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

 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended April 3, 2021 or 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-07283

REGAL BELOIT CORPORATION
(Exact name of registrant as specified in its charter)
 
Wisconsin39-0875718
(State of other jurisdiction of
incorporation)
(IRS Employer
Identification No.)
200 State Street, Beloit, Wisconsin 53511
(Address of principal executive office)
(608) 364-8800
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading SymbolName of each exchange on which registered
Common StockRBCNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
Accelerated Filer
Non-accelerated filer
Smaller Reporting Company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No  
On April 30, 2021 the registrant had outstanding 40,629,915 shares of common stock, $0.01 par value per share.




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

2


CAUTIONARY STATEMENT

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. This report contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company’s current estimates, expectations and projections about the Company’s future results, performance, prospects and opportunities. Such forward-looking statements may include, among other things, statements about the Company’s future operations, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competition and other expectations and estimates for future periods. Forward-looking statements may also include statements relating to the proposed acquisition of Rexnord Corporation's (“Rexnord”) Process & Motion Control business (the “PMC Business”) (the “Rexnord Transaction”), the benefits and synergies of the Rexnord Transaction, future opportunities for the Company, the PMC Business and the combined company, and any other statements regarding the Rexnord Transaction or the combined company. Forward-looking statements include statements that are not historical facts and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “plan,” “may,” “should,” “will,” “would,” “project,” “forecast,” and similar expressions. These forward-looking statements are based upon information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause the performance, prospects, or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Important factors that could cause actual results to differ materially from the results referred to in the forward-looking statements the Company makes in this report include:

Operations and Strategy
the continued financial and operational impacts of and uncertainties relating to the COVID-19 pandemic on customers and suppliers and the geographies in which they operate;
uncertainties regarding the ability to execute restructuring plans within expected costs and timing;
our ability to develop new products based on technological innovation, such as the Internet of Things ("IoT"), and marketplace acceptance of new and existing products, including products related to technology not yet adopted or utilized in certain geographic locations in which we do business;
fluctuations in commodity prices and raw material costs;
our dependence on significant customers;
effects on earnings of any significant impairment of goodwill or intangible assets;
prolonged declines or disruption in one or more markets we serve, such as heating, ventilation, air conditioning ("HVAC"), refrigeration, power generation, oil and gas, unit material handling or water heating;
product liability and other litigation, or claims by end users, government agencies or others that our products or our customers’ applications failed to perform as anticipated, particularly in high volume applications or where such failures are alleged to be the cause of property or casualty claims;
our overall debt levels and our ability to repay principal and interest on our outstanding debt, including debt assumed or incurred in connection with the Rexnord Transaction;
our dependence on key suppliers and the potential effects of supply disruptions;
seasonal impact on sales of our products into HVAC systems and other residential applications;
Global Footprint
actions taken by our competitors and our ability to effectively compete in the increasingly competitive global electric motor and controls, power generation and power transmission industries;
risks associated with global manufacturing, including risks associated with public health crises;
economic changes in global markets where we do business, such as reduced demand for the products we sell, currency exchange rates, inflation rates, interest rates, recession, government policies, including policy changes affecting taxation, trade, tariffs, immigration, customs, border actions and the like, and other external factors that we cannot control;
3


