Regal Beloit(RRX) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1 — Condensed Consolidated Financial Statements (Unaudited) The unaudited statements present core financials and 16 detailed notes for Q2 and H1 2025 and 2024 Condensed Consolidated Statements of Income Q2 2025 net sales decreased to $1,496.1 million, while net income increased to $79.2 million, driving higher diluted EPS Q2 & H1 2025 vs 2024 Income Statement Highlights (in Millions, Except Per Share Data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,496.1 | $1,547.6 | $2,914.2 | $3,095.3 | | Gross Profit | $564.7 | $571.0 | $1,092.3 | $1,124.1 | | Income from Operations | $182.3 | $193.9 | $342.0 | $327.8 | | Net Income Attributable to Regal Rexnord | $79.2 | $62.5 | $136.5 | $82.3 | | Diluted EPS | $1.19 | $0.94 | $2.05 | $1.23 | Condensed Consolidated Statements of Comprehensive Income (Loss) Q2 2025 comprehensive income surged to $290.8 million, driven by a significant positive foreign currency translation adjustment - A substantial positive foreign currency translation adjustment of $209.6 million in Q2 2025 was the main driver for the increase in comprehensive income[15] Condensed Consolidated Balance Sheets Total assets slightly decreased to $13.90 billion, while debt reduction drove total equity up to $6.71 billion Balance Sheet Comparison (in Millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $13,902.7 | $14,033.7 | | Long-Term Debt | $4,849.6 | $5,452.7 | | Total Liabilities | $7,194.8 | $7,766.5 | | Total Equity | $6,707.9 | $6,267.2 | Condensed Consolidated Statements of Equity Total equity grew to $6.71 billion in H1 2025, driven by net income and other comprehensive income - The increase in total equity from $6,267.2 million at the end of 2024 to $6,707.9 million at June 30, 2025 was mainly due to net income and positive other comprehensive income, partially offset by dividends[22] Condensed Consolidated Statements of Cash Flows H1 2025 operating cash flow increased significantly to $625.5 million, supporting debt repayments Cash Flow Summary for Six Months Ended June 30 (in Millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating Activities | $625.5 | $241.4 | | Investing Activities | $(29.2) | $325.2 | | Financing Activities | $(686.2) | $(672.5) | | Net Decrease in Cash | $(73.4) | $(124.9) | Notes to Condensed Consolidated Financial Statements Detailed disclosures cover accounting policies, segment data, divestitures, and a new securitization facility - On April 30, 2024, the company completed the sale of its industrial motors and generators businesses for a purchase price of $444.0 million, recognizing a gain of $17.2 million in Q2 2024[40] - On June 30, 2025, the company entered into a new $400 million accounts receivable securitization facility and received initial proceeds of $368.5 million[63][65] - The company prepaid $420.0 million of principal on its Term Facility on June 30, 2025, using proceeds from the new securitization facility[72] Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes a 3.3% Q2 sales decline, segment performance, cash flow, and updated 2025 EPS guidance Results of Operations Q2 2025 net sales fell 3.3% due to divestitures and organic declines in the IPS and AMC segments Q2 2025 vs Q2 2024 Net Sales by Segment (in Millions) | Segment | Q2 2025 Sales | Q2 2024 Sales | % Change | | :--- | :--- | :--- | :--- | | Automation & Motion Control | $411.1 | $422.2 | (2.6)% | | Industrial Powertrain Solutions | $649.8 | $675.5 | (3.8)% | | Power Efficiency Solutions | $435.2 | $410.9 | 5.9% | | Consolidated | $1,496.1 | $1,547.6 | (3.3)% | - The decrease in consolidated net sales was driven by a negative impact from divestitures (2.7%) and an organic sales decline (1.2%), partially offset by positive foreign currency translation (0.6%)[133] 2025 Outlook The company updated its full-year 2025 GAAP diluted EPS guidance to a range of $4.50 to $5.10 - Updated 2025 GAAP diluted EPS guidance is now $4.50 to $5.10[130] Liquidity and Capital Resources Strong H1 2025 operating cash flow of $625.5 million supported significant debt repayments - Operating cash flow for H1 2025 was $625.5 million, a $384.1 million increase from H1 2024, primarily driven by cash from the new Securitization Facility[148] - The company made net debt repayments of $633.9 million during the first six months of 2025[152] - Anticipated capital spending for property, plant and equipment in 2025 is approximately $120 million[151] Item 3 — Quantitative and Qualitative Disclosures about Market Risk The company uses derivative instruments to hedge interest rate, foreign currency, and commodity price risks - The company manages market risk from interest rates, foreign currency, and commodity prices using derivative instruments for non-speculative hedging[165] - As of June 30, 2025, the company had $73.0 million of variable rate debt; a hypothetical 10% change in the borrowing rate would change after-tax annualized earnings by $0.3 million[167][168] - The company holds foreign currency forward contracts with notional values including $776.0 million for the Euro and $296.8 million for the Mexican Peso to hedge currency risk[172] Item 4 — Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the period[178] - No material changes were made to the company's internal control over financial reporting during the quarter[179] PART II — OTHER INFORMATION Item 1 — Legal Proceedings There were no material changes in legal proceedings since the 2024 Annual Report on Form 10-K - There have been no material changes in legal proceedings since the company's 2024 Annual Report on Form 10-K[181] Item 1A — Risk Factors Key risks include adverse changes in US trade policy, tariffs, and geopolitical instability in manufacturing regions - Changes to US trade policy, tariffs, and import/export regulations, especially concerning China, Canada, and Mexico, pose a significant risk to the company's business and operating results[183] - The company's significant manufacturing presence outside the US (96 principal facilities) exposes it to risks from political, societal, or economic instability and geopolitical conflicts[187][189] Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares in Q2 2025, with $145.0 million remaining under its buyback program - No shares of common stock were repurchased during the quarter ended June 30, 2025[191] - The maximum value of shares remaining available for purchase under the company's share repurchase program is $145.0 million as of June 30, 2025[191] Item 5 — Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the quarter[192] Item 6 — Exhibits This section lists all exhibits filed with the Form 10-Q, including required CEO and CFO certifications - The filing includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act[194]