8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 8-K/A

_______________________

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):    October 4, 2021

_______________________

Regal Rexnord Corporation

(Exact name of registrant as specified in its charter)

Wisconsin	1-7283	39-0875718
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

200 State Street, Beloit, Wisconsin 53511-6254

(Address of Principal Executive Offices, Including Zip Code)

Registrant's Telephone Number: (608) 364-8800

_______________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

_______________________

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock	RRX	New York Stock Exchange

Introductory Note

On October 7, 2021, Regal Rexnord Corporation (the “Company”) filed a Current Report on Form 8-K (the “Closing Form 8-K”) regarding, among other events, the consummation of the previously announced combination of the Company with the Process & Motion Control (“PMC”) Business of Zurn Water Solutions Corporation (formerly Rexnord Corporation) (“Zurn”) pursuant to the Agreement and Plan of Merger, dated as of February 15, 2021, by and among Zurn, Land Newco, Inc., Phoenix 2021, Inc. and the Company and the other agreements entered into in connection therewith (the “Transaction”). This Current Report on Form 8-K/A is being filed solely for the purpose of amending Items 9.01(a) and 9.01(b) of the Closing Form 8-K and should be read in conjunction with the Closing Form 8-K. The pro forma financial information included as Exhibit 99.2 to this Current Report on Form 8-K/A has been presented for illustrative purposes only as required by Form 8-K, and is not intended to, and does not purport to, represent what the Company’s actual results or financial condition would have been if the Transaction had occurred on the relevant date, and is not intended to project the future results or the financial condition that the Company may achieve following the Transaction.

Item 9.01.    Financial Statements and Exhibits.

(a)    Financial Statements of the PMC Business.

The audited Combined Balance Sheets of the PMC Business as of December 31, 2020 and March 31, 2020, the related Combined Statements of Operations, Comprehensive Income and Cash Flows for each of the nine months ended December 31, 2020 and the fiscal years ended March 31, 2020 and 2019 and the Combined Statements of Changes in Parent Equity at March 31, 2020, 2019 and 2018 and December 31, 2020, and the notes related thereto, were included in the Company’s Registration Statement on Form S-4, as amendedhttps://www.sec.gov/Archives/edgar/data/0000082811/000110465921093110/tm2114810-10_s4a.htm(Registration No. 333-255982), which was declared effective by the SEC on July 20, 2021, and are incorporated herein by reference.

The unaudited interim Condensed Combined Balance Sheets of the PMC Business as of June 30, 2021, and the related Condensed Combined Statements of Operations, Comprehensive Income and Cash Flows for each of the six months ended June 30, 2021 and June 30, 2020, and related Condensed Combined Statement of Changes in Parent Equity at June 30, 2021, and the notes related thereto, are filed as Exhibit 99.1 to this Form 8-K/A and are incorporated herein by reference.

(b)    Pro Forma Financial Information.

The unaudited Pro Forma condensed combined financial information of the Company and the PMC Business for and as of the six months ended July 3, 2021 and for the fiscal year ended January 2, 2021, and the notes related thereto, are filed as Exhibit 99.2 to this Form 8-K/A and are incorporated herein by reference.

(c)    Not Applicable

(d)    Exhibits. The following exhibits are being filed herewith:

Exhibit Index to Report on Form 8-K/A

Exhibit Number	Exhibit Description
99.1	The unaudited interim Condensed Combined Balance Sheets of the PMC Business as of June 30, 2021, and the related Condensed Combined Statements of Operations, Comprehensive Income and Cash Flows for each of the six months ended June 30, 2021 and June 30, 2020, and related Condensed Combined Statement of Changes in Parent Equity at June 30, 2021, and the notes related thereto.
99.2	The unaudited Pro Forma condensed combined financial information of the Company and the PMC Business for and as of the six months ended July 3, 2021 and for the fiscal year ended January 2, 2021, and the notes related thereto.
104.1	Cover Page Interactive Data File (the Cover Page Interactive Data File is embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