Legal and Regulatory Environment
unanticipated costs or expenses we may incur related to litigation, including product warranty issues;
infringement of our intellectual property by third parties, challenges to our intellectual property and claims of infringement by us of third party technologies;
losses from failures, breaches, attacks or disclosures involving our information technology infrastructure and data;
Mergers, Acquisitions and Divestitures
the possibility that the conditions will not be satisfied or the approvals will not be obtained required to complete the Rexnord Transaction, including shareholder or regulatory approvals, and the possibility that the IRS ruling sought in connection with the Rexnord Transaction will not be received on the terms requested, or at all;
changes in the extent and characteristics of the common shareholders of Rexnord and the Company and its effect pursuant to the merger agreement for the Rexnord Transaction on the number of shares of Company common stock issuable pursuant to the transaction, magnitude of the dividend payable to Company shareholders pursuant to the transaction and the extent of indebtedness to be incurred by the Company in connection with the transaction;
failure to successfully integrate the PMC Business and any other future acquisitions into our business or achieve expected synergies and operating efficiencies, due to factors such as the future financial and operating performance of the acquired business, loss of key executives and employees, and operating costs, customer loss and business disruption being greater than expected;
costs and indemnification obligations related to the Rexnord Transaction;
unanticipated liabilities of acquired businesses, including the PMC Business;
operating restrictions related to the Rexnord Transaction;
unanticipated adverse effects or liabilities from business exits or divestitures;
General
changes in the method of determining London Interbank Offered Rate ("LIBOR"), or the replacement of LIBOR with an alternative reference rate;
cyclical downturns affecting the global market for capital goods;
and other risks and uncertainties including, but not limited, to those described in "Part I - Item 1A - Risk Factors" in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on March 2, 2021 and from time to time in other filed reports.
Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this report are made only as of the date of this report, and the Company undertakes no obligation to update any forward-looking information contained in this report or with respect to the announcements described herein to reflect subsequent events or circumstances. Additional information regarding these and other risks and uncertainties is included in "Part I - Item 1A - Risk Factors" in our Annual Report on Form 10-K filed with the SEC on March 2, 2021 and from time to time in other filed reports.

4


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

REGAL BELOIT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in Millions, Except Per Share Data)
 
 Three Months Ended
 April 3, 2021March 28, 2020
Net Sales$814.1 $734.2 
Cost of Sales568.7 530.9 
Gross Profit245.4 203.3 
Operating Expenses148.3 131.9 
Gain on Divestiture of Businesses (0.1)
Asset Impairments 1.5 
       Total Operating Expenses148.3 133.3 
Income from Operations97.1 70.0 
Other Income, Net(1.2)(1.1)
Interest Expense12.6 11.6 
Interest Income(1.5)(1.1)
Income before Taxes87.2 60.6 
Provision for Income Taxes20.2 13.9 
Net Income67.0 46.7 
Less: Net Income Attributable to Noncontrolling Interests1.4 0.9 
Net Income Attributable to Regal Beloit Corporation$65.6 $45.8 
Earnings Per Share Attributable to Regal Beloit Corporation:
Basic$1.62 $1.13 
Assuming Dilution$1.60 $1.12 
Weighted Average Number of Shares Outstanding:
Basic40.6 40.6 
Assuming Dilution41.0 40.8 

See Accompanying Notes to Condensed Consolidated Financial Statements

5


REGAL BELOIT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in Millions)
 
 Three Months Ended
 April 3, 2021March 28, 2020
Net Income$67.0 $46.7 
Other Comprehensive Income (Loss) Net of Tax:
Foreign Currency Translation Adjustments(21.7)(57.5)
Hedging Activities:
Increase (Decrease) in Fair Value of Hedging Activities, Net of Tax Effects of $4.6 Million and $(9.4) Million for the Three Months Ended April 3, 2021 and March 28, 2020, Respectively
14.6 (29.6)
Reclassification of Gains included in Net Income, Net of Tax Effects of $(2.8) Million and $(0.6) Million for the Three Months Ended April 3, 2021 and March 28, 2020, Respectively
(8.7)(2.0)
Pension and Post Retirement Plans:
Reclassification Adjustments for Pension and Post Retirement Benefits included in Net Income, Net of Tax Effects of $0.1 Million and zero for the Three Months Ended April 3, 2021 and March 28, 2020, Respectively
0.3 0.1 
Other Comprehensive Loss(15.5)(89.0)
Comprehensive Income (Loss)51.5 (42.3)
Less: Comprehensive Income Attributable to Noncontrolling Interests1.1 0.2 
Comprehensive Income (Loss) Attributable to Regal Beloit Corporation$50.4 $(42.5)
        See Accompanying Notes to Condensed Consolidated Financial Statements

