365.1 
Net Income— — 19.8 — 0.6 20.4 
Other Comprehensive Loss— — — (87.3)(0.4)(87.7)
Dividends Declared ($0.35 Per Share)
— — (23.3)— — (23.3)
Stock Options Exercised— (8.1)— — — (8.1)
Share-Based Compensation— 9.1 — — — 9.1 
March 31, 2024$0.7 $4,647.2 $1,976.3 $(369.7)$21.0 $6,275.5 
December 31, 2022$0.7 $4,609.6 $2,130.0 $(352.1)$34.4 $6,422.6 
Net (Loss) Income— — (5.9)— 0.4 (5.5)
Other Comprehensive Income— — — 51.9 0.3 52.2 
Dividends Declared ($0.35 Per Share)
— — (23.2)— — (23.2)
Stock Options Exercised— (7.5)— — — (7.5)
Replacement Equity-Based Awards Granted— 11.1 — — 11.1 
Share-Based Compensation— 6.0 — — — 6.0 
March 31, 2023$0.7 $4,619.2 $2,100.9 $(300.2)$35.1 $6,455.7 
 
See Accompanying Notes to Condensed Consolidated Financial Statements.
























8


REGAL REXNORD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Millions)
 Three Months Ended
March 31, 2024March 31, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $20.4 $(5.5)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities (Net of Acquisitions and Divestitures):
Depreciation41.5 30.2 
Amortization86.7 46.3 
Loss on Assets Held for Sale21.5  
Noncash Lease Expense11.3 7.7 
Share-Based Compensation Expense9.1 21.7 
Financing Fee Expense3.1 23.0 
Benefit from Deferred Income Taxes(30.4)(10.2)
Other Non-Cash Changes1.4 0.3 
Change in Operating Assets and Liabilities, Net of Acquisitions and Divestitures
Receivables47.7 31.7 
Inventories(47.8)47.1 
Accounts Payable14.5 (18.3)
Other Assets and Liabilities(95.9)(67.8)
Net Cash Provided by Operating Activities83.1 106.2 
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant and Equipment(18.5)(18.7)
Business Acquisitions, Net of Cash Acquired (4,852.9)
Proceeds Received from Sales of Property, Plant and Equipment1.0 6.1 
Net Cash Used in Investing Activities(17.5)(4,865.5)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings Under Revolving Credit Facility495.1 893.3 
Repayments Under Revolving Credit Facility(566.8)(639.5)
Proceeds from Short-Term Borrowings 14.1 
Repayments of Short-Term Borrowings (15.9)
Proceeds from Long-Term Borrowings 5,532.9 
Repayments of Long-Term Borrowings(65.8)(500.8)
Dividends Paid to Shareholders(23.3)(23.2)
Shares Surrendered for Taxes(10.7)(8.2)
Proceeds from the Exercise of Stock Options3.5 0.9 
Financing Fees Paid (50.0)
Net Cash (Used in) Provided By Financing Activities(168.0)5,203.6 
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS(10.5)10.5 
Net (Decrease) Increase in Cash and Cash Equivalents(112.9)454.8 
Cash and Cash Equivalents at Beginning of Period635.3 688.5 
Cash and Cash Equivalents at End of Period$522.4 $1,143.3 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid For:
 Interest$94.8 $75.1 
 Income taxes$36.2 $23.0 
Cash and Cash Equivalents Presentation:
Cash and Cash Equivalents$465.3 1,143.3 
Assets Held for Sale57.1  
Total Cash and Cash Equivalents$522.4 $1,143.3 
See Accompanying Notes to Condensed Consolidated Financial Statements.


9


REGAL REXNORD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
(Dollars in Millions Except Per Share Data, Unless Otherwise Noted)

1. BASIS OF PRESENTATION

The accompanying (a) Condensed Consolidated Balance Sheet of Regal Rexnord Corporation (the “Company”), as of December 31, 2023, which has been derived from audited Consolidated Financial Statements, and (b) unaudited interim Condensed Consolidated Financial Statements as of March 31, 2024 and for the three months ended March 31, 2024 and March 31, 2023, 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 2023 Annual Report on Form 10-K filed with the SEC on February 26, 2024.
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 31, 2024 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2024.
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, allowances for credit losses; excess and obsolete inventory; share-based compensation; acquisitions; product warranty obligations; pension and post retirement assets and liabilities; derivative fair values; goodwill and other asset impairments; health care reserves; 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 sale of the industrial motors and generators businesses, as further described in Note 3 – Held for Sale, Acquisitions and Divestitures, does not represent a strategic shift that will have a major effect on the Company's operations and financial results and, therefore, did not qualify for presentation as discontinued operations. The assets and liabilities related to these businesses were reclassified to Assets Held for Sale, Noncurrent Assets Held for Sale, Liabilities Held for Sale and Noncurrent Liabilities Held for Sale on the Company's Condensed Consolidated Balance Sheet as of September 30, 2023.

