關於我們與Rexnord PMC業務合併的事宜，Zurn收到了其稅務顧問的稅務意見（「Rexnord稅務意見」），其中包括達成一致的意見，即重組及分配將被視爲對Zurn、Land及Zurn股東適用的無稅務影響，適用於美國聯邦所得稅目的，除了在Zurn的情況下，Land根據分離協議的條款向Zurn子公司支付的款項（「Land現金支付」）超出RBS Global Inc.在Land普通股的調整後稅基的部分。Rexnord稅務意見基於某些聲明和關於事實事項的假設，以及我們、Land和Zurn做出的某些承諾。儘管我們相信Rexnord稅務意見中的聲明、假設和承諾是真實的，但任何這樣的事實聲明、假設或承諾在所有重要方面未能真實、正確和完整，可能會對該意見的有效性產生不利影響。Rexnord稅務意見對IRS或法院沒有約束力，IRS或法院可能不同意該意見。此外，Rexnord稅務意見基於當前法律，如果當前法律有追溯效力的變化，則無法依賴該意見中的結論。
(1) 2023 excludes 0.4 million of share based compensation awards as the Company had a net loss during the year.
Defined Benefit Pension Plans
The majority of the defined benefit pension plans covering the Company's domestic associates have been closed to new associates and frozen for existing associates. Most of the Company's foreign associates are covered by government sponsored plans in the countries in which they are employed. The Company's obligations under its defined benefit pension plans are determined with the assistance of actuarial firms. The actuaries, under management's direction, make certain assumptions regarding such factors as withdrawal rates and mortality rates. The actuaries also provide information and recommendations from which management makes further assumptions on such factors as the long-term expected rate of return on plan assets, the discount rate on benefit obligations and where applicable the rate of annual compensation increases.
Based upon the assumptions made, the investments made by the plans, overall conditions and movement in financial markets, life-spans of benefit recipients and other factors, annual expenses and recorded assets or liabilities of these defined benefit pension plans may change significantly from year to year.
The service cost component of the Company's net periodic benefit cost is included in Cost of Sales and Operating Expenses. All other components of net periodic benefit costs are included in Other (Income) Expenses, net on the Company's Consolidated Statements of Income (Loss). See Note 7 –Retirement Plans for more information.
65
Derivative Financial Instruments
Derivative instruments are recorded on the Consolidated Balance Sheets at fair value. Any fair value changes are recorded in Net Income (Loss) or Accumulated Other Comprehensive Income (Loss) ("AOCI") as determined under accounting guidance that establishes criteria for designation and effectiveness of the hedging relationships. Cash inflows and outflows related to derivative instruments are included as a component of Operating, Investing, or Financing Cash Flows within the Consolidated Statements of Cash Flows.
The Company uses derivative instruments to manage its exposure to fluctuations in certain raw material commodity pricing, fluctuations in the cost of forecasted foreign currency transactions, and variability in interest rate exposure on floating rate borrowings. The majority of derivative instruments have been designated as cash flow hedges. See Note 12 – Derivative Financial Instruments for more information.
Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification ("ASC") 740, Accounting for Income Taxes (“ASC 740”). Deferred tax assets and liabilities arise from temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and consideration of operating loss and tax credit carryforwards. Deferred income taxes are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled. The impact on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Valuation allowances are provided to reduce deferred tax assets to the amount that will more likely than not be realized. This requires management to make judgments and estimates regarding the amount and timing of the reversal of taxable temporary differences, expected future taxable income, and the impact of tax planning strategies.
Uncertainty exists regarding tax positions taken in previously filed tax returns which remain subject to examination, along with positions expected to be taken in future returns. The Company provides for unrecognized tax benefits, based on the technical merits, when it is more likely than not that an uncertain tax position will not be sustained upon examination. Adjustments are made to the uncertain tax positions when facts and circumstances change, such as the closing of a tax audit; changes in applicable tax laws, including tax case rulings and legislative guidance; or expiration of the applicable statute of limitations. See Note 10 – Income Taxes for more information.
Foreign Currency Translation
For those operations using a functional currency other than the US Dollar, assets and liabilities are translated into US Dollars at year-end exchange rates, and revenues and expenses are translated at monthly average rates. The resulting translation adjustments are recorded as a separate component of Shareholders' Equity. Foreign currency remeasurement gains and losses are included in Operating Expenses in the Consolidated Statements of Income (Loss).
Product Warranty Reserves
The Company maintains reserves for product warranty to cover the stated warranty periods for its products. Such reserves are established based on an evaluation of historical warranty experience and specific significant warranty matters when they become known and can reasonably be estimated. See Note 11 –Contingenciesfor more information.
Accumulated Other Comprehensive Income (Loss)
Foreign currency translation adjustments, unrealized gains and losses on derivative instruments designated as hedges and pension and post retirement liability adjustments are included in Shareholders' Equity under AOCI.
The components of the ending balances of AOCI are as follows:
2024
2023
Foreign Currency Translation Adjustments
$
(415.7)
$
(286.2)
Hedging Activities, Net of Tax of $(2.1) in 2024 and $8.8 in 2023
(5.5)
28.8
Pension and Post-Retirement Benefits, Net of Tax of $(6.7) in 2024 and $(7.8) in 2023
(21.5)
(25.0)
Total
$
(442.7)
$
(282.4)
Legal Claims and Contingent Liabilities
The Company is subject to various legal proceedings, claims and regulatory matters, the outcomes of which are subject to significant uncertainty and will only be resolved when one or more future events occur or fail to occur. Management conducts
66
regular reviews, including updates from legal counsel, to assess the need for accounting recognition or disclosure of these contingencies. The Company records expenses and liabilities when the Company believes that an obligation of the Company or a subsidiary on a specific matter is probable and there is a basis to reasonably estimate the value of the obligation, and such assessment inherently involves an exercise in judgment. This methodology is used for legal claims that are filed against the Company or a subsidiary from time to time. The uncertainty that is associated with such matters frequently requires adjustments to the liabilities previously recorded. See Note 11 –Contingenciesfor more information.
Fair Values of Financial Instruments
The fair values of cash equivalents, term deposits, trade receivables and accounts payable approximate their carrying values due to the short period of time to maturity. The fair value of fixed rate debt is estimated using discounted cash flows based on rates for instruments with comparable maturities and credit ratings as further described in Note 6 – Debt and Bank Credit Facilities. The fair value of pension assets and derivative instruments is determined based on the methods disclosed in Note 7 - Retirement Plans and Note 12 – Derivative Financial Instruments.
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 following information presents changes to the Company's outstanding obligations under the supplier finance program, which are classified within Accounts Payable, during the year ended December 31, 2024:
Balance as of December 31, 2023
$
60.8
Plus: Obligations Added
169.7
Less: Obligations Settled
189.5
Balance as of December 31, 2024
$
41.0
New Accounting Standards
New Accounting Standards Adopted
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU requires enhanced segment disclosures, such as significant segment expenses, and is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this new accounting guidance in 2024, and has included the required disclosures within Note 5 - Segment Information.
In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The Company adopted this new accounting guidance during the first quarter of 2023, except that the requirement to include roll forward information became effective for fiscal years beginning after December 15, 2023. The Company completed the adoption of this new accounting guidance in 2024, and has included the required roll forward disclosures within this Note.
Recently Issued Accounting Standards
In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU requires additional information about certain expenses in the notes to financial statements. The new guidance will be effective for annual periods beginning after December 15, 2026. The Company is evaluating the effect of adopting this new accounting guidance.
In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires consistent categories and greater disaggregation of information in the rate reconciliation, income taxes paid disaggregated by jurisdiction and certain other amendments. The new guidance will be effective for annual periods beginning after December 15, 2024. The Company is evaluating the effect of adopting this new accounting guidance.
67
(3) Acquisitions and Divestitures
Industrial Systems Divestiture
On September 23, 2023, the Company signed an agreement to sell its industrial motors and generators businesses which represented the substantial majority of the Industrial Systems operating segment.
The transaction closed on April 30, 2024 for a total purchase price of $444.0 million. For the years ended December 31, 2024 and December 31, 2023, the Company recognized a Loss on Sale of Businesses related to the sale of the industrial motors and generators businesses of $7.7 million and $87.7 million, respectively, in the Consolidated Statements of Income (Loss). The Company recognized a cumulative loss of $95.4 million on the sale of the industrial motors and generators businesses, which was primarily related to foreign currency translation losses that were reclassified out of accumulated other comprehensive income into earnings at the closing of the transaction.
The following table summarizes the fair value of the sale proceeds received in connection with the divestiture:
April 30, 2024
Purchase price
$
400.0
Cash transferred to buyer
64.5
Estimated working capital and other adjustments
(20.5)
Total purchase price
444.0
Direct costs to sell
(7.3)
Fair value of sale consideration, net(1)
$
436.7
(1) The fair value of sale consideration, net includes an immaterial post-close adjustment to the purchase price for which cash was received in January 2025.
The following table summarizes the carrying value of the disposal group and resulting loss on sale:
April 30, 2024
Net assets sold
$
420.2
Noncontrolling Interest
(9.2)
Accumulated Other Comprehensive Income
121.3
Payables to seller
(0.2)
Carrying value of disposal group
$
532.1
Loss on Sale of Businesses
$
(95.4)
68
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 of December 31, 2023, as shown in the table below:
December 31, 2023
Assets Held for Sale
Cash and Cash Equivalents
$
61.3
Trade Receivables, Less Allowances
88.3
Inventories
199.7
Prepaid Expenses and Other Current Assets
12.2
Total Current Assets Held for Sale
$
361.5
Net Property, Plant and Equipment
96.0
Operating Lease Assets
18.0
Goodwill
54.7
Intangible Assets, Net of Amortization
2.1
Deferred Income Tax Benefits
11.0
Loss on Assets Held for Sale
(87.7)
Total Noncurrent Assets Held for Sale
$
94.1
Liabilities Held for Sale
Accounts Payable
$
67.2
Accrued Compensation and Employee Benefits
11.3
Other Accrued Expenses
21.7
Current Operating Lease Liabilities
3.5
Total Current Liabilities Held for Sale
$
103.7
Pension and Other Post Retirement Benefits
0.9
Noncurrent Operating Lease Liabilities
16.2
Other Noncurrent Liabilities
3.3
Total Noncurrent Liabilities Held for Sale
$
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 December 31, 2023, which are not material.