REGAL REXNORD CORPORATION

Date: December 17, 2021          By: /s/ Thomas E. Valentyn

Thomas E. Valentyn

Vice President, General Counsel and Secretary

Document

INDEX TO FINANCIAL STATEMENTS

Unaudited Condensed Combined Financial Statements of the PMC Business

Condensed Combined Balance Sheets as of June 30, 2021 and December 31, 2020	2
Condensed Combined Statements of Operations for the three and six months ended June 30, 2021 and June 30, 2020	3
Condensed Combined Statements of Comprehensive Income for the three and six months ended June 30, 2021 and June 30, 2020	4
Condensed Combined Statements of Changes in Parent Equity at June 30, 2021 andJune 30,2020	5
Condensed Combined Statements of Cash Flows for the six months ended June 30, 2021 and June 30, 2020	6
Notes to Condensed Combined Financial Statements	7

Process & Motion Control

Condensed Combined Balance Sheets

(in Millions)

(Unaudited)

	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	217.8	$	193.3
Receivables, net	186.1		171.2
Inventories	215.0		194.0
Other current assets	39.0		27.5
Total current assets	657.9		586.0
Property, plant and equipment, net	347.4		365.2
Intangible assets, net	317.4		324.3
Goodwill	1,125.3		1,125.3
Other assets	69.2		71.9
Total assets	$	2,517.2	$	2,472.7
Liabilities and Parent Equity
Current liabilities:
Current maturities of debt	$	2.3	$	2.1
Trade payables	120.4		88.1
Compensation and benefits	39.9		41.6
Current portion of pension obligations	1.4		1.4
Other current liabilities	65.7		64.8
Total current liabilities	229.7		198.0
Long-term debt	70.6		71.2
Pension obligations	50.1		51.9
Deferred income taxes	117.1		117.2
Other liabilities	70.3		73.1
Total liabilities	537.8		511.4
Parent equity:
Net Parent investment	1,986.0		1,967.0
Accumulated other comprehensive loss	(9.8)		(8.7)
Total Parent equity	1,976.2		1,958.3
Non-controlling interest	3.2		3.0
Total Parent equity and non-controlling interest	1,979.4		1,961.3
Total liabilities and Parent equity	$	2,517.2	$	2,472.7

See notes to condensed combined financial statements.

Process & Motion Control

Condensed Combined Statements of Operations

(in Millions)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net sales	$	324.6	$	274.4	$	645.5	$	638.0
Cost of sales	192.7		177.4		394.1		409.4
Gross profit	131.9		97.0		251.4		228.6
Selling, general and administrative expenses	70.3		62.5		141.6		132.8
Restructuring and other similar charges	0.8		0.7		0.8		6.9
Amortization of intangible assets	3.3		3.4		6.6		7.0
Income from operations	57.5		30.4		102.4		81.9
Non-operating expense:
Interest expense, net	(1.2)		(0.5)		(2.5)		(1.2)
Actuarial loss on pension and postretirement benefit obligations	—		—		—		(15.7)
Other income (expense), net	2.2		0.3		1.5		(2.8)
Income before income taxes	58.5		30.2		101.4		62.2
Provision for income taxes	(12.9)		(9.9)		(23.8)		(14.2)
Equity method investment income (loss)	0.2		—		0.3		(0.2)
Net income	45.8		20.3		77.9		47.8
Non-controlling interest income	0.1		0.2		0.2		0.3
Net income attributable to Process & Motion Control	$	45.7	$	20.1	$	77.7	$	47.5

See notes to condensed combined financial statements.

Process & Motion Control

Condensed Combined Statements of Comprehensive Income

(in Millions)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net income attributable to Process & Motion Control	$	45.7	$	20.1	$	77.7	$	47.5
Other comprehensive income (loss):
Foreign currency translation and other adjustments	3.1		5.8		(1.1)		(9.2)
Change in pension and other postretirement defined benefit plans, net of tax	—		—		—		(2.5)
Other comprehensive income (loss), net of tax	3.1		5.8		(1.1)		(11.7)
Non-controlling interest income	0.1		0.2		0.2		0.3
Total comprehensive income	$	48.9	$	26.1	$	76.8	$	36.1

See notes to condensed combined financial statements.