Reclassifications

Benefit from Deferred Income Taxes for the three months ended March 31, 2023 has been reclassified from Current Liabilities and Other and presented individually in the Condensed Consolidated Statements of Cash Flows to conform to the presentation used for the three months ended March 31, 2024.




10


2. OTHER FINANCIAL INFORMATION

Revenue Recognition

The Company recognizes revenue from the sale of electric motors, electrical motion controls, power generation, automation and power transmission products and components, factory automation sub-systems, industrial powertrain solutions, air moving products, and specialty electrical components and systems. The Company recognizes revenue when control of the product passes to the customer or the service is provided. Revenue is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services.
The following tables presents the Company’s revenues disaggregated by geographical region:
Three Months Ended
March 31, 2024Industrial Powertrain SolutionsPower Efficiency SolutionsAutomation & Motion ControlIndustrial SystemsTotal
North America$406.9 $296.9 $263.2 $58.8 $1,025.8 
Asia35.7 37.8 21.1 34.0 128.6 
Europe150.0 34.6 95.8 13.4 293.8 
Rest-of-World50.8 16.0 20.1 12.6 99.5 
Total$643.4 $385.3 $400.2 $118.8 $1,547.7 
March 31, 2023Industrial Powertrain SolutionsPower Efficiency SolutionsAutomation & Motion ControlIndustrial SystemsTotal
North America$293.2 $367.4 $141.8 $73.7 $876.1 
Asia16.5 43.8 1.4 36.7 98.4 
Europe52.8 42.7 43.8 15.6 154.9 
Rest-of-World51.9 15.6 16.2 11.0 94.7 
Total$414.4 $469.5 $203.2 $137.0 $1,224.1 
Trade Receivables

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

Inventories

The following table presents approximate percentage distribution between major classes of inventories:
March 31, 2024December 31, 2023
Raw Material and Work in Process67.4%66.7%
Finished Goods and Purchased Parts32.6%33.3%

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


11


Property, Plant, and Equipment

The following table presents property, plant, and equipment by major classification:
Useful Life in YearsMarch 31, 2024December 31, 2023
Land and Improvements$132.7 $139.2 
Buildings and Improvements
3 - 50
389.2 414.5 
Machinery and Equipment
3 - 15
1,221.5 1,219.4 
Property, Plant and Equipment1,743.4 1,773.1 
Less: Accumulated Depreciation(749.4)(731.9)
Net Property, Plant and Equipment$994.0 $1,041.2 

As of March 31, 2024 and December 31, 2023, $43.6 million and $44.4 million of right-of-use assets were included in Net Property, Plant and Equipment, respectively.

Supplier Finance Program

The Company's supplier finance program with Bank of America ("the Bank") offers the Company's designated suppliers the option to receive payments of outstanding invoices in advance of the invoice maturity dates at a discount. The Company's payment obligation to the Bank remains subject to the respective supplier's invoice maturity date. The Bank acts as a payment agent, making payments on invoices the Company confirms are valid. The supplier finance program is offered for open account transactions only and may be terminated by either the Company or the Bank upon 15 days' notice. The Company has not pledged any assets under this program. The Company has not incurred any subscription, service or other fees related to the Company's supplier finance program. The Company's outstanding obligations under the supplier finance program, which are classified within Accounts Payable, were $41.6 million and $60.8 million as of March 31, 2024 and December 31, 2023, respectively.


12


3. HELD FOR SALE, ACQUISITIONS AND DIVESTITURES

Assets and Liabilities Held for Sale - Industrial Systems

On September 23, 2023, the Company signed an agreement to sell its industrial motors and generators businesses which represent the substantial majority of the Industrial Systems operating segment. The transaction closed on April 30, 2024 for total consideration of $400 million, approximately 17% of which is deferred and will be paid upon the completion of the China Business transfer, as defined below. The total consideration remains subject to taxes, transaction expenses, working capital adjustments and customary post-closing adjustments. The Company anticipates that aggregate net proceeds will approximate $355 million. Due to administrative requirements, the transfer of the Chinese subsidiaries of the industrial motors and generators business, (the “China Business”) remains in progress and is expected to occur following completion of customary local filings and transfer documentation. The Company expects the deferred transfer of the China Business will occur in mid second quarter of 2024, at which time it anticipates it will receive the portion of the purchase price allocated to the China Business. The sale of the industrial motors and generators businesses does not represent a strategic shift that will have a major effect on the Company's operations and financial results and, therefore, did not qualify for presentation as discontinued operations. The assets and liabilities related to these businesses were included in Assets Held for Sale, Noncurrent Assets Held for Sale, Liabilities Held for Sale and Noncurrent Liabilities Held for Sale as shown in the table below:


March 31, 2024December 31, 2023
Assets Held for Sale
Cash and Cash Equivalents$57.1 $61.3 
Trade Receivables, Less Allowances92.8 88.3 
Inventories192.5 199.7 
Prepaid Expenses and Other Current Assets13.1 12.2 
  Total Current Assets Held for Sale$355.5 $361.5 
Net Property, Plant and Equipment94.4 96.0 
Operating Lease Assets17.4 18.0 
Goodwill54.5 54.7 
Intangible Assets, Net of Amortization1.9 2.1 
Deferred Income Tax Benefits8.0 11.0 
Other Noncurrent Assets1.5  
Loss on Assets Held for Sale(109.2)(87.7)
  Total Noncurrent Assets Held for Sale$68.5 $94.1 
Liabilities Held for Sale
Accounts Payable$60.0 $67.2 
Accrued Compensation and Employee Benefits7.6 11.3 
Other Accrued Expenses18.6 21.7 
Current Operating Lease Liabilities3.7 3.5 
  Total Current Liabilities Held for Sale$89.9 $103.7 
Pension and Other Post Retirement Benefits0.9 0.9 
Noncurrent Operating Lease Liabilities15.4 16.2 
Other Noncurrent Liabilities3.6 3.3 
  Total Noncurrent Liabilities Held for Sale$19.9 $20.4 

In addition to the assets and liabilities of the industrial motors and generators businesses, there are other assets recorded in Assets Held for Sale on the Company's Consolidated Balance Sheet as of March 31, 2024 and December 31, 2023, which are not material.



13


Altra Transaction

On October 26, 2022, the Company entered into an Agreement and Plan of Merger (the “Altra Merger Agreement”) by and among the Company, Altra Industrial Motion Corp., a Delaware corporation (“Altra”), and Aspen Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”). Altra is a leading global manufacturer of highly-engineered products and sub-systems in the factory automation and industrial power transmission markets. Regal Rexnord entered into the Altra Merger Agreement because it believes it can recognize substantial revenue and cost synergies through the combination. In particular, Altra transforms Regal Rexnord's automation portfolio into a global provider with significant sales into markets with secular growth characteristics. Altra also adds significant capabilities to Regal Rexnord's industrial power transmission portfolio, in particular in clutches and brakes, allowing it to provide a broader offering, and more robust industrial powertrain solutions to its customers.

On March 27, 2023, in accordance with the terms and conditions of the Altra Merger Agreement, Merger Sub merged with and into Altra (the "Altra Merger"), with Altra surviving the Altra Merger as a wholly owned subsidiary of the Company (the “Altra Transaction”).

Pursuant to the Altra Merger Agreement, following the Altra Merger, each of Altra’s issued and outstanding shares of common stock were converted into $62.00 in cash, without interest (the “Altra Merger Consideration”). In addition, all Altra equity awards outstanding immediately prior to the Altra Merger were converted into an award of cash or an award of restricted stock equal to the equivalent value of the original equity award with similar terms and conditions based on the Altra Merger Consideration.

The Company's management determined that the Company is the accounting acquirer in the Altra Transaction based on the facts and circumstances noted within this section and other relevant factors. As such, the Company applied the acquisition method of accounting to the identifiable assets and liabilities of Altra, which have been measured at estimated fair value as of the date of the business combination.

The total purchase price to acquire Altra was $5.1 billion, which consisted of the following:

Cash paid for outstanding Altra Common Stock(1)
$4,051.0 
Stock based compensation(2)
23.1 
Payment of Altra debt(3)
1,061.0 
Pre-existing relationships(4)
(0.5)
Purchase price$5,134.6 

(1) Cash paid for the common stock component of the purchase price was based on 65.3 million shares of outstanding Altra Common Stock as of March 27, 2023 at $62.00 per share, in accordance with the Altra Merger Agreement.
(2) Represents fair value of replacement equity-based awards and Company common stock issued in settlement of other Altra share based awards. The portion of the fair value attributable to pre-acquisition service was recorded as part of the consideration transferred in the Altra Transaction of which $17.3 million was paid in cash during the second quarter of 2023.
(3) Cash paid by the Company to settle (a) the term loan facility, (b) the revolving credit facility and (c) 95.28% of the 6.125% senior notes due 2026 of Stevens Holding Company, Inc., a wholly owned subsidiary of Altra (the "Altra Notes"). $18.1 million of the Altra Notes remained outstanding following the closing of the Altra Transaction. See Note 7 - Debt and Bank Credit Facilities for more information.
(4) Represents effective settlement of outstanding payables and receivables between the Company and Altra. No gain or loss was recognized on this settlement.