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
69
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 6 - 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.
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:
70
As Reported as of December 31, 2023
Measurement period adjustments
As of March 31, 2024
Cash and Cash Equivalents
$
259.1
$
—
$
259.1
Trade Receivables
258.1
(1.5)
256.6
Inventories
387.5
(0.5)
387.0
Prepaid Expenses and Other Current Assets
32.4
—
32.4
Property, Plant and Equipment
403.0
(0.5)
402.5
Intangible Assets(2)
2,142.0
—
2,142.0
Deferred Income Tax Benefits
0.7
0.1
0.8
Operating Lease Assets
46.8
—
46.8
Other Noncurrent Assets
12.7
—
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 Assets
2,520.0
5.1
2,525.1
Goodwill
2,614.6
(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.
Summary of Significant Fair Value Methods
The methods used to determine the fair value of significant identifiable assets and liabilities included in the allocation of purchase price are discussed below.
Inventories
Acquired inventory was comprised of finished goods, work in process and raw materials. The fair value of finished goods was calculated as the estimated selling price, adjusted for costs of the selling effort and a reasonable profit allowance relating to the selling effort. The fair value of work in process inventory was primarily calculated as the estimated selling price, adjusted for estimated costs to complete the manufacturing, estimated costs of the selling effort, as well as a reasonable profit margin on the remaining manufacturing and selling effort. The fair value of raw materials and supplies was determined based on replacement cost which approximates historical carrying value.
Property, Plant and Equipment
The preliminary fair value of Property, Plant, and Equipment was determined using either the cost approach, which relies on an estimate of replacement costs of the new assets and estimated accrued depreciation, or the market approach.
Identifiable Intangible Assets
71
The fair value and weighted average useful life of the identifiable intangible assets are as follows:
Fair Value
Weighted Average Useful Life (Years)
Customer Relationships(1)
$
1,710.0
14.0
Trademarks(2)
330.0
10.0
Technology(3)
102.0
13.0
Total Identifiable Intangible Assets
$
2,142.0
(1) The fair value of Customer Relationships was valued using a multi-period excess earnings method, a form of the income approach, which incorporates the estimated future cash flows to be generated from Altra's existing customer base.
(2) The Altra Trademarks were valued using the relief from royalty method, which considers both the market approach and the income approach.
(3) The Altra Technology was valued using the relief from royalty method, which considers both the market approach and the income approach.
The intangible assets related to definite-lived customer relationships, trademarks and technology are amortized over their estimated useful lives.
Leases, including right-of-use ("ROU") assets and lease liabilities
Lease liabilities were measured as of the effective date of the acquisition at the present value of future minimum lease payments over the remaining lease term and the incremental borrowing rate of the Company as if the acquired leases were new leases as of the acquisition date. ROU assets recorded within “Operating Lease Assets” are equal to the amount of the lease liability at the acquisition date adjusted for any off-market terms of the lease. The remaining lease term was based on the remaining term at the acquisition date plus any renewal or extension options that the Company is reasonably certain will be exercised.
Deferred Income Tax Assets and Liabilities
The acquisition was structured as a merger, and therefore the Company assumed the historical tax basis of Altra’s assets and liabilities. The deferred income tax assets and liabilities include the expected future federal, state, and foreign tax consequences associated with temporary differences between the fair values of the assets acquired and liabilities assumed and the respective tax bases. Tax rates utilized in calculating deferred income taxes generally represent the enacted statutory tax rates at the effective date of the acquisition in the jurisdictions in which legal title of the underlying asset or liability resides. See Note 10 - Income Taxes for further information related to income taxes.
Other Assets Acquired and Liabilities Assumed (excluding Goodwill)
The Company utilized the carrying values, net of allowances, to value accounts receivable and accounts payable as well as other current assets and liabilities, as it was determined that carrying values represented the fair value of those items at the acquisition date. Accounts receivable reflect the best estimate at the acquisition date of the contractual cash flows expected to be collected.
Goodwill
The excess of the consideration for the acquisition over the fair value of net assets acquired was recorded as goodwill. The goodwill is attributable to expected synergies and expanded market opportunities from combining the Company’s operations with those of Altra. The goodwill created in the acquisition is not expected to be deductible for tax purposes.
Transaction and Integration Costs
72
The Company incurred transaction and integration-related costs in connection with the Altra Transaction of approximately $23.5 million during the year ended December 31, 2024, which includes legal, professional service and integration costs associated with the Altra Transaction. During the year ended December 31, 2023 the Company incurred $86.9 million of costs related to the Altra Transaction, which includes legal and professional services and certain employee compensation costs, including severance and retention. These costs were recognized as Operating Expenses in the Company's Condensed Consolidated Statements of Income (Loss).
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 6 – 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 years ended December 31, 2023 and December 31, 2022, respectively, as if the Altra Transaction had occurred on January 2, 2022, the first day of the Company's 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 $102.6 million and increased expenses by $102.6 million for the years ended December 31, 2023 and December 31, 2022, respectively, (v) additional cost of sales related to the inventory valuation and lease ROU assets valuation adjustments which reduced expenses by $54.5 million and increased expenses by $54.5 million for the years ended December 31, 2023 and December 31, 2022, respectively and (vi) the estimated income tax effect on the pro forma adjustments.
The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the Altra Transaction been completed as of the date indicated or the results that may be obtained in the future.
For the Year Ended December 31, 2023
For the Year Ended December 31, 2022
Net Sales
$
6,701.8
$
7,163.4
Net Income Attributable to Regal Rexnord Corporation
$
50.1
$
131.1
Earnings Per Share Attributable to Regal Rexnord Corporation:
Basic
$
0.76
$
1.97
Assuming Dilution
$
0.75
$
1.95
73
(4) Goodwill and Intangible Assets
Goodwill
The following information presents changes to goodwill during the periods indicated:
Total
Industrial Powertrain Solutions
Power Efficiency Solutions
Automation & Motion Control
Industrial Systems
Balance as of December 31, 2022
$
4,018.8
$
2,290.0
$
752.3
$
865.0
$
111.5
Acquisitions
2,614.6
1,438.3
—
1,176.3
—
Reclassification to Noncurrent Assets Held for Sale
(53.9)
—
—
—
(53.9)
Impairment Charges
(57.3)
—
—
—
(57.3)
Translation and Other
30.9
18.7
1.6
10.9
(0.3)
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 and Other
(89.1)
(44.0)
(4.7)
(40.4)
—
Balance as of December 31, 2024
$
6,458.9
$
3,697.2
$
749.2
$
2,012.5
$
—
Cumulative Goodwill Impairment Charges⁽¹⁾
$
223.6
$
18.1
$
200.4
$
5.1
$
—
(1) Excludes impairment charges related to Industrial Systems, since it was sold in April 2024. See Note 3 - Acquisitions and Divestitures for more information.
Intangible Assets
Intangible assets consist of the following:
December 31, 2024
December 31, 2023
Weighted Average Amortization Period (Years)
Gross Amount
Accumulated Amortization
Net Carrying Amount
Gross Amount
Accumulated Amortization
Net Carrying Amount
Customer Relationships
15
$
3,892.8
$
915.1
$
2,977.7
$
4,028.5
$
746.2
$
3,282.3
Technology
13
293.0
109.0
184.0
302.6
92.9
209.7
Trademarks
10
692.3
189.4
502.9
712.1
120.7
591.4
Total Intangibles
$
4,878.1
$
1,213.5
$
3,664.6
$
5,043.2
$
959.8
$
4,083.4
While the Company believes its customer relationships are long-term in nature, the Company's contractual customer relationships are generally short-term. Useful lives are established at acquisition based on historical attrition rates.
Amortization expense was $346.5 million in 2024, $307.8 million in 2023 and $185.5 million in 2022.
The following table presents estimated future amortization expense:
Year
Estimated Amortization
2025
$
341.9
2026
338.6
2027
338.5
2028
338.5
2029
333.5
74
(5) Segment Information
The Company's operations are organized and managed based on similar product offerings and end markets in the following three reportable segments: Industrial Powertrain Solutions ("IPS"), Power Efficiency Solutions ("PES") and Automation & Motion Control ("AMC").
The IPS segment designs, produces and services a broad portfolio of highly-engineered transmission products, including mounted and unmounted bearings, couplings, mechanical power transmission drives and components, gearboxes and gear motors, clutches, brakes, and industrial powertrain components and solutions. Increasingly, the segment produces industrial powertrain solutions, which are integrated sub-systems comprised of Regal Rexnord motors plus the critical power transmission components that efficiently transmit motion to power industrial applications. The segment serves a broad range of markets that include metals and mining, general industrial, energy, alternative energy, machinery / off-highway, discrete automation 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 commercial HVAC, water heaters, commercial refrigeration, commercial building ventilation, pool and spa, irrigation, dewatering, agricultural, conveying 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 designed and produced integral motors, alternators for industrial applications, and sold aftermarket parts and kits to support such products. These products served the general industrial, metals and mining, and food and beverage end markets. As described within Note 3 – Acquisitions and Divestitures, the sale of the industrial motors and generators business, which represented a substantial majority of the Industrial Systems operating segment, was completed on April 30, 2024.
The chief operating decision maker ("CODM") of the Company is its chief executive officer. Among other considerations, the CODM evaluates performance and allocates resources based on the segment's income from operations. The Company also regularly provides to the CODM information on adjusted cost of sales and adjusted engineering, selling and administration expenses, which are significant expenses.