Process & Motion Control

Condensed Combined Statements of Changes in Parent Equity

(in Millions)

(Unaudited)

	Net Parent Investment		Accumulated Other Comprehensive Loss		Non-controlling interest (1)		Total Parent equity and non-controlling interest
Balance at December 31, 2019	$	1,978.8	$	(29.1)	$	2.6	$	1,952.3
Net income		27.4		—		0.1		27.5
Foreign currency translation and other adjustments	—		(15.0)		—		(15.0)
Change in pension and other postretirement defined benefit plans	—		(2.5)		—		(2.5)
Total comprehensive income (loss)	27.4		(17.5)		0.1		10.0
Stock-based compensation expense	2.2		—		—		2.2
Proceeds from exercise of stock options		6.7		—		—		6.7
Net transfers to Parent	(39.7)		—		—		(39.7)
Balance at March 31, 2020	$	1,975.4	$	(46.6)	$	2.7	$	1,931.5
Net income		20.1		—		0.2		20.3
Foreign currency translation and other adjustments		—		5.8		—		5.8
Total comprehensive income		20.1		5.8		0.2		26.1
Stock-based compensation expense		5.0		—		—		5.0
Proceeds from exercise of stock options		3.7		—		—		3.7
Taxes withheld and paid on share-based payment awards		(0.4)		—		—		(0.4)
Net transfers to Parent		(9.9)		—		—		(9.9)
Balance at June 30, 2020	$	1,993.9	$	(40.8)	$	2.9	$	1,956.0
	Net Parent Investment		Accumulated Other Comprehensive Loss		Non-controlling interest		Total Parent equity and non-controlling interest
Balance at December 31, 2020	$	1,967.0	$	(8.7)	$	3.0	$	1,961.3
Net income		32.0		—		0.1		32.1
Foreign currency translation and other adjustments	—		(4.2)		—		(4.2)
Total comprehensive income (loss)	32.0		(4.2)		0.1		27.9
Stock-based compensation expense	5.7		—		—		5.7
Proceeds from exercise of stock options		2.4		—		—		2.4
Net transfers to Parent	(30.1)		—		—		(30.1)
Balance at March 31, 2021	$	1,977.0	$	(12.9)	$	3.1	$	1,967.2
Net income	$	45.7	$	—	$	0.1	$	45.8
Foreign currency translation and other adjustments		—		3.1		—		3.1
Total comprehensive income (loss)		45.7		3.1		0.1		48.9
Stock-based compensation expense		5.1		—		—		5.1
Proceeds from exercise of stock options		7.7		—		—		7.7
Taxes withheld and paid on share-based payment awards		(0.5)		—		—		(0.5)
Net transfers to Parent		(49.0)		—		—		(49.0)
Balance at June 30, 2021	$	1,986.0	$	(9.8)	$	3.2	$	1,979.4

____________________

(1) During the six months ended June 30, 2020, represents a 30% non-controlling interest in a subsidiary and a 5% non-controlling interest in another joint venture relationship. On November 24, 2020, PMC acquired the remaining 30% non-controlling interest associated with the aforementioned joint venture for a cash purchase price of $0.3 million. Following this transaction, represents a 5% non-controlling interest in the remaining joint venture relationship. Refer to Note 2, Acquisitions and Divestiture for further detail.

See notes to condensed combined financial statements.