6


REGAL BELOIT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Millions, Except Per Share Data)
 
April 3, 2021January 2, 2021
ASSETS
Current Assets:
Cash and Cash Equivalents$566.4 $611.3 
Trade Receivables, Less Allowances of $18.8 Million and $18.3 Million in 2021 and 2020, Respectively
483.9 432.0 
Inventories722.2 690.3 
Prepaid Expenses and Other Current Assets145.9 108.6 
Assets Held for Sale8.0 9.1 
Total Current Assets1,926.4 1,851.3 
Net Property, Plant and Equipment539.2 555.5 
Operating Lease Assets75.3 73.4 
Goodwill1,509.1 1,518.2 
Intangible Assets, Net of Amortization515.1 530.3 
Deferred Income Tax Benefits43.8 43.9 
Other Noncurrent Assets18.3 16.4 
Total Assets$4,627.2 $4,589.0 
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable$412.3 $360.1 
Dividends Payable12.2 12.2 
Accrued Compensation and Employee Benefits68.9 76.6 
Other Accrued Expenses124.0 120.5 
Current Operating Lease Liabilities22.8 21.6 
Current Maturities of Long-Term Debt230.8 231.0 
Total Current Liabilities871.0 822.0 
Long-Term Debt786.9 840.4 
Deferred Income Taxes173.5 172.0 
Pension and Other Post Retirement Benefits66.6 69.5 
Noncurrent Operating Lease Liabilities55.9 55.1 
Other Noncurrent Liabilities55.5 53.0 
Contingencies (see Note 13)
Equity:
Regal Beloit Corporation Shareholders' Equity:
Common Stock, $0.01 par value, 100.0 Million Shares Authorized, 40.6 Million Shares Issued and Outstanding for 2021 and 2020, Respectively
0.4 0.4 
Additional Paid-In Capital698.1 696.6 
Retained Earnings2,064.1 2,010.7 
Accumulated Other Comprehensive Loss(178.5)(163.3)
Total Regal Beloit Corporation Shareholders' Equity2,584.1 2,544.4 
Noncontrolling Interests33.7 32.6 
Total Equity2,617.8 2,577.0 
Total Liabilities and Equity$4,627.2 $4,589.0 
See Accompanying Notes to Condensed Consolidated Financial Statements.
7


REGAL BELOIT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(Dollars in Millions, Except Per Share Data)
 
Three Months Ended
Common Stock $0.01 Par ValueAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Noncontrolling InterestsTotal Equity
January 2, 2021$0.4 $696.6 $2,010.7 $(163.3)$32.6 $2,577.0 
Net Income— — 65.6 — 1.4 67.0 
Other Comprehensive Loss— — — (15.2)(0.3)(15.5)
Dividends Declared ($0.30 Per Share)
— — (12.2)— — (12.2)
Stock Options Exercised— (1.8)— — — (1.8)
Share-Based Compensation— 3.3 — — — 3.3 
April 3, 2021$0.4 $698.1 $2,064.1 $(178.5)$33.7 $2,617.8 
December 28, 2019$0.4 $701.8 $1,886.7 $(237.8)$29.3 $2,380.4 
Net Income— — 45.8 — 0.9 46.7 
Other Comprehensive Loss— — — (88.3)(0.7)(89.0)
Dividends Declared ($0.30 Per Share)
— — (12.1)— — (12.1)
Stock Options Exercised— (0.9)— — — (0.9)
Stock Repurchase— (11.1)(13.9)— — (25.0)
Share-Based Compensation— 2.7 — — — 2.7 
Adoption of ASU 2016-13— — (2.7)— — (2.7)
March 28, 2020$0.4 $692.5 $1,903.8 $(326.1)$29.5 $2,300.1 
 