The following sets forth certain financial information attributable to the Company's operating segments for the year ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively:
75
Industrial Powertrain Solutions
Power Efficiency Solutions
Automation & Motion Control
Industrial Systems
Eliminations
Total
December 31, 2024
Total Sales
$
2,614.1
$
1,656.5
$
1,652.8
$
158.3
$
(47.9)
$
6,033.8
Intersegment Sales
16.0
12.4
19.0
0.5
(47.9)
—
Net Sales(1)
2,598.1
1,644.1
1,633.8
157.8
—
6,033.8
Adjusted Cost of Sales(2)
1,541.5
1,171.4
1,024.5
118.4
3,855.8
Adjusted Engineering, Selling and Administration Expenses(3)
483.1
273.2
342.9
29.0
1,128.2
Other Segment Items(4)
250.8
36.9
122.0
10.1
419.8
Income from Operations
322.7
162.6
144.4
0.3
—
630.0
Interest Expense
399.7
Interest Income
(18.8)
Other Expense, Net
1.1
Income before Taxes
248.0
Other Supplemental Disclosures
Amortization
201.5
7.7
137.1
0.2
—
346.5
Depreciation
80.7
37.0
47.2
0.4
165.3
Other significant noncash items:
Asset Impairment
1.1
1.1
1.8
—
—
4.0
Loss on Sale of Businesses
1.7
1.4
1.1
4.3
—
8.5
Capital Expenditures
50.3
25.0
29.9
4.3
—
109.5
76
Industrial Powertrain Solutions
Power Efficiency Solutions
Automation & Motion Control
Industrial Systems
Eliminations
Total
December 31, 2023
Total Sales
$
2,418.4
$
1,826.6
$
1,537.7
$
524.1
$
(56.1)
$
6,250.7
Intersegment Sales
14.9
17.7
20.9
2.6
(56.1)
—
Net Sales(1)
2,403.5
1,808.9
1,516.8
521.5
—
6,250.7
Adjusted Cost of Sales(2)
1,516.9
1,293.4
950.7
414.1
—
4,175.1
Adjusted Engineering, Selling and Administration Expenses(3)
433.2
279.5
291.1
84.8
—
1,088.6
Other Segment Items(4)
301.6
18.6
136.0
153.7
—
609.9
Income (Loss) from Operations
151.8
217.4
139.0
(131.1)
—
377.1
Interest Expense
431.0
Interest Income
(43.6)
Other Income, Net
(8.7)
Loss before Taxes
(1.6)
Other Supplemental Disclosures
Amortization
181.4
8.3
117.2
0.9
—
307.8
Depreciation
91.8
43.0
41.0
9.2
—
185.0
Other significant noncash items:
Goodwill Impairment
—
—
—
57.3
—
57.3
Asset Impairments
2.5
1.5
3.4
0.4
—
7.8
Loss on Sale of Businesses
—
—
—
87.7
—
87.7
Capital Expenditures
41.3
35.0
34.6
8.2
—
119.1
77
Industrial Powertrain Solutions
Power Efficiency Solutions
Automation & Motion Control
Industrial Systems
Eliminations
Total
December 31, 2022
Total Sales
$
1,673.6
$
2,237.6
$
788.1
$
554.0
$
(35.4)
$
5,217.9
Intersegment Sales
7.3
10.4
15.8
1.9
(35.4)
—
Net Sales(1)
1,666.3
2,227.2
772.3
552.1
—
5,217.9
Adjusted Cost of Sales(2)
997.7
1,610.0
498.7
422.7
—
3,529.1
Adjusted Engineering, Selling and Administration Expenses(3)
276.4
269.0
131.1
84.2
—
760.7
Other Segment Items(4)
150.0
21.3
64.3
2.1
—
237.7
Income from Operations
242.2
326.9
78.2
43.1
—
690.4
Interest Expense
87.2
Interest Income
(5.2)
Other Income, Net
(5.4)
Income before Taxes
613.8
Other Supplemental Disclosures
Amortization
119.5
8.4
56.8
0.8
—
185.5
Depreciation
49.5
38.5
21.2
12.7
—
121.9
Other significant noncash items:
Asset Impairment
0.9
—
—
—
—
0.9
Capital Expenditures
18.8
41.9
11.2
11.9
—
83.8
(1) Represents revenues from external customers.
(2) Adjusted Cost of Sales includes costs associated with producing goods for sale, such as materials, labor and overhead costs, and intercompany cost of sales. Adjusted Cost of Sales differs from Cost of Sales reported under US GAAP primarily because it includes intercompany cost of sales and excludes certain costs, primarily restructuring and related expenses. The difference is included in Other Segment Items.
(3) Adjusted Engineering, Selling and Administration Expenses includes operating expenses such as engineering, selling and administration expenses, as well as hedging, foreign currency gains and losses and certain overhead expenses. Adjusted Engineering, Selling and Administration Expenses differs from Operating Expenses reported under US GAAP primarily because it excludes costs such as significant noncash items, restructuring and related costs, and transaction and integration related costs. The difference is included in Other Segment Items.
(4) Other Segment Items includes other significant noncash items, intangible amortization, as well as restructuring and related costs, transaction and integration related costs, certain overhead expenses and the elimination of intercompany cost of sales.
The following table presents total identifiable assets attributable to the Company's operating segments as of December 31, 2024 and December 31, 2023:
Industrial Powertrain Solutions
Power Efficiency Solutions
Automation & Motion Control
Industrial Systems
Total
Identifiable Assets as of December 31, 2024
$
7,528.8
$
1,862.5
$
4,642.4
$
—
$
14,033.7
Identifiable Assets as of December 31, 2023
8,009.4
2,036.4
4,909.2
476.4
15,431.4
The following sets forth net sales by country in which the Company operates for 2024, 2023 and 2022, respectively:
78
Net Sales
2024
2023
2022
US
$
3,644.0
$
3,840.4
$
3,332.5
Rest of the World
2,389.8
2,410.3
1,885.4
Total
$
6,033.8
$
6,250.7
$
5,217.9
US net sales for 2024, 2023 and 2022 represented 60.4%, 61.4% and 63.9% of total net sales, respectively. No individual foreign country represented a material portion of total net sales for any of the years presented.
The following sets forth net property, plant and equipment by country in which the Company operates for 2024 and 2023, respectively:
Net Property, Plant and Equipment
2024
2023
US
$
411.9
$
441.1
Mexico
154.2
203.8
Germany
92.7
113.0
China
50.9
45.8
Rest of the World
211.3
237.5
Total
$
921.0
$
1,041.2
No other individual foreign country represented a material portion of net property, plant and equipment for any of the years presented.
(6) Debt and Bank Credit Facilities
The Company's indebtedness as of December 31, 2024 and December 31, 2023 was as follows:
December 31, 2024
December 31, 2023
Senior Notes
$
4,700.0
$
4,700.0
Term Facility
665.0
1,053.5
Land Term Facility
—
486.8
Multicurrency Revolving Facility
40.0
98.1
Altra Notes
18.1
18.1
Finance Leases
70.1
70.5
Other
6.6
7.5
Less: Debt Issuance Costs
(42.1)
(53.6)
Total
5,457.7
6,380.9
Less: Current Maturities
5.0
3.9
Non-Current Portion
$
5,452.7
$
6,377.0
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");
79
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").
The Term Facility requires quarterly amortization at 5.0% per annum, unless previously prepaid. Per the terms of the Credit Agreement, prepayments can be made without penalty and be applied to the next payment due. 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.
Weighted average interest rates on the Term Facility and Land Term facility are as follows:
Year Ended
December 31, 2024
December 31, 2023
Term Facility
7.0
%
7.0
%
Land Term Facility
7.1
%
6.8
%
As of December 31, 2024 the Company had no standby letters of credit issued under the Multicurrency Revolving Facility and $1,530.0 million of available borrowing capacity. The average daily balance in borrowings under the Multicurrency Revolving Facility was $72.0 million and $283.1 million for the years ended December 31, 2024 and December 31, 2023, respectively. The Company paid a non-use fee of 0.25% as of December 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.
Weighted average interest rates on the Multicurrency Revolving Facility are as follows:
Year Ended
December 31, 2024
December 31, 2023
Multicurrency Revolving Facility
7.0
%
6.4
%
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 offering expenses. The Company used a portion of the net proceeds to repay the Company’s $500.0 million 3.90% notes originally issued on April 7, 2022 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.
80
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 repurchased 95.28% of the outstanding Altra Notes for total consideration of $382.7 million. See Note 3 – 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 December 31, 2024.
Finance Leases
See Note 8 - Leases for the weighted average discount rate associated with the Company's finance leases in 2024 and 2023.
Other Disclosures
The fair value of the Senior Notes is based on rates for instruments with comparable maturities and credit quality, which is considered a Level 2 fair value measurement (see also Note 13 – Fair Value). The approximate fair value of the Senior Notes was $4,795.2 million and $4,802.4 million as of December 31, 2024 and December 31, 2023, respectively, compared to a carrying value of $4,700.0 million as of December 31, 2024 and December 31, 2023. The Company believes that the fair value of all other debt instruments approximates their carrying value.
Maturities of long-term debt outstanding as of December 31, 2024, excluding debt issuance costs, are as follows:
Year
Amount of Maturity
2025
$
5.0
2026
1,123.1
2027
710.5
2028
1,260.9
2029
4.3
Thereafter
2,396.0
Total
$
5,499.8
(7) Retirement Plans
Retirement Plans
81
The Company sponsors pension and other post-retirement benefit plans for certain associates. Most of the Company's associates are accumulating retirement income benefits through defined contribution plans. The majority of the Company's defined benefit pension plans covering the Company's domestic associates have been closed to new associates and frozen for existing associates, however certain employees represented by collective bargaining continue to earn benefits. Certain foreign associates are covered by government sponsored plans in the countries in which they are employed.