Purchase Price Allocation

Altra’s assets and liabilities were measured at estimated fair values at March 27, 2023, primarily using Level 3 inputs. Estimates of fair value represent management’s best estimate of assumptions about future events and uncertainties, including significant judgments related to future cash flows, discount rates, competitive trends, margin and revenue growth assumptions, royalty rates and customer attrition rates and others. Inputs used were generally obtained from historical data supplemented by current and anticipated market conditions and growth rates expected as of the acquisition date.



14


The Company estimated the fair value of net assets acquired based on information available during the measurement period and as of March 31, 2024, the valuation process to determine the fair values of the net assets acquired during the measurement period was complete. The fair value of the assets acquired and liabilities assumed were as follows:

As Reported as of December 31, 2023Measurement period adjustmentsAs of March 31, 2024
Cash and Cash Equivalents$259.1 $— $259.1 
Trade Receivables258.1 (1.5)256.6 
Inventories387.5 (0.5)387.0 
Prepaid Expenses and Other Current Assets32.4 — 32.4 
Property, Plant and Equipment403.0 (0.5)402.5 
Intangible Assets(2)
2,142.0 — 2,142.0 
Deferred Income Tax Benefits0.7 0.1 0.8 
Operating Lease Assets46.8 — 46.8 
Other Noncurrent Assets12.7 — 12.7 
Accounts Payable(183.3)— (183.3)
Accrued Compensation and Benefits(66.0)— (66.0)
Other Accrued Expenses(1)
(144.6)(0.7)(145.3)
Current Operating Lease Liabilities(12.3)— (12.3)
Current Maturities of Long-Term Debt(0.4)— (0.4)
Long-Term Debt(25.3)— (25.3)
Deferred Income Taxes(533.3)8.2 (525.1)
Pension and Other Post Retirement Benefits(19.8)— (19.8)
Noncurrent Operating Lease Liabilities(29.0)— (29.0)
Other Noncurrent Liabilities(8.3)— (8.3)
Total Identifiable Net Assets2,520.0 5.1 2,525.1 
Goodwill2,614.6 (5.1)2,609.5 
Purchase price$5,134.6 $— $5,134.6 

(1) Includes $60.1 million related to Altra Transaction costs paid by the Company at the closing of the Altra Transaction.
(2) Includes $1,710.0 million related to Customer Relationships, $330.0 million related to Trademarks and $102.0 million related to Technology.

Transaction Costs

The Company incurred transaction and integration-related costs in connection with the Altra Transaction of approximately $5.0 million during the three months ended March 31, 2024, which includes legal, professional service and integration costs associated with the Altra Transaction. There were $65.6 million of transaction and integration-related costs in connection with the Altra Transaction recognized during the three months ended March 31, 2023, which includes legal and professional services and certain employee compensation costs, including severance and retention, that were recognized as Operating Expenses in the Company's Condensed Consolidated Statements of Income (Loss).


15



The Company also incurred $15.7 million of share-based compensation expense during the first quarter of 2023 related to the accelerated vesting of awards for certain former Altra employees. See Note 9 – Shareholders' Equity for additional information.

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

Unaudited Pro Forma Information

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

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

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


16


4. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustments, hedging activities and pension and post-retirement benefit adjustments are included in Accumulated Other Comprehensive Income (Loss) ("AOCI") a component of Total Equity.
The following tables present changes in AOCI by component for the three months ended March 31, 2024 and March 31, 2023:
Three Months Ended
March 31, 2024Hedging ActivitiesPension and Post Retirement Benefit AdjustmentsForeign Currency Translation AdjustmentsTotal
Beginning Balance$28.8 $(25.0)$(286.2)$(282.4)
Other Comprehensive Income (Loss) before Reclassifications9.4  (87.1)(77.7)
Tax Impact(2.3)  (2.3)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)(9.9)0.2  (9.7)
Tax Impact2.4   2.4 
Net Current Period Other Comprehensive (Loss) Income(0.4)0.2 (87.1)(87.3)
Ending Balance$28.4 $(24.8)$(373.3)$(369.7)
March 31, 2023Hedging ActivitiesPension and Post Retirement Benefit AdjustmentsForeign Currency Translation AdjustmentsTotal
Beginning Balance$17.3 $(13.3)$(356.1)$(352.1)
Other Comprehensive Income before Reclassifications22.1  34.2 56.3 
Tax Impact(5.3)  (5.3)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)1.7 (0.5) 1.2 
Tax Impact(0.4)0.1  (0.3)
Net Current Period Other Comprehensive Income (Loss) 18.1 (0.4)34.2 51.9 
Ending Balance$35.4 $(13.7)$(321.9)$(300.2)
The Condensed Consolidated Statements of Income (Loss) line items affected by the hedging activities reclassified from AOCI in the tables above are disclosed in Note 13 - Derivative Financial Instruments.