Process & Motion Control

Condensed Combined Statements of Cash Flows

(in Millions)

(Unaudited)

	Six Months Ended
	June 30, 2021		June 30, 2020
Operating activities
Net income	$	77.9	$	47.8
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	23.5		22.3
Amortization of intangible assets	6.6		7.0
Gain on dispositions of assets	(9.2)		(0.3)
Deferred income taxes	0.1		1.5
Actuarial loss on pension and postretirement benefit obligations	—		0.7
Other non-cash charges	(0.9)		(0.5)
Stock-based compensation expense	10.8		7.2
Changes in operating assets and liabilities:
Receivables	(21.9)		9.8
Inventories	(21.3)		5.6
Other assets	(8.2)		10.9
Accounts payable	32.7		(15.9)
Accruals and other	4.7		9.0
Cash provided by operating activities	94.8		105.1
Investing activities
Expenditures for property, plant and equipment	(12.3)		(21.9)
Proceeds from dispositions of long-lived assets	13.0		0.9
Cash provided by (used for) investing activities	0.7		(21.0)
Financing activities
Repayments of debt	(1.1)		(0.6)
Proceeds from exercise of stock options	10.1		10.4
Taxes withheld and paid on employees' share-based payment awards	(0.5)		(0.4)
Net transfers to Parent	(79.1)		(49.6)
Cash used for financing activities	(70.6)		(40.2)
Effect of exchange rate changes on cash and cash equivalents	(0.4)		(2.2)
Increase in cash and cash equivalents	24.5		41.7
Cash and cash equivalents at beginning of period	193.3		136.4
Cash and cash equivalents at end of period	$	217.8	$	178.1

See notes to condensed combined financial statements.

Process & Motion Control

Notes to Condensed Combined Financial Statements

June 30, 2021

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

Spin-off from Rexnord Corporation

On October 4, 2021, in accordance with the terms and conditions of the Agreement and Plan of Merger, dated as of February 15, 2021, Regal Beloit Corporation (which changed its name on October 4, 2021 to Regal Rexnord Corporation) (“Regal”) completed its previously announced combination with the Process & Motion Control segment (“PMC” or the “Company”) of Rexnord Corporation (which changed its name on October 4, 2021 to Zurn Water Solutions) (“Rexnord” or the “Parent”) in a Reverse Morris Trust (“RMT”) transaction.

PMC

PMC designs, manufactures, markets and services a comprehensive range of specified, highly engineered mechanical components used within complex systems where PMC’s customers' reliability requirements and costs of failure or downtime are high. The PMC portfolio includes motion control products, shaft management products, aerospace components and related value-added services. Products and services are marketed and sold globally under widely recognized brand names, including Rexnord®, Rex®, Addax®, Euroflex®, Falk®, FlatTop®, Cambridge®, Link-Belt®, Omega®, PSI®, Shafer®, Stearns®, Highfield®, Thomas®, Centa®, and TollokTM. PMC products and services are sold into a diverse group of attractive end markets, including food and beverage, aerospace, mining, petrochemical, energy and power generation, cement and aggregates, forest and wood products, agriculture, and general industrial and automation applications.

PMC has a global presence with manufacturing plants, sales centers, and administrative offices located throughout the world. PMC operates within legal entities that are established for the sole purpose of containing activities of PMC, with little or no presence of other Rexnord operations and legal entities that are shared between PMC and other Rexnord operations (“shared entities”) to varying degrees. Although PMC operates in over a dozen countries, its revenues are primarily recognized by entities in United States and Europe.

Principles of Combination and Basis of Presentation

Throughout the periods covered by the condensed combined financial statements, PMC operated as a part of Rexnord. Consequently, standalone financial statements have not historically been prepared for PMC. The condensed combined financial statements included herein present, on a historical basis, the financial position, results of operations and cash flows related to PMC, in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and are presented on a carve-out basis. The accompanying condensed combined financial statements have been derived from the consolidated financial statements and accounting records of Rexnord, as if PMC’s operations had been conducted independently from Rexnord.

The assets, liabilities and operations of PMC have historically been held and managed by various legal entities within Rexnord. Certain of these legal entities solely pertain to the operations of PMC for which discrete financial information is available. As Rexnord records transactions at the legal entity level, for the shared entities (i.e., entities related to both PMC and non-PMC businesses) for which discrete financial information was not available, allocation methodologies were applied to certain accounts to allocate amounts to PMC.