Defined Benefit Pension Plans
Benefits provided under defined benefit pension plans are based, depending on the plan, on associates' average earnings and years of credited service, or a benefit multiplier times years of service. Funding of these qualified defined benefit pension plans is in accordance with federal laws and regulations. The actuarial valuation measurement date for pension plans is the calendar year end of each year.
The Company's target allocation, target return and actual weighted-average asset allocation by asset category are as follows:
Target
Actual Allocation
Allocation
Return
2024
2023
Equity Investments
20.6%
5.2 - 7.5%
15.6%
14.7%
Fixed Income
66.8%
3.7 - 7.0%
70.3%
68.2%
Other
12.6%
0.5% - 7.0%
14.1%
17.1%
Total
100.0%
5.5%
100.0%
100.0%
During 2024, the Company maintained its dynamic de-risking investment strategy designed to allow the plans to attain and/or maintain fully funded status levels while reducing volatility, in order to further increase the overall fixed income portfolio to meet allocation targets in such a manner that its interest rate sensitivity correlates highly with that of the liabilities of the plans while other asset classes are intended to provide additional return with associated higher levels of risk. This strategy is designed to result in improved funding levels and less required contributions over time. Allocation targets have been established to fit this strategy in response to increased funded ratio thresholds along a glidepath. The long-term rate of return assumptions consider historic returns and volatilities adjusted for changes in overall economic conditions that may affect future returns and a weighting of each investment class.
The following table presents a reconciliation of the funded status of the defined benefit pension plans:
82
2024
2023
Change in Projected Benefit Obligation:
Obligation at Beginning of Period
$
483.1
$
440.3
Service Cost
2.0
2.1
Interest Cost
21.3
22.8
Actuarial (Gain) Loss
(25.8)
20.1
Less: Benefits Paid
34.3
34.4
Settlements
(0.7)
(3.9)
Foreign Currency Translation
(8.3)
6.0
Other Events
13.8
—
(Divestitures) Acquisitions
(1.1)
30.1
Obligation at End of Period
$
450.0
$
483.1
Change in Fair Value of Plan Assets:
Fair Value of Plan Assets at Beginning of Period
$
367.7
$
346.2
Actual Return on Plan Assets
(1.9)
34.2
Employer Contributions
16.6
8.3
Less: Benefits Paid
34.3
34.4
Settlements
(0.7)
(3.9)
Foreign Currency Translation
(3.3)
3.6
Other Events
2.1
—
(Divestitures) Acquisitions
(1.1)
13.7
Fair Value of Plan Assets at End of Period
$
345.1
$
367.7
Funded Status
$
(104.9)
$
(115.4)
The actuarial gain for 2024 was primarily due to an increase in discount rates. The actuarial loss for 2023 was primarily due to a decrease in discount rates.
The funded status as of December 31, 2024 included domestic plans of $(52.4) million and international plans of $(52.5) million. The funded status as of December 31, 2023 included domestic plans of $(64.5) million and international plans of $(50.9) million.
Funded Status and Expense
The Company recognized the funded status of its defined benefit pension plans on the Consolidated Balance Sheets as follows:
2024
2023
Other Noncurrent Assets
$
5.3
$
4.1
Accrued Compensation and Benefits
(7.6)
(6.6)
Pension and Other Post Retirement Benefits (a)
(102.6)
(112.9)
Total
$
(104.9)
$
(115.4)
(a) Excludes post-retirement health care plans included on the Consolidated Balance Sheets
Amounts Recognized in Accumulated Other Comprehensive Loss
Net Actuarial Gain
$
32.0
$
35.6
Prior Service Cost
0.3
0.3
Total
$
32.3
$
35.9
The accumulated benefit obligation for all defined benefit pension plans was $438.7 million and $475.6 million as of December 31, 2024 and December 31, 2023, respectively.
83
Defined pension plans with accumulated benefit obligations in excess of plan assets as of December 31, 2024 and December 31, 2023 were as follows:
2024
2023
Projected Benefit Obligation
$
415.1
$
445.7
Accumulated Benefit Obligation
408.5
442.1
Fair Value of Plan Assets
304.9
326.4
Defined pension plans with projected benefit obligations in excess of plan assets as of December 31, 2024 and December 31, 2023 were as follows:
2024
2023
Projected Benefit Obligation
$
415.1
$
447.2
Accumulated Benefit Obligation
408.5
443.3
Fair Value of Plan Assets
304.9
327.7
The following weighted average assumptions were used to determine the projected benefit obligation as of December 31, 2024 and December 31, 2023, respectively:
2024
2023
Discount Rate
5.4%
4.7%
The objective of the discount rate assumption is to reflect the rate at which the pension benefits could be effectively settled. In making the determination, the Company takes into account the timing and amount of benefits that would be available under the plans. The methodology for selecting the discount rate was to match the plan's cash flows to that of a theoretical bond portfolio yield curve.
Certain of the Company's defined benefit pension plan obligations are based on years of service rather than on projected compensation percentage increases. For those plans that use compensation increases in the calculation of benefit obligations and net periodic pension cost, the Company used an assumed rate of compensation increase of 3.0% and 2.8% for the years ended December 31, 2024 and December 31, 2023, respectively.
Net periodic pension benefit costs and the net actuarial loss and prior service cost recognized in OCI for the defined benefit pension plans were as follows:
2024
2023
2022
Service Cost
$
2.0
$
2.1
$
1.4
Interest Cost
21.3
22.8
14.0
Expected Return on Plan Assets
(20.0)
(27.1)
(20.3)
Amortization of Net Actuarial (Gain) Loss
(0.2)
(1.8)
1.0
Amortization of Prior Service Cost
0.1
0.1
0.1
Curtailment Expense
—
0.2
—
Net Periodic Benefit Cost
$
3.2
$
(3.7)
$
(3.8)
Change in Obligations Recognized in OCI, Net of Tax
Prior Service Cost
$
0.1
$
0.1
$
0.1
Net Actuarial (Gain) Loss
(3.7)
(14.4)
0.7
Total Recognized in OCI
$
(3.6)
$
(14.3)
$
0.8
The amortization of any prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of associates expected to receive benefits under the plans. The amortization of the net actuarial loss is determined using a straight-line amortization of the loss over the average remaining life expectancy of the associates expected to receive benefits under the plans.
84
The following weighted average assumptions were used to determine net periodic pension cost for 2024, 2023 and 2022, respectively.
2024
2023
2022
Discount Rate
4.7%
5.2%
2.7%
Expected Long-Term Rate of Return on Assets
5.1%
6.6%
4.6%
Pension Assets
The Company classifies its investments into Level 1, which refers to securities valued using quoted prices from active markets for identical assets, Level 2, which refers to securities not traded on an active market but for which observable market inputs are readily available, and Level 3, which refers to securities valued based on significant unobservable inputs. Mutual funds are valued at the unadjusted quoted market prices for the securities. Common collective trust funds are valued based on the net asset value (“NAV”) provided by the administrator of the fund as a practical expedient to estimate fair value. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. Investments in units of collective trust funds and short-term investment funds, comprised of cash and money market funds, are valued at their respective published market prices as reported by the funds daily. Certain international plans hold insurance contracts. The fair value of these contracts is calculated by projecting expected future cash flows from the contract and discounting them to present value based on current market rates. The contracts are included within Level 3 of the hierarchy as the assumptions used to project expected future cash flows are based on actuarial estimates and are unobservable.
Pension assets by type and level are as follows:
December 31, 2024
Total
Level 1
Level 3
Cash and Cash Equivalents
$
4.3
$
4.3
$
—
Mutual Funds:
International Equity Funds
6.0
6.0
—
Fixed Income Funds
10.2
10.2
—
Other
5.1
1.0
4.1
Insurance Contracts
21.1
—
21.1
$
46.7
$
21.5
$
25.2
Investments Measured at Net Asset Value
298.4
Total
$
345.1
December 31, 2023
Total
Level 1
Level 3
Cash and Cash Equivalents
$
4.9
$
4.9
$
—
Mutual Funds:
US Equity Funds
1.8
1.8
—
International Equity Funds
9.5
9.5
—
Fixed Income Funds
3.8
3.8
—
Other
6.1
1.8
4.3
Insurance Contracts
23.7
—
23.7
$
49.8
$
21.8
$
28.0
Investments Measured at Net Asset Value
317.9
Total
$
367.7
85
The Company had no assets classified within Level 2 of the hierarchy as of December 31, 2024 and December 31, 2023.
The following table sets forth additional disclosures for the fair value measurement of the fair value of pension plan assets that calculate fair value based on NAV per share practical expedient as of December 31, 2024 and December 31, 2023:
2024
2023
Common Collective Trust Funds
$
298.4
$
317.9
The 2024 and 2023 common collective trust funds are investments in the following portfolios:
•Mercer US Small/Midcap Equity Portfolio - seeks to provide long term total returns comprised primarily of capital appreciation by investing in equity securities issued by small to medium capitalization US companies;
•Mercer Non-US Core Equity Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing in equity securities of non-US companies;
•Mercer Global Low Volatility Equity Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing in equity securities of US and foreign issuers;
•Mercer US Large Cap Passive Equity Portfolio - seeks to approximate, as closely as possible, the performance of the S&P 500 Index over the long term by investing in the equity securities comprising the index in approximately the same proportions as they are represented in the index;
•Mercer Emerging Markets Equity Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing equity securities of companies that are located in emerging markets, other investments that are tied economically to emerging markets, as well as in American, European and Global Depository Receipts;
•Mercer Active Long Corporate Fixed Income Portfolio - seeks to maximize long term total return by investing on high quality US corporate bonds;
•Mercer Opportunistic Fixed Income Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing in high yield bonds and emerging markets debt;
•Mercer Long Strips Fixed Income Portfolio - seeks to extend the duration of plan assets by investing in US Treasury STRIPS with a maturity of greater than 20 years;
•Mercer Core Real Estate Portfolio - seeks to earn attractive risk-adjusted returns on a diversified portfolio of private real estate, by systematically favoring the market segments and opportunities believed to offer the most attractive relative value at a given point in time;
•Mercer Active Intermediate Credit Fixed Income Portfolio - seeks to maximize long-term total return relative to the Bloomberg Barclays US Intermediate Credit Index;
•Mercer Long Duration Passive Fixed Income Portfolio - seeks to match the total return of the Bloomberg US Long Government Bond Index.