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


5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

As required, the Company performs an annual impairment test of goodwill as of the end of October, 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 31, 2024:
TotalIndustrial Powertrain SolutionsPower Efficiency SolutionsAutomation & Motion Control
Balance as of December 31, 2023$6,553.1 $3,747.0 $753.9 $2,052.2 
Acquisitions(5.1)(5.8) 0.7 
Translation Adjustments(41.8)(20.1)(2.2)(19.5)
Balance as of March 31, 2024$6,506.2 $3,721.1 $751.7 $2,033.4 
Cumulative Goodwill Impairment Charges(1)
$223.6 $18.1 $200.4 $5.1 
(1) Excludes impairment charges related to Industrial Systems.

Intangible Assets

Intangible assets consist of the following:
 March 31, 2024December 31, 2023
 Weighted Average Amortization Period (Years)Gross ValueAccumulated
Amortization
Net Carrying AmountGross ValueAccumulated
Amortization
Net Carrying Amount
Customer Relationships15$4,000.8 $804.6 $3,196.2 $4,028.5 $746.2 $3,282.3 
Technology13300.3 97.5 202.8 302.6 92.9 209.7 
Trademarks10705.5 138.7 566.8 712.1 120.7 591.4 
Total Intangibles$5,006.6 $1,040.8 $3,965.8 $5,043.2 $959.8 $4,083.4 

Amortization expense recorded for the three months ended March 31, 2024 was $86.7 million. Amortization expense recorded for the three months ended March 31, 2023 was $46.3 million. Amortization expense for 2024 is estimated to be $348.7 million.

The following table presents future estimated annual amortization for intangible assets:
 YearEstimated Amortization
2025$346.8 
2026343.5 
2027343.4 
2028343.4 
2029341.3 


6. SEGMENT INFORMATION

As of March 31, 2024, the Company is comprised of four operating segments: Industrial Powertrain Solutions ("IPS"), Power Efficiency Solutions ("PES"), Automation & Motion Control ("AMC"), and Industrial Systems.

The IPS segment designs, produces and services a broad portfolio of highly-engineered power transmission products, including mounted and unmounted bearings, couplings, mechanical power transmission drives and components, gearboxes and gear motors, clutches, brakes, and industrial powertrain components and solutions. Increasingly, the segment produces industrial


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powertrain solutions, which are integrated sub-systems comprised of Regal Rexnord motors plus the critical power transmission components that efficiently transmit motion to power industrial applications. The segment serves a broad range of markets that include general industrial, metals & mining, agricultural and construction, food and beverage, energy, alternative energy and other markets.

The PES segment designs and produces fractional to approximately 5 horsepower AC and DC motors, electronic variable speed controls, electronic drives, fans and blowers, as well as integrated subsystems comprised of two or more of these components. The segment's products are used in residential and light commercial HVAC, water heater, commercial refrigeration, commercial building ventilation, pool and spa, irrigation, dewatering, agriculture and other applications.

The AMC segment designs, produces and services conveyor products, conveying automation subsystems, aerospace components, precision motion control solutions, high-efficiency miniature servo motors, controls, drives and linear actuators, as well as power management products that include automatic transfer switches and paralleling switchgear. The segment sells into markets that include industrial automation, robotics, food and beverage, aerospace, medical, agricultural and construction, general industrial, data center, and other markets.
The Industrial Systems segment designs and produces integral motors, alternators for industrial applications, along with aftermarket parts and kits to support such products. These products serve the general industrial, metals and mining, and food and beverage end markets. As described within Note 3 – Held for Sale, Acquisitions and Divestitures, the sale of the industrial motors and generators business was completed on April 30, 2024.
The Company evaluates performance based on the segment's income (loss) 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 31, 2024 and March 31, 2023:
Three Months Ended
March 31, 2024Industrial Powertrain SolutionsPower Efficiency SolutionsAutomation & Motion ControlIndustrial SystemsEliminationsTotal
External Sales$643.4 $385.3 $400.2 $118.8 $— $1,547.7 
Intersegment Sales2.9 5.1 4.6 0.3 (12.9)— 
  Total Sales646.3 390.4 404.8 119.1 (12.9)1,547.7 
Gross Profit264.8 99.3 159.9 29.1 — 553.1 
Operating Expenses182.7 70.8 119.7 24.5 — 397.7 
Loss on Assets Held for Sale   21.5 — 21.5 
Total Operating Expenses182.7 70.8 119.7 46.0 — 419.2 
Income (Loss) from Operations82.1 28.5 40.2 (16.9)— 133.9 
Depreciation and Amortization70.2 11.6 45.9 0.5 — 128.2 
Capital Expenditures8.8 3.7 5.9 0.1 — 18.5 
March 31, 2023
External Sales$414.4 $469.5 $203.2 $137.0 $— $1,224.1 
Intersegment Sales3.5 4.2 5.2 0.7 (13.6)— 
  Total Sales417.9 473.7 208.4 137.7 (13.6)1,224.1 
Gross Profit177.4 117.7 75.4 27.6 — 398.1 
Operating Expenses151.5 72.3 80.6 24.8 — 329.2 
Total Operating Expenses151.5 72.3 80.6 24.8 — 329.2 
Income (Loss) from Operations25.9 45.4 (5.2)2.8 — 68.9 
Depreciation and Amortization41.6 11.7 19.7 3.5 — 76.5 
Capital Expenditures5.4 8.7 3.1 1.5 — 18.7 