See Accompanying Notes to Condensed Consolidated Financial Statements.
8


REGAL BELOIT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Millions)
 Three Months Ended
April 3, 2021March 28, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income$67.0 $46.7 
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities (Net of Acquisitions and Divestitures):
Depreciation and Amortization31.8 32.6 
Asset Impairments 1.5 
Noncash Lease Expense6.1 7.6 
Loss on Sale or Disposition of Assets, Net0.6 0.7 
Share-Based Compensation Expense3.3 2.7 
Financing Fees Amortization4.8 0.3 
Gain on Divestiture of Businesses (0.1)
Change in Operating Assets and Liabilities(64.1)10.7 
Net Cash Provided by Operating Activities49.5 102.7 
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant and Equipment(10.7)(10.9)
Proceeds Received from Sales of Property, Plant and Equipment0.9 2.7 
Business Acquisitions, Net of Cash Acquired(1.9) 
Proceeds from Divestiture of Businesses 0.3 
Net Cash Used in Investing Activities(11.7)(7.9)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings Under Revolving Credit Facility140.7 409.7 
Repayments Under Revolving Credit Facility(140.7)(182.6)
Proceeds from Short-Term Borrowings5.4 1.5 
Repayments of Short-Term Borrowings(5.6)(1.5)
Repayments of Long-Term Borrowings(50.1)(0.1)
Dividends Paid to Shareholders(12.2)(12.2)
Shares Surrendered for Taxes(1.9)(1.1)
Proceeds from the Exercise of Stock Options0.1  
Repurchase of Common Stock (25.0)
Financing fees paid(12.4) 
Net Cash (Used in) Provided by Financing Activities(76.7)188.7 
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS(6.0)(10.4)
Net (Decrease) Increase in Cash and Cash Equivalents(44.9)273.1 
Cash and Cash Equivalents at Beginning of Period611.3 331.4 
Cash and Cash Equivalents at End of Period$566.4 $604.5 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid For:
 Interest$12.6 $16.1 
 Income taxes$15.8 $7.3 

See Accompanying Notes to Condensed Consolidated Financial Statements.
9


REGAL BELOIT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 3, 2021
(Unaudited)

1. BASIS OF PRESENTATION
The accompanying (a) Condensed Consolidated Balance Sheet of Regal Beloit Corporation (the “Company”) as of January 2, 2021, which has been derived from audited Consolidated Financial Statements, and (b) unaudited interim Condensed Consolidated Financial Statements as of April 3, 2021 and for the three months ended April 3, 2021 and March 28, 2020, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.
It is suggested that these Condensed Consolidated Financial Statements be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in the Company’s 2020 Annual Report on Form 10-K filed on March 2, 2021.
In the opinion of management, all adjustments considered necessary for a fair presentation of financial results have been made. Except as otherwise discussed, such adjustments consist of only those of a normal recurring nature. Operating results for the three months ended April 3, 2021 are not necessarily indicative of the results that may be expected for the entire fiscal year ending January 1, 2022.
The Condensed Consolidated Financial Statements have been prepared in accordance with GAAP, which requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Condensed Consolidated Financial Statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. The Company uses estimates in accounting for, among other items, allowance for doubtful accounts; excess and obsolete inventory; share-based compensation; acquisitions; product warranty obligations; pension and post retirement assets and liabilities; derivative fair values; goodwill and other asset impairments; health care reserves; retirement benefits; rebates and incentives; litigation claims and contingencies, including environmental matters; and income taxes. The Company accounts for changes to estimates and assumptions when warranted by factually based experience.
The Company operates on a 52/53 week fiscal year ending on the Saturday closest to December 31.
Adopted Accounting Standards
In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, and clarifies and amends existing guidance to improve consistent application. This ASU becomes effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted the standard as of January 3, 2021, the beginning of fiscal 2021, with no material impact on the Company's Condensed Consolidated Financial Statements.