The 2024 and 2023 common collective trust funds are available for immediate redemption.
The table below sets forth a summary of changes in the Company's Level 3 assets in its pension plan investments as of December 31, 2024 and December 31, 2023:
2024
2023
Other
Insurance Contracts
Total
Other
Insurance Contracts
Total
Beginning balance
$
4.3
$
23.7
$
28.0
$
—
$
20.9
$
20.9
Acquisition
—
—
—
4.3
—
4.3
Net Sales
—
(0.3)
(0.3)
—
(0.8)
(0.8)
Net Gains (Losses)
0.1
(0.8)
(0.7)
—
2.7
2.7
Translation
(0.3)
(1.5)
(1.8)
—
0.9
0.9
Ending balance
$
4.1
$
21.1
$
25.2
$
4.3
$
23.7
$
28.0
The Company made contributions to its defined benefit plan of $16.6 million and $8.3 million for the years ended December 31, 2024 and December 31, 2023.
The Company estimates that in 2025 it will make contributions in the amount of $14.7 million to fund its defined benefit pension plans.
86
The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Year
Expected Payments
2025
$
38.4
2026
37.3
2027
36.5
2028
36.7
2029
36.0
2030-2034
176.1
Post-Retirement Health Care Plans
The Company's other post-retirement health care plans were not significant during 2024 and 2023.
Defined Contribution Plans
Company contributions to domestic defined contribution plans totaled $29.5 million, $24.3 million and $16.2 million in 2024, 2023 and 2022, respectively. Company contributions to non-US defined contribution plans were $14.0 million, $15.7 million and $7.8 million in 2024, 2023 and 2022, respectively.
(8) 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 determines its incremental borrowing rate based on its unsecured borrowing rate, adjusted for collateralization and lease term, at the lease commencement date. For leases denominated in a currency other than the US dollar, 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 may 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 leased 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. These increases are reflected as variable lease payments and are included in the measurement of the ROU asset and lease liability. 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 Consolidated Balance Sheets: 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 Consolidated Balance Sheets: Net Property, Plant and Equipment (see Note 2 - Accounting Policies), Current Maturities of Long-Term Debt and Long-Term Debt (see Note 6 - Debt and Bank Credit Facilities).
87
Short-term and variable lease expense was immaterial. The components of lease expense were as follows:
2024
2023
2022
Operating Lease Cost
$
55.1
$
56.1
$
40.7
Finance Lease Cost:
Amortization of ROU Assets
3.6
3.2
3.2
Interest on Lease Liabilities
3.6
3.7
3.8
Total Lease Expense
$
62.3
$
63.0
$
47.7
Maturity of lease liabilities as of December 31, 2024 were as follows:
Operating Leases
Finance Leases
Total
2025
$
45.4
$
8.2
$
53.6
2026
39.2
8.2
47.4
2027
30.4
8.3
38.7
2028
19.2
7.4
26.6
2029
11.0
6.8
17.8
Thereafter
75.3
62.2
137.5
Total Lease Payments
$
220.5
$
101.1
$
321.6
Less: Interest
(70.8)
(31.0)
(101.8)
Present Value of Lease Liabilities
$
149.7
$
70.1
$
219.8
Other information related to leases was as follows:
Supplemental Cash Flow Information:
2024
2023
2022
Cash Paid for Amounts Included in the Measurement of Lease Liabilities:
Operating Cash Flows - Operating Leases
$
51.4
$
56.2
$
38.4
Operating Cash Flows - Finance Leases
3.6
3.7
3.8
Financing Cash Flows - Finance Leases
3.9
3.3
2.9
Leased Assets Obtained in Exchange for New Finance Lease Liabilities
3.9
0.6
—
Leased Assets Obtained in Exchange for New Operating Lease Liabilities
22.8
115.7
31.4
Weighted Average Remaining Lease Term (Years)
Operating Leases
7.3 years
7.2 years
5.5 years
Finance Leases
14.8 years
16.1 years
17.0 years
Weighted Average Discount Rate
Operating Leases
8.1
%
8.1
%
8.0
%
Finance Leases
5.2
%
5.2
%
5.2
%
The Company had no material operating or finance leases that have been entered into but not yet commenced as of December 31, 2024.
88
(9) Shareholders' Equity
Repurchase of Common Stock
At a meeting of the Board of Directors on October 26, 2021, the Company's Board of Directors approved the authorization to purchase up to $500.0 million of shares under the Company's share repurchase program. The authorization has no expiration date. In 2024, the Company acquired and retired 332,439 shares of its common stock at an average cost of $150.42 per share for a total cost of $50.0 million. In 2023, the Company did not acquire any shares of its common stock. In 2022, the Company acquired and retired 1,698,227 shares of its common stock at an average cost of $140.89 per share for a total cost of $239.2 million.
Based on share repurchase activity since the most recent authorization, as of December 31, 2024, the maximum value of shares of the Company’s common stock available to be purchased was approximately $145.0 million.
Share-Based Compensation
The Company recognized approximately $34.8 million, $58.2 million and $22.5 million in share-based compensation expense in 2024, 2023 and 2022, respectively. In connection with the Altra Transaction, the Company 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. The total income tax benefit recognized in the Consolidated Statements of Income (Loss) for share-based compensation expense was $4.8 million, $10.5 million and $5.4 million in 2024, 2023 and 2022, 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. The total fair value of shares and options vested was $46.2 million, $35.4 million and $25.6 million in 2024, 2023 and 2022, respectively.
Total unrecognized compensation cost related to share-based compensation awards was approximately $39.3 million, net of estimated forfeitures, which the Company expects to recognize over a weighted average period of approximately 1.8 years as of December 31, 2024.
During 2023, the Company's shareholders approved the 2023 Equity Incentive Plan ("2023 Plan"). The 2023 Plan authorized the issuance of 5.6 million shares of common stock for equity-based awards and terminated any further grants under prior equity plans. Approximately 5.0 million shares were available for future grant or payment under the 2023 Plan as of December 31, 2024.
Options and Stock Appreciation Rights
The Company uses several forms of share-based incentive awards including non-qualified stock options and stock settled stock appreciation rights (“SARs”). 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. Shares granted generally vest over three years on the anniversary date of the grant date. Generally all grants 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 years ended December 31, 2024, December 31, 2023 and December 31, 2022, expired and canceled shares were immaterial.
The table below presents share-based compensation activity for 2024, 2023 and 2022:
2024
2023
2022
Total Intrinsic Value of Share-Based Incentive Awards Exercised
$22.0
$6.2
$7.8
Cash Received from Stock Option Exercises
4.9
2.5
3.5
Income Tax Benefit from the Exercise of Stock Options
21.2
5.3
6.1
Total Fair Value of Share-Based Incentive Awards Vested
13.4
10.9
8.2
The weighted average assumptions used in the Company's Black-Scholes valuation related to grants for options and SARs were as follows:
89
2024
2023
2022
Per Share Weighted Average Fair Value of Grants
$62.85
$54.20
$42.21
Risk-Free Interest Rate
4.3%
4.1%
1.8%
Expected Life (Years)
5.0
5.0
4.0
Expected Volatility
38.0%
35.8%
35.3%
Expected Dividend Yield
0.8%
0.9%
0.9%
The average risk-free interest rate is based on US Treasury security rates in effect as of the grant date. The expected dividend yield is based on the projected annual dividend as a percentage of the estimated market value of the Company's common stock as of the grant date. The Company estimated the expected volatility using a weighted average of daily historical volatility of the Company's stock price over the expected term of the award. The Company estimated the expected term using historical data.
Following is a summary of share-based incentive plan activity (options and SARs) for 2024:
Number of Shares Under Options and SARs
Shares
Weighted Average Exercise Price
Weighted Average Remaining Contractual Term (years)
Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2023
829,417
$
101.44
Granted
98,998
168.43
Exercised
(275,347)
85.85
Forfeited
(24,574)
151.93
Outstanding as of December 31, 2024
628,494
$
116.90
6.0
$
25.2
Exercisable as of December 31, 2024
443,632
$
99.47
5.0
$
24.7
Compensation expense recognized related to options and SARs was $5.1 million, $7.4 million and $6.1 million for 2024, 2023 and 2022, respectively.
As of December 31, 2024, there was $5.6 million of unrecognized compensation cost related to non-vested options and SARs that is expected to be recognized as a charge to earnings over a weighted average period of 1.8 years.
The amount of options and SARs expected to vest is materially consistent with those outstanding and not yet exercisable.
Restricted Stock Awards and Restricted Stock Units
Restricted stock awards ("RSAs") and restricted stock units ("RSUs") 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, or death, disability or normal retirement of the grantee.
Following is the summary of RSAs activity for 2024:
Shares
Weighted Average Fair Value at Grant Date
Weighted Average Remaining Contractual Term (years)
Unvested RSAs as of December 31, 2023
21,997
$
133.41
0.9
Granted
—
—
Vested
(18,451)
132.49
Forfeited
(1,555)
135.50
Unvested RSAs as of December 31, 2024
1,991
$
136.77
1.9
90
There was no grant of RSAs in 2024. The weighted average grant date fair value of awards granted was $134.71 and $131.27 in 2023 and 2022, respectively.
Other than RSAs that were issued to replace equity awards held by employees of Altra at the time of the Altra acquisition in the prior year, RSAs vest on the one year 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 $0.9 million, $2.3 million and $1.4 million for 2024, 2023 and 2022, respectively.