The condensed combined statements of operations include all revenues and costs directly attributable to PMC as well as an allocation of expenses related to executive management, finance, legal, tax, information technology, human resources and other shared services (“Allocated corporate costs”). Expenses that are specifically identifiable to PMC are directly recorded to the condensed combined statements of operations. The remaining expenses are primarily allocated on the basis of revenues generated or headcount. PMC considers these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to, PMC. See Note 15, Related Party Transactions. The Allocated corporate costs are deemed to be settled by PMC to Rexnord in the period in which the expense was recorded in the condensed combined statements of operations. All significant intercompany transactions between PMC and Rexnord have been included in these condensed combined financial statements and are considered to be effectively settled for cash at the time the transaction is recorded. The condensed combined statements of cash flows present these corporate expenses as cash flows from operating activities, as these costs were incurred by Rexnord. Current and deferred income taxes and related tax expense have been determined based on the standalone results of PMC by applying Accounting Standards Codification ("ASC") No. 740, Income Taxes (“ASC 740”), to PMC’s operations in each country as if it were a separate taxpayer (i.e. following the separate return methodology).

The condensed combined financial statements include all assets and liabilities that reside within PMC legal entities. Assets and liabilities in shared entities were included in the standalone financial statements to the extent the asset is primarily used by PMC. If PMC is not the primary user of the asset, it was excluded entirely from the condensed combined financial statements.

As the operations comprising PMC were in various legal entities owned 100% by Rexnord during the periods covered by the condensed combined financial statements, in which PMC had no direct ownership relationship, Rexnord’s net investment in these operations is shown in lieu of stockholder’s equity in the condensed combined financial statements. Legal entities owned less than 100% by Rexnord but controlled by Rexnord are shown on a combined basis less their respective non-controlling ownership interest. Transactions between PMC and Rexnord are reflected as net Parent investment in the condensed combined balance sheets and as a financing activity in net transfers to Parent in the condensed combined statements of cash flows. All material intra-company transactions and accounts within these condensed combined financial statements have been eliminated. See Note 15, Related Party Transactions for additional information.

Cash and cash equivalents in the condensed combined balance sheets represent cash held in foreign entities specifically related to PMC. Rexnord utilizes a centralized approach to cash management in the U.S. and funds PMC’s operating and investing activities as needed. The cash and cash equivalents centrally held by Rexnord are not specifically identifiable to PMC and therefore have not been reflected in the condensed combined balance sheets. Transfers of cash, both to and from Rexnord’s centralized cash management system, are reflected as a component of Rexnord’s net investment in PMC’s condensed combined balance sheet and as a financing activity in the condensed combined statements of cash flow.

Rexnord’s third party debt and the related interest have not been allocated to PMC for any of the periods presented because Rexnord’s borrowings are primarily for corporate cash purposes and are not directly attributable to PMC.

Rexnord has an accounts receivable securitization facility, which is corporate in nature and not specific to PMC. The securitization facility borrowings are not presented in the condensed combined financial statements. See Note 15, Related Party Transactions for additional discussion.

Rexnord maintains various stock-based compensation plans at a corporate level. PMC employees participated in those programs during the periods covered by the condensed combined financial statements and a portion of the compensation cost associated with those plans is included in the PMC condensed combined statements of operations. The amounts presented in the condensed combined financial statements are not necessarily indicative of future awards and may not reflect the results that PMC would have experienced as a standalone entity. See Note 15, Related Party Transactions for additional discussion.

Certain PMC employees participated in U.S. pension and other postretirement benefit plans sponsored by Rexnord during the periods covered by the condensed combined financial statements that were shared amongst its businesses, including PMC. For shared plans, the participation in these plans is reflected in the condensed combined financial statements as though PMC participated in a multi-employer plan with the other businesses of Rexnord and a proportionate share of the cost is reflected in the condensed combined statements of operations, while the assets and liabilities of such plans are retained by Rexnord. Additionally, PMC sponsors pension plans for certain employees primarily associated with its foreign operations.