2. OTHER FINANCIAL INFORMATION
Inventories
The following table presents approximate percentage distribution between major classes of inventories:
April 3, 2021January 2, 2021
Raw Material and Work in Process50.3%48.7%
Finished Goods and Purchased Parts49.7%51.3%

Inventories are stated at cost, which is not in excess of market. Cost for approximately 49.1% of the Company's inventory at April 3, 2021, and 50.0% at January 2, 2021 was determined using the last-in, first-out ("LIFO") method.
10


Property, Plant, and Equipment
The following table presents property, plant, and equipment by major classification (dollars in millions):
Useful Life in YearsApril 3, 2021January 2, 2021
Land and Improvements$74.9 $76.1 
Buildings and Improvements
3 - 50
286.6 290.7 
Machinery and Equipment
3 - 15
976.1 978.2 
Property, Plant and Equipment1,337.6 1,345.0 
Less: Accumulated Depreciation(798.4)(789.5)
Net Property, Plant and Equipment$539.2 $555.5 

For the three months ended April 3, 2021, the Company recognized no asset impairment related to the transfer of assets to held for sale. For the three months ended March 28, 2020, the Company recognized $1.5 million of asset impairments related to the transfer of assets to held for sale.

Revenue Recognition

The Company recognizes revenue from the sale of electric motors, electrical motion controls, power generation and power transmission products. The Company recognizes revenue when control of the product passes to the customer or the service is provided and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services.
Nature of Goods and Services
The Company sells products with multiple applications as well as customized products that have a single application such as those manufactured for its OEM customers. The Company reports in four operating segments: Commercial Systems, Industrial Systems, Climate Solutions and Power Transmission Solutions. See Note 6 for a description of the different segments.
Nature of Performance Obligations
The Company’s contracts with customers typically consist of purchase orders, invoices and master supply agreements. At contract inception, across all four segments, the Company assesses the goods and services promised in its sales arrangements with customers and identifies a performance obligation for each promise to transfer to the customer a good or service that is distinct. The Company’s primary performance obligations consist of product sales and customized system/solutions.
Product:
The nature of products varies from segment to segment but across all segments, individual products are not integrated and represent separate performance obligations.
Customized system/solutions:
The Company provides customized system/solutions which consist of multiple products engineered and designed to specific customer specification, combined or integrated into one combined solution for a specific customer application. The goods are transferred to the customer and revenue is typically recognized over time as the performance obligations are satisfied.
When Performance Obligations are Satisfied
For performance obligations related to substantially all of the Company's product sales, the Company determines that the customer obtains control upon shipment and recognizes revenue accordingly. Once a product has shipped, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from the asset. The Company considers control to have transferred upon shipment because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.
11