As of December 31, 2024, there was $0.2 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 1.9 years.
Following is the summary of RSUs activity for 2024:
Shares
Weighted Average Fair Value at Grant Date
Weighted Average Remaining Contractual Term (years)
Unvested RSUs as of December 31, 2023
263,596
$
143.43
1.9
Granted
142,551
165.10
Vested
(121,447)
143.18
Forfeited
(42,527)
153.56
Unvested RSUs as of December 31, 2024
242,173
$
154.79
1.8
The weighted average grant date fair value of awards granted was $165.10, $141.89 and $147.70 in 2024, 2023 and 2022, respectively.
Other than RSUs that were issued to replace equity awards held by employees of Altra at the time of the Altra acquisition in the prior year, RSUs vest one third each year on the anniversary of the grant date, provided the holder of the shares is continuously employed by the Company until the vesting date. Compensation expense recognized related to the RSUs was $17.3 million, $24.7 million and $10.3 million for 2024, 2023 and 2022, respectively.
As of December 31, 2024, there was $18.3 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 1.8 years.
Performance Share Units
Performance share unit awards ("PSUs") consist of shares or the rights to shares of the Company's stock which are awarded to associates 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, vest three years from the grant date and are issued at a performance target of 100%. 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 grant agreements, acceleration of vesting may occur under a change in control, death or disability. There are no voting rights with these instruments until vesting occurs and a share of stock is issued. PSUs with a performance criteria using returns relative to the Company's peer group are valued using a Monte Carlo simulation method as of the grant date while PSUs with a performance criteria based on a return on invested capital are valued using the closing market price less net present value of dividends as of the grant date.
The assumptions used in the Company's Monte Carlo simulation related to grants for PSUs were as follows:
December 31, 2024
December 31, 2023
December 31, 2022
Risk-free interest rate
4.5%
4.4%
1.8%
Expected life (years)
3.0
3.0
3.0
Expected volatility
36.0%
41.0%
38.0%
Expected dividend yield
—%
—%
—%
91
Following is the summary of PSUs activity for 2024:
Shares
Weighted Average Fair Value at Grant Date
Weighted Average Remaining Contractual Term (years)
Unvested PSUs as of December 31, 2023
125,902
$
197.36
1.9
Granted
68,350
254.05
Vested
(43,708)
151.05
Forfeited
(8,458)
190.97
Unvested PSUs as of December 31, 2024
142,086
$
229.60
1.8
The weighted average grant date fair value of awards granted was $254.05, $235.77 and $151.27 in 2024, 2023 and 2022, respectively.
Compensation expense for PSUs is recognized based on the Monte Carlo simulation 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 $11.5 million, $8.1 million and $4.7 million for 2024, 2023 and 2022, respectively. Total unrecognized compensation expense for all PSUs granted as of December 31, 2024 was $15.2 million and it is expected to be recognized as a charge to earnings over a weighted average period of 1.8 years.
(10) Income Taxes
Income (loss) before taxes consisted of the following:
2024
2023
2022
US
$
(169.2)
$
(389.5)
$
221.2
Foreign
417.2
387.9
392.6
Total
$
248.0
$
(1.6)
$
613.8
The provision for income taxes is summarized as follows:
2024
2023
2022
Current
US Federal
$
45.9
$
39.6
$
101.6
US State
10.0
6.4
10.2
Foreign
146.0
122.0
87.2
$
201.9
$
168.0
$
199.0
Deferred
US Federal
$
(89.6)
$
(84.3)
$
(50.7)
US State
(15.3)
(9.4)
(12.1)
Foreign
(47.4)
(21.6)
(17.3)
(152.3)
(115.3)
(80.1)
Total
$
49.6
$
52.7
$
118.9
92
A reconciliation of the federal statutory expense (benefit) and the income tax expense reflected in the Consolidated Statements of Income (Loss) follows:
2024
2023
2022
Federal Statutory Expense (Benefit)
$
52.1
$
(0.4)
$
128.9
State Income Taxes, Net of Federal Benefit
(3.2)
(8.6)
3.2
Effect of Impairments and Divestitures
21.2
35.0
—
Foreign Rate Differential
(8.3)
(10.8)
(1.4)
Research and Development Credit
(8.7)
(8.7)
(9.7)
Valuation Allowance
(6.6)
4.3
0.2
Tax on Repatriation
5.3
25.8
7.2
Transaction Costs
—
6.9
—
US Tax on Foreign Operations
(6.6)
14.2
6.7
Deferred Tax Remeasurement
(1.1)
3.4
(2.4)
Other
5.5
(8.4)
(13.8)
Income Tax Expense
$
49.6
$
52.7
$
118.9
Deferred taxes arise primarily from differences in amounts reported for tax and financial statement purposes. The Company's net deferred tax liability was $785.5 million as of December 31, 2024, classified on the Consolidated Balance Sheet as a net non-current deferred income tax benefit of $30.0 million and a net non-current deferred income tax liability of $815.5 million. As of December 31, 2023, the Company's net deferred tax liability was $978.9 million classified on the Consolidated Balance Sheet as a net non-current deferred income tax asset of $33.8 million and a net non-current deferred income tax liability of $1,012.7 million.
The components of this net deferred tax liability are as follows:
December 31, 2024
December 31, 2023
Accrued Benefits
$
53.1
$
65.4
Bad Debt Allowances
7.4
7.9
Warranty Accruals
7.6
8.4
Derivative Instruments
2.6
—
Inventory
33.7
8.6
Tax Loss Carryforward
14.8
16.1
Operating Lease Liability
56.5
67.4
Deferred Interest
92.6
43.7
Other
35.0
32.3
Deferred Tax Assets before Valuation Allowance
303.3
249.8
Valuation Allowance
(8.3)
(11.0)
Total Deferred Tax Assets
295.0
238.8
Property Related
(83.3)
(92.5)
Intangible Items
(936.4)
(1,026.6)
Accrued Liabilities
(11.8)
(29.9)
Derivative Instruments
—
(8.3)
Operating Lease Asset
(49.0)
(60.4)
Deferred Tax Liabilities
(1,080.5)
(1,217.7)
Net Deferred Tax Liability
$
(785.5)
$
(978.9)
93
Following is a reconciliation of the beginning and ending amount of unrecognized tax benefits:
Unrecognized Tax Benefits, January 1, 2022
$
8.8
Gross Increases from Current Period Tax Positions
0.6
Settlements with Taxing Authorities
(2.0)
Lapse of Statute of Limitations
(1.7)
Unrecognized Tax Benefits, December 31, 2022
$
5.7
Gross Increases from Current Period Tax Positions
0.3
Gross Increases from Acquisitions
3.8
Lapse of Statute of Limitations
(1.3)
Unrecognized Tax Benefits, December 31, 2023
$
8.5
Gross Increases from Current Period Tax Positions
0.8
Acquisition Measurement Period Adjustment
(2.8)
Lapse of Statute of Limitations
(2.3)
Unrecognized Tax Benefits, December 31, 2024
$
4.2
Unrecognized tax benefits as of December 31, 2024 amount to $4.2 million, 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. During 2024, 2023 and 2022, the Company recognized approximately $(0.3) million, $(0.1) million and $(0.1) million of net interest income, respectively. The Company had approximately $0.7 million, $1.1 million and $1.2 million of accrued interest as of December 31, 2024, December 31, 2023 and December 31, 2022, respectively.
Due to statute expirations, approximately $1.8 million of the unrecognized tax benefits, including accrued interest, could reasonably change in the coming year.
The Company conducts business globally and, as a result, files income tax returns in the US federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The US Internal Revenue Service is currently conducting an audit of the Company's 2022 income tax return. No material deficiencies have been assessed related to ongoing audits as of December 31, 2024. 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 2021, and the Company is no longer subject to non-US income tax examinations by tax authorities for years prior to 2020.
As of December 31, 2024 and December 31, 2023 the Company had approximately $14.8 million and $16.1 million, respectively, of tax effected net operating losses in various jurisdictions with a portion expiring over a period of up to 15 years and the remaining without expiration.
Valuation allowances totaling $8.3 million and $11.0 million as of December 31, 2024 and December 31, 2023, respectively, have been established for deferred income tax assets primarily related to certain subsidiary loss carryforwards that may not be realized. Realization of the net deferred income tax assets is dependent on generating sufficient taxable income prior to their expiration. Although realization is not assured, management believes it is more-likely-than-not that the net deferred income tax assets will be realized. The amount of the net deferred income tax assets considered realizable, however, could change in the near term if future taxable income during the carryforward period fluctuates.
The Company continues to treat approximately $213.0 million of earnings from certain foreign entities as permanently reinvested and has not recorded a deferred tax liability for the local withholding taxes of approximately $16.9 million on those earnings.
94
(11) 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, subject to certain limitations. The following paragraphs summarize the most significant actions and proceedings:
•In 2002, the Company's subsidiary, Rexnord Industries, LLC ("Rexnord Industries") was named as a potentially responsible party ("PRP"), together with at least ten other companies, at the Ellsworth Industrial Park Site, Downers Grove, DuPage County, Illinois (the "Site"), by the United States Environmental Protection Agency ("USEPA"), and the Illinois Environmental Protection Agency ("IEPA"). Rexnord Industries' Downers Grove property is situated within the Ellsworth Industrial Complex. The USEPA and IEPA allege there have been one or more releases or threatened releases of chlorinated solvents and other hazardous substances, pollutants or contaminants at the Site, allegedly including but not limited to a release or threatened release on or from Rexnord Industries' property. The relief sought by the USEPA and IEPA includes further investigation and potential remediation of the Site and reimbursement of USEPA's past costs. In early 2020, Rexnord Industries entered into an administrative order with the USEPA to do remediation work on its Downers Grove property. The soil excavation work and transporting and disposing of the excavated material was completed in October 2020. The construction of an AS/SVE system was completed and became operational in February 2022. The system continues to operate pending the US EPA's approval of a pilot study work plan for an on site chemical oxidation soil remediation system. Soil remediation is expected to continue for a minimum of 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
95
Industries, and provide Rexnord Industries with indemnification against certain products related asbestos exposure liabilities. The Company believes that, pursuant to such indemnity obligations, Hamilton Sundstrand is obligated to defend and indemnify Rexnord Industries with respect to asbestos claims described below, and that, with respect to these claims, such indemnity obligations are not subject to any time or dollar limitations.