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The following table presents identifiable assets information attributable to the Company's operating segments as of March 31, 2024 and December 31, 2023:
Industrial Powertrain SolutionsPower Efficiency SolutionsAutomation & Motion ControlIndustrial SystemsTotal
Identifiable Assets as of March 31, 2024$7,838.1 $1,960.4 $4,836.6 $438.7 $15,073.8 
Identifiable Assets as of December 31, 20238,009.4 2,036.4 4,909.2 476.4 15,431.4 
7. DEBT AND BANK CREDIT FACILITIES

The following table presents the Company’s indebtedness as of March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
Senior Notes$4,700.0 $4,700.0 
Term Facility993.5 1,053.5 
Land Term Facility482.0 486.8 
Multicurrency Revolving Facility26.4 98.1 
Altra Notes18.1 18.1 
Finance Leases69.7 70.5 
Other7.1 7.5 
Less: Debt Issuance Costs(50.9)(53.6)
Total6,245.9 6,380.9 
Less: Current Maturities3.9 3.9 
Long-Term Debt$6,242.0 $6,377.0 
The below discussion of the Company’s indebtedness should be read in conjunction with the Note 7 – Debt and Bank Credit Facilities in the Company’s 2023 Annual Report on Form 10-K filed on February 26, 2024.

Credit Agreement

On March 28, 2022, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. as Administrative Agent and the lenders named therein, which was subsequently amended on November 17, 2022 (the "First Amendment") and November 30, 2022 (the "Assumption Agreement"), which in combination provide for, among other things:

i.an unsecured term loan facility in the initial principal amount of up to $550.0 million, maturing on March 28, 2027, which was upsized by $840.0 million on March 27, 2023 in connection with the Altra Transaction (the "Term Facility");
ii.an unsecured term loan facility in the initial principal amount of $486.8 million, under which the Company's subsidiary Land Newco, Inc. remains the sole borrower, maturing on March 28, 2027 (the "Land Term Facility"); and
iii.an unsecured revolving loan in the initial principal amount of up to $1,000.0 million, maturing on March 28, 2027, which was upsized by $570.0 million on March 27, 2023 in connection with the Altra Transaction (the "Multicurrency Revolving Facility").

Borrowings under the Credit Agreement bear interest at floating rates based upon indices determined by the currency of the borrowing (SOFR or an alternative base rate for US Dollar borrowings) or at an alternative base rate, in each case, plus an applicable margin. The weighted average interest rate on the Term Facility for the three months ended March 31, 2024 and March 31, 2023 was 7.2% and 6.0%, respectively. The weighted average interest rate on the Land Term Facility for the three months ended March 31, 2024 and March 31, 2023 was 7.2% and 5.9%, respectively.

The Term Facility requires quarterly amortization at 5.0% per annum, unless previously prepaid. Per the terms of the Credit Agreement, prepayments can be made without penalty and are applied to the next payment due. The Land Term Facility has no required amortization.


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As of March 31, 2024, the Company had no standby letters of credit issued under the Multicurrency Revolving Facility, and $1,543.6 million of available borrowing capacity. For the three months ended March 31, 2024 and March 31, 2023 under the Multicurrency Revolving Facility, the average daily balance in borrowings was $98.5 million and $580.6 million, respectively, and the weighted average interest rate was 7.2% and 5.8%, respectively. The Company paid a non-use fee of 0.25% as of March 31, 2024 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.