For a limited number of contracts, the Company transfers control and recognizes revenue over time. The Company satisfies its performance obligations over time and the Company uses a cost-based input method to measure progress. In applying the cost-based method of revenue recognition, the Company uses actual costs incurred to date relative to the total estimated costs for the contract in conjunction with the customer's commitment to perform in determining the amount of revenue and cost to recognize. The Company has determined that the cost-based input method provides a faithful depiction of the transfer of goods to the customer.
Payment Terms
The arrangement with the customer states the final terms of the sale, including the description, quantity, and price of each product or service purchased. Payment terms vary by customer but typically range from due upon delivery to 120 days after delivery. For contracts recognized at a point in time, revenue and billing typically occur simultaneously. The Company generally has payment terms with its customers of one year or less and has elected the practical expedient applicable to such contracts not to consider the time value of money. For contracts recognized using the cost-based input method, revenue recognized in excess of customer billings and billings in excess of revenue recognized are reviewed to determine the net asset or net liability position and classified as such on the Condensed Consolidated Balance Sheet.
Returns, Refunds, and Warranties
The Company’s contracts do not explicitly offer a “general” right of return to its customers (e.g. customers ordered excess products and return unused items). Warranties are classified as either assurance type or service type warranties. A warranty is considered an assurance type warranty if it provides the customer with assurance that the product will function as intended. A warranty that goes above and beyond ensuring basic functionality is considered a service type warranty. The Company generally only offers limited warranties which are considered to be assurance type warranties and are not accounted for as separate performance obligations. Customers generally receive repair or replacement on products that do not function to specification. Estimated product warranties are provided for specific product groups and the Company accrues for estimated future warranty cost in the period in which the sale is recognized. The Company estimates the accrual requirements based on historical warranty loss experience and the cost is included in Cost of Sales.
Volume Rebates
In some cases, the nature of the Company’s contract may give rise to variable consideration including volume based sales incentives. If the customer achieves specific sales targets, they are entitled to rebates. The Company estimates the projected amount of the rebates that will be achieved and recognizes the estimated costs as a reduction to Net Sales as revenue is recognized.
Disaggregation of Revenue
The following tables presents the Company’s revenues disaggregated by geographical region (in millions):
Three Months Ended
April 3, 2021Commercial SystemsIndustrial SystemsClimate SolutionsPower Transmission SolutionsTotal
North America$154.1 $71.1 $209.7 $163.8 $598.7 
Asia46.0 43.2 9.3 6.9 105.4 
Europe24.7 11.6 9.5 23.5 69.3 
Rest-of-World12.2 10.5 10.6 7.4 40.7 
Total$237.0 $136.4 $239.1 $201.6 $814.1 
March 28, 2020Commercial SystemsIndustrial SystemsClimate SolutionsPower Transmission SolutionsTotal
North America$143.4 $72.9 $184.6 $160.9 $561.8 
Asia23.4 36.8 8.6 4.9 73.7 
Europe28.5 13.2 7.6 23.9 73.2 
Rest-of-World4.1 6.7 9.3 5.4 25.5 
Total$199.4 $129.6 $210.1 $195.1 $734.2 

12


3. HELD FOR SALE, DIVESTITURES AND ACQUISITIONS
Assets Held for Sale

The balances that were classified as Assets Held for Sale as of April 3, 2021 and January 2, 2021 were $8.0 million and $9.1 million, respectively.

Acquisition Pending

On February 15, 2021, the Company entered into definitive agreements with Rexnord Corporation (“Rexnord”), Land Newco, Inc., a wholly owned indirect subsidiary of Rexnord (“Land”), and Phoenix 2021, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), with respect to a Reverse Morris Trust transaction (the “Rexnord Transaction”) pursuant to which, and subject to the terms and conditions of those definitive agreements discussed below, (1) Rexnord will transfer (or cause to be transferred) to Land substantially all of the assets, and Land will assume substantially all of the liabilities, of Rexnord’s Process & Motion Control business (“PMC Business”) (the “Reorganization”), (2) after which, all of the issued and outstanding shares of common stock, $0.01 par value per share, of Land (“Land common stock”) held by a subsidiary of Rexnord will be distributed in a series of distributions to Rexnord’s stockholders (the distributions, and the final distribution of Land common stock from Rexnord to Rexnord’s stockholders, which is to be made pro rata for no consideration, the “Spin-Off”) and (3) immediately after the Spin-Off, Merger Sub will merge with and into Land (the “Merger”) and all shares of Land common stock (other than those held by Rexnord, Land, the Company, Merger Sub or their respective subsidiaries) will be converted into the right to receive shares of our common stock, $0.01 par value per share (“Company common stock”), as calculated and subject to adjustment as set forth in the Merger Agreement (as defined below). When the Merger is completed, Land (which at that time will hold the PMC Business) will be a wholly owned subsidiary of the Company.

The definitive agreements the Company entered into in connection with the Rexnord Transaction include an Agreement and Plan of Merger, by and among Rexnord, Land, Merger Sub and the Company (the “Merger Agreement”), a Separation and Distribution Agreement, by and among Rexnord, Land and the Company and certain ancillary agreements.