The following paragraph summarizes the most significant actions and proceedings for which Hamilton Sundstrand has accepted responsibility:
•Rexnord Industries is a defendant in multiple lawsuits pending in state or federal court in numerous jurisdictions relating to alleged personal injuries due to the alleged presence of asbestos in certain clutches and drives previously manufactured by The Falk Corporation. The ultimate outcome of these lawsuits cannot presently be determined. Hamilton Sundstrand is defending Rexnord Industries in these lawsuits pursuant to its indemnity obligations and has paid 100% of the costs to date.
The Company is, from time to time, party to litigation and other legal or regulatory proceedings that arise in the normal course of its business operations and the outcomes of which are subject to significant uncertainty, including product warranty and liability claims, contract disputes and environmental, asbestos, intellectual property, employment and other litigation matters. The Company's products are used in a variety of industrial, commercial and residential applications that subject the Company to claims that the use of its products is alleged to have resulted in injury or other damage. Many of these matters will only be resolved when one or more future events occur or fail to occur. Management conducts regular reviews, including updates from legal counsel, to assess the need for accounting recognition or disclosure of these contingencies, and such assessment inherently involves an exercise in judgment. The Company accrues for exposures in amounts that it believes are adequate, and the Company does not believe that the outcome of any such lawsuit individually or collectively will have a material effect on the Company's financial position, its results of operations or its cash flows.
The Company recognizes the cost associated with its standard warranty on its products at the time of sale. The amount recognized is based on historical experience. The following is a reconciliation of the changes in accrued warranty costs for 2024 and 2023:
December 31, 2024
December 31, 2023
Beginning Balance
$
34.5
$
28.8
Less: Payments
21.9
23.4
Provisions
21.5
21.8
Acquisitions
—
9.8
Reclassification to Liabilities Held for Sale
—
(3.4)
Translation Adjustments
(0.7)
0.9
Ending Balance
$
33.4
$
34.5
These liabilities are included in Other Accrued Expenses and Other Noncurrent Liabilities on the Consolidated Balance Sheets.
(12) 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.
96
The Company recognizes all derivative instruments as either assets or liabilities at fair value in the 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 December 31, 2024 or December 31, 2023.
Cash flow hedges
The effective portion 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 December 31, 2024 and December 31, 2023, the Company had $(0.8) million and $15.1 million, net of tax, of derivative losses and gains, respectively, on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings.
The Company has commodity forward contracts to hedge forecasted purchases of commodities with maturities extending through December 2025. The notional amounts expressed in terms of the dollar value of the hedged item were as follows:
December 31, 2024
December 31, 2023
Copper
$
41.7
$
37.5
Aluminum
—
1.4
The Company has currency forward contracts with maturities extending through December 2025. The notional amounts expressed in terms of the dollar value of the hedged currency were as follows:
December 31, 2024
December 31, 2023
Mexican Peso
$
233.2
$
101.4
Chinese Renminbi
359.5
302.3
Indian Rupee
23.0
30.1
Euro
1,221.5
465.8
Canadian Dollar
52.2
—
British Pound
6.1
7.1
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 will be 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 two additional receive variable/pay-fixed forward starting non-amortizing interest rate swaps in May 2022, with a total notional amount of $250.0 million to hedge the floating rate interest of the Term Facility. These swaps will expire in March 2027.
97
Fair values of derivative instruments as of December 31, 2024 and December 31, 2023 were:
December 31, 2024
Prepaid Expenses and Other Current Assets
Other Noncurrent Assets
Other Accrued Expenses
Designated as Hedging Instruments:
Interest Rate Swap Contracts
$
—
$
5.5
$
—
Currency Contracts
0.1
—
8.0
Commodity Contracts
0.1
—
4.4
Not Designated as Hedging Instruments:
Currency Contracts
0.9
—
5.6
Total Derivatives
$
1.1
$
5.5
$
18.0
December 31, 2023
Prepaid Expenses and Other Current Assets
Other Noncurrent Assets
Other Accrued Expenses
Designated as Hedging Instruments:
Interest Rate Swap Contracts
$
—
$
5.3
$
—
Currency Contracts
13.1
0.2
1.0
Commodity Contracts
1.0
0.1
0.6
Not Designated as Hedging Instruments:
Currency Contracts
1.3
—
5.9
Total Derivatives
$
15.4
$
5.6
$
7.5
Derivatives Designated as Cash Flow Hedging Instruments
The effect of derivative instruments designated as cash flow hedges on the Consolidated Statements of Income (Loss) and Consolidated Statements of Comprehensive Income for 2024, 2023 and 2022 were:
2024
Interest
Commodity
Currency
Rate
Forwards
Forwards
Swaps
Total
(Loss) Gain Recognized in Other Comprehensive Loss
$
(4.5)
$
(14.3)
$
0.2
$
(18.6)
Amounts Reclassified from Other Comprehensive Income (Loss):
(Loss) Gain Recognized in Cost of Sales
(1.3)
22.3
—
21.0
Gain Recognized in Interest Expense
—
—
5.6
5.6
98
2023
Interest
Commodity
Currency
Rate
Forwards
Forwards
Swaps
Total
(Loss) Gain recognized in Other Comprehensive Loss
$
(0.5)
$
31.2
$
(2.5)
$
28.2
Amounts reclassified from Other Comprehensive Income (Loss):
(Loss) Gain recognized in Cost of Sales
(13.6)
20.8
—
7.2
Gain recognized in Interest Expense
—
—
5.9
5.9
2022
Interest
Commodity
Currency
Rate
Forwards
Forwards
Swaps
Total
(Loss) Gain recognized in Other Comprehensive Loss
$
(23.5)
$
11.4
$
18.2
$
6.1
Amounts reclassified from Other Comprehensive Income (Loss):
Gain recognized in Net Sales
—
0.1
—
0.1
Gain recognized in Cost of Sales
3.5
6.1
—
9.6
Gain recognized in Interest Expense
—
—
1.3
1.3
The ineffective portion of hedging instruments recognized was immaterial for all periods presented.
Derivatives Not Designated as Cash Flow Hedging Instruments
The effect of derivative instruments not designated as cash flow hedges on the Consolidated Statements of Income (Loss) for 2024, 2023 and 2022 were:
2024
Commodity Forwards
Currency Forwards
Total
Gain recognized in Operating Expenses
—
4.6
4.6
2023
Commodity Forwards
Currency Forwards
Total
Gain recognized in Cost of Sales
$
0.3
$
—
$
0.3
Loss recognized in Operating Expenses
—
(17.8)
(17.8)
2022
Commodity Forwards
Currency Forwards
Total
Loss recognized in Cost of Sales
$
(0.6)
$
—
$
(0.6)
Gain recognized in Operating Expenses
—
10.2
10.2
The AOCI balance related to hedging activities of a $(5.5) million loss net of tax as of December 31, 2024 includes $(9.8) million of net current deferred losses expected to be reclassified to the Consolidated Statement of Income (Loss) in the next twelve months. There were no gains or losses reclassified from AOCI to earnings based on the probability that the forecasted transaction would not occur.
99
The Company's commodity and currency derivative contracts are subject to master netting agreements with the respective counterparties which allow the Company to net settle transactions with a single net amount payable by one party to another party. The Company has elected to present the derivative assets and derivative liabilities on the Consolidated Balance Sheets on a gross basis for the periods ended December 31, 2024 and December 31, 2023.
The following table presents on a net basis the derivative assets and liabilities that are subject to right of offset under enforceable master netting agreements:
December 31, 2024
Gross Amounts as Presented in the Consolidated Balance Sheet
Derivative Contract Amounts Subject to Right of Offset
Derivative Contracts as Presented on a Net Basis
Assets
$
6.6
$
(1.1)
$
5.5
Liabilities
18.0
(1.1)
16.9
December 31, 2023
Gross Amounts as Presented in the Consolidated Balance Sheet
Derivative Contract Amounts Subject to Right of Offset
Derivative Contracts as Presented on a Net Basis
Assets
$
15.7
$
(2.6)
$
13.1
Liabilities
7.5
(2.6)
4.9
(13) Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:
Level 1
Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2
Unadjusted quoted prices in active markets for similar assets or liabilities, or
Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or
Inputs other than quoted prices that are observable for the asset or liability
Level 3
Unobservable inputs for the asset or liability
100
The Company uses the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The fair values of cash equivalents and short-term deposits approximate their carrying values as of December 31, 2024 and December 31, 2023, due to the short period of time to maturity and are classified using Level 1 inputs. The fair values of trade receivables and accounts payable approximate the carrying values due to the short period of time to maturity. See Note 6 - Debt and Bank Credit Facilities for disclosure of the approximate fair value of the Company's debt as of December 31, 2024 and December 31, 2023.
The following table sets forth the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2024 and December 31, 2023, respectively:
December 31, 2024
December 31, 2023
Classification
Assets:
Prepaid Expenses and Other Current Assets:
Derivative Currency Contracts
$
1.0
$
14.4
Level 2
Derivative Commodity Contracts
0.1
1.0
Level 2
Other Noncurrent Assets:
Interest Rate Swap
5.5
5.3
Level 2
Assets Held in Rabbi Trust
14.6
12.7
Level 1
Derivative Currency Contracts
—
0.2
Level 2
Derivative Commodity Contracts
—
0.1
Level 2
Liabilities:
Other Accrued Expenses:
Derivative Currency Contracts
13.6
6.9
Level 2
Derivative Commodity Contracts
4.4
0.6
Level 2
Level 1 fair value measurements for assets held in a Rabbi Trust are unadjusted quoted prices.