Senior Notes

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

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

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

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

The Senior Notes were issued and sold in a private offering to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and persons outside the United States in accordance with Regulation S under the Securities Act. Pursuant to a registration rights agreement, the Company agreed to exchange the Senior Notes with registered notes with terms substantially identical to those of the Senior Notes of the corresponding series (the “New Notes”) within 540 days from the date of issuance. The Company and certain subsidiaries that guarantee the Senior Notes filed a registration statement on Form S-4 with the SEC on March 26, 2024, registering an offer to exchange the Senior Notes validly tendered for New Notes of the corresponding series (the “Exchange Offer”). In May 2024, the Company and the guarantor subsidiaries completed the Exchange Offer, exchanging approximately $4,697.1 million in aggregate principal amount of Senior Notes for approximately $4,697.1 million in aggregate principal amount of New Notes of the corresponding series. The aggregate principal amount of Senior Notes not exchanged, approximately $2.9 million, remained outstanding across the four series of Senior Notes. The New Notes consist of approximately $1,099.0 million aggregate principal amount of 6.050% senior notes due 2026, $1,249.4 million aggregate principal amount of 6.050% senior notes due 2028, $1,099.4 million aggregate principal amount of 6.300% senior notes due 2030 and $1,249.3 million aggregate principal amount of 6.400% senior notes due 2033.

Altra Notes

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

The Altra Notes will mature on October 1, 2026. The Altra Notes may be redeemed at the option of the issuer on or after October 1, 2023. The Notes are guaranteed on a senior unsecured basis by certain of the Company's domestic subsidiaries.

Compliance with Financial Covenants

The Credit Agreement requires the Company to meet specified financial ratios and to satisfy certain financial condition tests. The Company was in compliance with all financial covenants as of March 31, 2024.


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Finance leases

The weighted average discount rate associated with the Company's finance leases was 5.2% as of March 31, 2024 and March 31, 2023.

Other Disclosures

Based on rates for instruments with comparable maturities and credit quality, which are classified as Level 2 inputs (see also Note 14 - Fair Value), the approximate fair value of the Senior Notes was $4,791.7 million and $4,802.4 million as of March 31, 2024 and December 31, 2023, respectively, compared to a carrying value of $4,700.0 million as of March 31, 2024 and December 31, 2023. The Company believes that the fair value of all other debt instruments approximates their carrying value.

8. RETIREMENT PLANS

The following table presents the Company’s net periodic benefit cost (income) components:
 Three Months Ended
 March 31, 2024March 31, 2023
Service Cost$0.5 $0.3 
Interest Cost5.4 5.6 
Expected Return on Plan Assets(5.0)(6.7)
Amortization of Prior Service Cost and Net Actuarial Loss (Gain)0.2 (0.5)
Special Termination Benefits0.2  
Net Periodic Benefit Expense (Income)$1.3 $(1.3)

The service cost component is included in Cost of Sales and Operating Expenses. All other components of net periodic benefit costs are included in Other Expense (Income), Net on the Company's Condensed Consolidated Statements of Income (Loss).
For the three months ended March 31, 2024 and March 31, 2023, the Company contributed $1.8 million and $1.5 million, respectively, to retirement plans. The Company expects to make total contributions of $17.8 million in 2024. The Company contributed a total of $8.3 million in 2023.
For the three months ended March 31, 2024 and March 31, 2023, the Company contributed $11.6 million and $6.2 million, respectively, to defined contribution plans.
9. SHAREHOLDERS’ EQUITY

Share-Based Compensation

The Company recognized approximately $9.1 million and $21.7 million in share-based compensation expense for the three months ended March 31, 2024 and March 31, 2023, respectively. The expense for the three months ended March 31, 2023 includes $15.7 million related to the accelerated vesting of awards for certain former Altra employees. The total income tax benefit recognized in the Condensed Consolidated Statements of Income (Loss) for share-based compensation expense was $2.1 million and $1.4 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The Company recognizes compensation expense on grants of share-based compensation awards on a straight-line basis over the vesting period of each award.

During the three months ended March 31, 2024, the Company granted the following share-based incentive awards:



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Award TypeNumber of AwardsWeighted Average Grant-Date Fair Value
Options and SARs99,566 $62.85 
Restricted Stock Units107,395 $167.43 
Performance Share Units53,206 $245.81 

10. INCOME TAXES

The effective tax rate for the three months ended March 31, 2024 was 34.8% versus 180.9% for the three months ended March 31, 2023, which was due to the non-deductible transaction costs associated with the Altra Transaction incurred in 2023.

As of March 31, 2024 and December 31, 2023, the Company had approximately $5.6 million and $8.5 million of unrecognized tax benefits, all of which would impact the effective income tax rate if recognized. Potential interest and penalties related to unrecognized tax benefits are recorded in income tax expense. The Company had approximately $1.2 million and $1.1 million of accrued interest as of March 31, 2024 and December 31, 2023, respectively.
11. EARNINGS PER SHARE

Diluted earnings per share is calculated based upon earnings applicable to common shares divided by the weighted-average number of common shares outstanding during the period adjusted for the effect of other dilutive securities. The amount of the anti-dilutive shares was 0.3 million and 0.4 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The following table reconciles the basic and diluted shares used in earnings per share calculations for the three months ended March 31, 2024 and March 31, 2023:
 Three Months Ended
 March 31, 2024March 31, 2023
Denominator for Basic Earnings Per Share66.4 66.2 
Effect of Dilutive Securities0.4 0.4 
Denominator for Diluted Earnings Per Share66.8 66.6 

12. 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.