In connection with the Rexnord Transaction, the Merger Agreement provides that the Company shall, to the extent required by the Merger Agreement, in certain circumstances in which additional shares of Company common stock are issued at closing to holders of Land common stock, declare a special dividend to the Company's stockholders immediately prior to the consummation of the Merger (the “Company Special Dividend”). The existence and magnitude of the dividend will depend on whether and to what extent the Company is able to count certain overlapping shareholders of the Company and Rexnord in satisfying the tax requirements applicable to a Reverse Morris Trust transaction. In the event that the Company Special Dividend is required to be paid, it could range in amount between zero and approximately $2.0 billion.

In connection with the Rexnord Transaction, the Company has entered into certain financing arrangements, which are described in Note 7.

Closing of the Rexnord Transaction is subject to various closing conditions, including the receipt of the approval of the Company's and Rexnord's shareholders, the receipt of regulatory approvals and other customary closing conditions.

The Rexnord Transaction is described more fully in the Company's Current Report on Form 8-K filed with the SEC on February 19, 2021, and this description is qualified in its entirety by the description set forth in that report.

13


4. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments, hedging activities and pension and post retirement benefit adjustments are included in Accumulated Other Comprehensive Income (Loss) ("AOCI") a component of Total Equity.
The following tables present changes in AOCI by component for the three months ended April 3, 2021 and March 28, 2020 (in millions):
Three Months Ended
April 3, 2021Hedging ActivitiesPension and Post Retirement Benefit AdjustmentsForeign Currency Translation AdjustmentsTotal
Beginning Balance$23.5 $(31.1)$(155.7)$(163.3)
Other Comprehensive Income (Loss) before Reclassifications19.2  (21.4)(2.2)
Tax Impact(4.6)  (4.6)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)(11.5)0.4  (11.1)
Tax Impact2.8 (0.1) 2.7 
Net Current Period Other Comprehensive Income (Loss)5.9 0.3 (21.4)(15.2)
Ending Balance$29.4 $(30.8)$(177.1)$(178.5)
March 28, 2020Hedging ActivitiesPension and Post Retirement Benefit AdjustmentsForeign Currency Translation AdjustmentsTotal
Beginning Balance$8.0 $(31.0)$(214.8)$(237.8)
Other Comprehensive Income (Loss) before Reclassifications(39.0)0.4 (57.2)(95.8)
Tax Impact9.4   9.4 
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)(2.6)0.1  (2.5)
Tax Impact0.6   0.6 
Net Current Period Other Comprehensive Income (Loss)(31.6)0.5 (57.2)(88.3)
Ending Balance$(23.6)$(30.5)$(272.0)$(326.1)
The Condensed Consolidated Statements of Income line items affected by the hedging activities reclassified from AOCI in the tables above are disclosed in Note 14.

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


5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

As required, the Company performs an annual impairment test of goodwill as of the end of the October fiscal month or more frequently if events or circumstances change that would more likely than not reduce the fair value of its reporting units below their carrying value.

14


The following table presents changes to goodwill during the three months ended April 3, 2021 (in millions):
TotalCommercial SystemsIndustrial SystemsClimate SolutionsPower Transmission Solutions
Balance as of January 2, 2021$1,518.2 $433.3 $163.7 $330.8 $590.4 
Translation Adjustments(9.1)(3.1)(1.0)(0.2)(4.8)
Balance as of April 3, 2021$1,509.1 $430.2 $162.7 $330.6 $585.6 
Cumulative Goodwill Impairment Charges$295.7 $183.2 $72.1 $17.2 $23.2 
Intangible Assets
The following table presents intangible assets (in millions):
 April 3, 2021January 2, 2021
 Weighted Average Amortization Period (Years)Gross ValueAccumulated AmortizationGross ValueAccumulated Amortization
Amortizable Intangible Assets:
  Customer Relationships17$702.8 $356.1 $708.6 $349.4 
  Technology14145.7 108.7 146.3 108.0 
  Trademarks1437.0 27.8 37.7 27.7 
885.5 492.6 892.6 485.1 
Non-Amortizable Trade Name122.2 — 122.8 — 
$1,007.7 $492.6 $1,015.4 $485.1 
Intangible Assets, Net of Amortization$515.1 $530.3 