Level 2 fair value measurements for derivative assets and liabilities are measured using quoted prices in active markets for similar assets and liabilities. Interest rate swaps are valued based on the discounted cash flows using the SOFR forward yield curve for an instrument with similar contractual terms. Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments. Commodity forwards are valued based on observable market transactions of forward commodity prices. Senior Notes are valued based on rates for instruments with comparable maturities and credit quality. See Note 6 - Debt and Bank Credit Facilities for further information.
(14) Restructuring Activities
The Company incurred restructuring and restructuring-related costs on projects during 2024, 2023 and 2022. The Company has initiated restructuring plans to achieve cost synergies from procurement, distribution efficiencies, footprint rationalization and other general cost savings measures. Restructuring costs include employee termination and plant relocation costs. Restructuring-related costs include costs directly associated with actions resulting from the Company's simplification initiatives, such as asset write-downs or accelerated depreciation due to shortened useful lives in connection with site closures, discretionary employment benefit costs and other facility rationalization costs. Restructuring costs for employee termination expenses are generally recognized when the severance liability is determined to be probable of being paid and reasonably estimable while plant relocation costs and related costs are generally required to be expensed as incurred.
101
The following is a reconciliation of provisions and payments for the restructuring projects for 2024 and 2023:
December 31, 2024
December 31, 2023
Beginning Balance
$
29.1
$
15.1
Acquisition(1)
—
0.2
Provision(2)
41.3
42.2
Less: Payments
54.1
28.4
Ending Balance
$
16.3
$
29.1
(1) Excludes $12.4 million of severance related to the Altra Transaction, which was paid in the second quarter 2023.
(2) Excludes equipment related write-offs and restructuring related depreciation adjustments. The twelve month period ended December 31, 2023 excludes $19.3 million of accelerated depreciation.
The following is a reconciliation of expenses by type for the restructuring projects in 2024, 2023 and 2022:
2024
2023
2022
Restructuring Costs:
Cost of Sales
Operating Expenses
Total
Cost of Sales
Operating Expenses
Total
Cost of Sales
Operating Expenses
Total
Severance Expense
$
11.2
$
14.7
$
25.9
$
12.1
$
15.2
$
27.3
$
25.1
$
6.4
$
31.5
Facility Related Costs
7.8
1.5
9.3
25.5
0.3
25.8
13.5
1.1
14.6
Other Expenses
6.5
2.4
8.9
7.8
0.6
8.4
0.3
0.4
0.7
Total Restructuring Costs
$
25.5
$
18.6
$
44.1
$
45.4
$
16.1
$
61.5
$
38.9
$
7.9
$
46.8
The following table shows the allocation of Restructuring Expenses by segment for 2024, 2023 and 2022:
Total
Industrial Powertrain Solutions
Power Efficiency Solutions
Automation & Motion Control
Industrial Systems
Restructuring Expenses - 2024
$
44.1
$
21.7
$
11.3
$
10.1
$
1.0
Restructuring Expenses - 2023
$
61.5
$
27.0
$
30.4
$
3.2
$
0.9
Restructuring Expenses - 2022
$
46.8
$
11.8
$
19.4
$
14.1
$
1.5
The Company expects to record aggregate future charges of approximately $29.8 million in 2025. The Company continues to evaluate operating efficiencies and anticipates incurring additional costs in future periods in connection with these activities.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A - CONTROLS AND PROCEDURES
In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(d) and 15(e) under the Exchange Act) as of the end of the year ended December 31, 2024. Based upon their evaluation of these disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, 2024 to ensure that (a) information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and (b) information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
102
The report of management required under this Item 9A is contained in Item 8 of Part II of this Annual Report on Form 10-K under the heading “Management's Annual Report on Internal Control over Financial Reporting.”
Report of Independent Registered Public Accounting Firm
The attestation report required under this Item 9A is contained in Item 8 of Part II of this Annual Report on Form 10-K under the heading “Report of Independent Registered Public Accounting Firm.”
Changes in Internal Controls
There were no changes in the Company's internal control over financial reporting that occurred during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B - OTHER INFORMATION
During our last fiscal quarter, no director or officer of the Company, as defined in Rule 16a-1(f), adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” each as defined in Item 408 of Regulation S-K.
ITEM 9C - DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
103
PART III
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information in the sections titled “Proposal 1: Election of Directors,” “Board of Directors,” "Other Matters-Delinquent Section 16(a) Reports" and “Stock Ownership” in the 2025 Proxy Statement is incorporated by reference herein. Information with respect to our executive officers appears in Part I of this Annual Report on Form 10-K.
We have adopted a Code of Business Conduct and Ethics (our “Code”) that applies to all our directors, officers and associates. Our Code is available on our website, along with our current Corporate Governance Guidelines, at www.regalrexnord.com. Our Code and our Corporate Governance Guidelines are also available in print to any shareholder who requests a copy in writing from the Secretary of Regal Rexnord Corporation. We intend to disclose through our website any amendments to, or waivers from, the provisions of these codes.
The Company has insider trading policies and procedures that govern transactions in its securities by directors, officers, and employees. We believe these policies and procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations and applicable listing standards. A copy of our insider trading policy is filed with this Annual Report on Form 10-K as Exhibit 19.
ITEM 11 - EXECUTIVE COMPENSATION
The information in the sections titled “Compensation Discussion and Analysis,” “Executive Compensation,” “Report of the Compensation and Human Resources Committee,” “Director Compensation,” and "Compensation Committee Interlocks and Insider Participation" in the 2025 Proxy Statement is incorporated by reference herein.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information in the sections titled “Stock Ownership” in the 2025 Proxy Statement is incorporated by reference herein.
Equity Compensation Plan Information
The following table provides information about our equity compensation plans as of December 31, 2024.
Number of Securities to be Issued upon the Exercise of Outstanding Options, Warrants and Rights (1)
Weighted-average Exercise Price of Outstanding Options, Warrants and Rights
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in the column 1)
Equity Compensation Plans Approved by Security Holders
628,494
$
116.90
5,020,002
Equity Compensation Plans Not Approved by Security Holders
—
—
—
Total
628,494
5,020,002
(1) Represents options to purchase our Common Stock and stock-settled appreciation rights granted under our 2013 Equity Incentive Plan, 2018 Equity Incentive Plan and 2023 Equity Incentive Plan.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information inthe section titled “Board of Directors” in the 2025 Proxy Statement is incorporated by reference herein.
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information in the section titled “Proposal 4: Ratification of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for the Year Ending December 31, 2025” in the 2025 Proxy Statement is incorporated by reference herein.
104
PART IV
ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
(i) Financial Statements (Item 8):
Report of Deloitte & Touche LLP Independent Registered Public Accounting Firm (PCAOB ID: 34)
Consolidated Statements of Income (Loss) for the years ended December 31, 2024, December 31, 2023 and December 31, 2022
Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, December 31, 2023 and December 31, 2022
Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023
Consolidated Statements of Equity for the years ended December 31, 2024, December 31, 2023 and December 31, 2022
Consolidated Statements of Cash Flows for the years ended December 31, 2024, December 31, 2023 and December 31, 2022
Notes to the Consolidated Financial Statements
(ii) Financial Statement Schedule:
Schedule II -Valuation and Qualifying Accounts for the years ended December 31, 2024, December 31, 2023 and December 31, 2022
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).
________________________
* A management contract or compensatory plan or arrangement.
** Furnished herewith.
+ Schedules (or similar attachments) to this Exhibit have been omitted in accordance with Items 601(a)(5) and/or 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of all omitted schedules to the Securities Exchange
108
Commission on a confidential basis upon request.
(b) Exhibits- see (a)3., above.
(c) See (a)2., above.
109
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 21st day of February 2025.
REGAL REXNORD CORPORATION
By:
/s/ ROBERT J. REHARD
Robert J. Rehard
Executive Vice President Chief Financial Officer (Principal Financial Officer)
By:
/s/ ALEXANDER P. SCARPELLI
Alexander P. Scarpelli
Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)
110
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
/s/ LOUIS V. PINKHAM
Director and Chief Executive Officer
February 21, 2025
Louis V. Pinkham
(Principal Executive Officer)
/s/ JAN A. BERTSCH
Director
February 21, 2025
Jan A. Bertsch
/s/ STEPHEN M. BURT
Director
February 21, 2025
Stephen M. Burt
/s/ THEODORE D. CRANDALL
Director
February 21, 2025
Theodore D. Crandall
/s/ MICHAEL P. DOSS
Director
February 21, 2025
Michael P. Doss
/s/ MICHAEL F. HILTON
Director
February 21, 2025
Michael F. Hilton
/s/ RAKESH SACHDEV
Director, Chairman
February 21, 2025
Rakesh Sachdev
/s/ CURTIS W. STOELTING
Director
February 21, 2025
Curtis W. Stoelting
/s/ ROBIN A. WALKER-LEE
Director
February 21, 2025
Robin A. Walker-Lee
111
SCHEDULE II
REGAL REXNORD CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Balance Beginning of Year
Charged to Expenses
Deductions (a)
Adjustments (b)
Balance End of Year
(Dollars in Millions)
Allowance for Credit Losses:
2024
$
30.3
$
3.4
$
(3.8)
$
—
$
29.9
2023
30.9
(0.4)
(4.1)
3.9
30.3
2022
18.7
2.9
(1.7)
11.0
30.9
(a) Deductions consist of write offs charged against the allowance for doubtful accounts.
(b) Adjustments for 2023 and 2022 consist of purchase accounting adjustment and translation. See Note 2 - Accounting Policies for additional information. 2023 adjustments also include $5.8 million reclassified to Assets Held for Sale for the industrial motors and generators businesses within the Industrial Systems segment. See Note 3 - Acquisitions and Divestitures for more information.