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


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

Multiple lawsuits (with over 350 claimants) are pending in state or federal court in numerous jurisdictions relating to alleged personal injuries due to the alleged presence of asbestos in certain brakes and clutches previously manufactured by the Rexnord PMC business' Stearns brand of brakes and clutches and/or its predecessor owners. Invensys and FMC, prior owners of the Stearns business, have paid 100% of the costs to date related to the Stearns lawsuits. Similarly, the Rexnord PMC business' Prager subsidiary is the subject of claims by multiple claimants alleging personal injuries due to the alleged presence of asbestos in a product allegedly manufactured by Prager. However, all these claims are currently on the Texas Multi-district Litigation inactive docket, and the Company does not believe that they will become active in the future. To date, the Rexnord PMC business' insurance providers have paid 100% of the costs related to the Prager asbestos matters. We believe that the combination of the Company's insurance coverage and the Invensys indemnity obligations will cover any future costs of these matters.
In connection with the Company's acquisition of the Rexnord PMC business, transaction documents related to the Rexnord PMC business’ acquisition of The Falk Corporation from Hamilton Sundstrand Corporation were assigned to Rexnord Industries, and provide Rexnord Industries with indemnification against certain product related asbestos exposure liabilities. The Company believes that, pursuant to such indemnity obligations, Hamilton Sundstrand is obligated to defend and indemnify Rexnord Industries with respect to asbestos claims described below, and that, with respect to these claims, such indemnity obligations are not subject to any time or dollar limitations.

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

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

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


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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 31, 2024 and March 31, 2023:
 Three Months Ended
 March 31, 2024March 31, 2023
Beginning Balance$34.5 $28.8 
Less: Payments(5.7)(3.3)
Provisions5.6 6.2 
Acquisitions 9.8 
Translation Adjustments(0.2) 
Ending Balance$34.2 $41.5 

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

13. DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative instruments are commodity price risk, currency exchange risk, and interest rate risk. Forward contracts on certain commodities are entered into to manage the price risk associated with forecasted purchases of materials used in the Company's manufacturing process. Forward contracts on certain currencies are entered into to manage forecasted cash flows in certain foreign currencies. Interest rate swaps are utilized to manage interest rate risk associated with the Company's floating rate borrowings.
The Company is exposed to credit losses in the event of non-performance by the counterparties to various financial agreements, including its commodity hedging transactions, foreign currency exchange contracts and interest rate swap agreements. Exposure to counterparty credit risk is managed by limiting counterparties to major international banks and financial institutions meeting established credit guidelines and continually monitoring their compliance with the credit guidelines. The Company does not obtain collateral or other security to support financial instruments subject to credit risk. The Company does not anticipate non-performance by its counterparties, but cannot provide assurances.
The Company recognizes all derivative instruments as either assets or liabilities at fair value on the Condensed Consolidated Balance Sheets. The Company designates commodity forward contracts as cash flow hedges of forecasted purchases of commodities, currency forward contracts as cash flow hedges of forecasted foreign currency cash flows and interest rate swaps as cash flow hedges of forecasted SOFR-based interest payments. There were no significant collateral deposits on derivative financial instruments as of March 31, 2024 or March 31, 2023.
Cash flow hedges
The effective of the gain or loss on the derivative is reported as a component of AOCI and reclassified into earnings 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.
As of March 31, 2024 and December 31, 2023, the Company had $14.2 million and $15.1 million, respectively, net of tax, of derivative gains on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings.
The Company has currency forward contracts with maturities extending through March 2027. The notional amounts expressed in terms of the dollar value of the hedged currency were as follows:
 March 31, 2024December 31, 2023
Chinese Renminbi$312.0 $302.3 
Mexican Peso72.1 101.4 
Euro617.4 465.8 
Indian Rupee24.4 30.1 
British Pound12.8 7.1 


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The Company has commodity forward contracts to hedge forecasted purchases of commodities with maturities extending through February 2025. The notional amounts expressed in terms of the dollar value of the hedged item were as follows:
 March 31, 2024December 31, 2023
Copper$26.9 $37.5 
Aluminum0.9 1.4 

The Company entered into two receive variable/pay-fixed forward starting non-amortizing interest rate swaps in June 2020, with a total notional amount of $250.0 million, which were subsequently terminated in March 2022. The cash proceeds of $16.2 million received to settle the terminated swaps is being recognized as a reduction of interest expense via the effective interest rate method through July 2025 when the terminated swaps were scheduled to expire. The Company entered into