Amortization expense recorded for the three months ended April 3, 2021 was $11.2 million. Amortization expense recorded for the three months ended March 28, 2020 was $12.2 million. Amortization expense for fiscal year 2021 is estimated to be $43.3 million. There was no impairment of intangible assets during the three months ended April 3, 2021 and March 28, 2020, respectively.
The following table presents future estimated annual amortization for intangible assets (in millions):
 YearEstimated Amortization
2022$41.5 
202341.4 
202440.8 
202538.7 
202635.2 


6. SEGMENT INFORMATION

The Company is comprised of four operating segments: Commercial Systems, Industrial Systems, Climate Solutions and Power Transmission Solutions.

15


Commercial Systems segment produces fractional to approximately 5 horsepower AC and DC motors, electronic variable speed controls, fans, and blowers for commercial applications. These products serve markets including commercial building ventilation and HVAC, pool and spa, irrigation, dewatering, agriculture, and general commercial equipment.

Industrial Systems segment produces integral motors, generators, alternators and switchgear for industrial applications, along with aftermarket parts and kits to support such products. These products serve markets including agriculture, marine, mining, oil and gas, food and beverage, data centers, healthcare, prime and standby power, and general industrial equipment.

Climate Solutions segment produces small motors, electronic variable speed controls and air moving solutions serving markets including residential and light commercial HVAC, water heaters and commercial refrigeration.

Power Transmission Solutions segment produces, sells and services belt and chain drives, helical and worm gearing, mounted and unmounted bearings, couplings, modular plastic belts, conveying chains and components, hydraulic pump drives, large open gearing and specialty mechanical products serving markets including e-commerce, alternative energy, beverage, bulk handling, metals, special machinery, energy, aerospace and general industrial.

The Company evaluates performance based on the segment's income from operations. Corporate costs have been allocated to each segment based on the net sales of each segment. The reported external net sales of each segment are from external customers.
The following sets forth certain financial information attributable to the Company's operating segments for the three months ended April 3, 2021 and March 28, 2020 (in millions):
Three Months Ended
April 3, 2021Commercial SystemsIndustrial SystemsClimate SolutionsPower Transmission SolutionsEliminationsTotal
External Sales$237.0 $136.4 $239.1 $201.6 $— $814.1 
Intersegment Sales17.5 3.7 4.3 0.7 (26.2)— 
 Total Sales254.5 140.1 243.4 202.3 (26.2)814.1 
Gross Profit65.5 26.8 74.0 79.1 — 245.4 
Operating Expenses38.0 23.1 30.7 56.5 — 148.3 
Income from Operations27.5 3.7 43.3 22.6 — 97.1 
Depreciation and Amortization7.8 5.9 4.5 13.6 — 31.8 
Capital Expenditures3.3 2.4 3.2 1.8 — 10.7 
March 28, 2020
External Sales$199.4 $129.6 $210.1 $195.1 $— $734.2 
Intersegment Sales11.8 6.7 4.5 0.7 (23.7)— 
 Total Sales211.2 136.3 214.6 195.8 (23.7)734.2 
Gross Profit50.3 23.0 59.4 70.6 — 203.3 
Operating Expenses37.5 22.9 29.4 42.1 — 131.9 
Gain on Divestitures(0.1)   — (0.1)
Asset Impairments0.8 0.2 0.5  — 1.5 
Total Operating Expenses38.2 23.1 29.9 42.1 — 133.3 
Income (Loss) from Operations12.1 (0.1)29.5 28.5 — 70.0 
Depreciation and Amortization8.3 5.9 4.7 13.7 — 32.6 
Capital Expenditures3.1 2.0 3.6 2.2 — 10.9 

16


The following table presents identifiable assets information attributable to the Company's operating segments as of April 3, 2021 and January 2, 2021 (in millions):
Commercial SystemsIndustrial SystemsClimate SolutionsPower Transmission SolutionsTotal
Identifiable Assets as of April 3, 2021$1,324.2 $847.4 $