These plans are recognized under a single employer method in the condensed combined financial statements. See Note 12, Retirement Benefits for further information.

PMC considers the allocations made in preparation of these condensed combined financial statements to be a reasonable reflection of the utilization of services by, or the benefits provided to, PMC. The allocations may not, however, reflect the expenses PMC would have incurred as a standalone entity for the periods presented. As a result, the condensed combined financial statements may not be indicative of PMC’s financial condition, results of operations or cash flows had PMC operated as a standalone entity during the periods presented, and the results stated in the condensed combined financial statements are not indicative of PMC’s future financial condition, results of operations or cash flows.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted for the interim periods, although the Company believes that the disclosures are adequate to make the information presented not misleading.

In the opinion of management, the unaudited condensed combined financial statements include all adjustments necessary for a fair presentation of the results of operations for the interim periods. Following the end of Rexnord's fiscal year ended March 31, 2020, Rexnord transitioned to a December 31 fiscal year-end date. Results for the interim periods are not necessarily indicative of results that may be expected for the year ending December 31, 2021. These condensed combined financial statements should be read in conjunction with the audited combined financial statements and the notes thereto included elsewhere in this report for the nine-month transition period ended December 31, 2020 (the "Transition Period").

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate that is expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. PMC did not modify any material contracts due to reference rate reform during the three and six months ended June 30, 2021. PMC will continue to evaluate the impact this guidance will have on its combined financial statements for all future transactions affected by reference rate reform during the time period referenced above.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The FASB issued this update as part of its initiative to reduce complexity in accounting standards. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also improve consistent application of other areas by clarifying and amending existing guidance. PMC adopted this ASU on January 1, 2021 using a retrospective, modified retrospective or prospective basis for certain amendments. There was no impact to the condensed combined financial statements.

2. Acquisitions and Divestiture

On October 1, 2020, PMC completed the sale of its gearbox product line in China for aggregate cash consideration of $5.8 million. The gearbox product line was not material to PMC's combined statements of operations or financial position and did not meet the criteria to be presented as discontinued operations. In completing the sale, PMC sold inventory, fixed assets and other intellectual property associated with the business with a carrying value of $5.0 million. In addition, PMC allocated $1.8 million of goodwill that was included in the calculation of the gain on sale of the business. PMC recognized a gain of $0.8 million within other income (expense), net in the condensed combined statements of operations during the nine months ended December 31, 2020.

On November 24, 2020, PMC acquired the remaining non-controlling interest in a joint venture for a cash purchase price of $0.3 million. The acquisition of the remaining minority interest was not material to PMC's condensed combined statements of operations or financial position.

PMC's results of operations include the acquired operations subsequent to the acquisition date. Pro-forma results of operations and certain other U.S. GAAP disclosures related to the acquisition have not been presented because they are not significant to PMC's condensed combined statements of operations or financial position.

3. Restructuring and Other Similar Charges

During the three and six months ended June 30, 2021, Rexnord continued to execute various restructuring actions. These initiatives were implemented to drive efficiencies and reduce operating costs while also modifying Rexnord's footprint to reflect changes in the markets it serves, the impact of acquisitions on Rexnord's overall manufacturing capacity and the refinement of its overall product portfolio. These restructuring actions primarily resulted in workforce reductions, lease termination costs and other facility rationalization costs. Management expects to continue executing similar initiatives to optimize its operating margin and manufacturing footprint. As such, Rexnord expects further expenses related to workforce reductions, potential impairment or accelerated depreciation of assets, lease termination costs and other facility rationalization costs. Since Rexnord's evaluation of other potential restructuring actions are in process, related restructuring expenses, if any, are not yet estimable.

The following table summarizes PMC's restructuring and other similar charges incurred during the three and six months ended June 30, 2021 and 2020 (in millions):

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Employee termination benefits	$	0.3	$	0.2	$	0.2	$	5.5
Contract termination and other associated costs	0.5		0.5		0.6		1.4
Total restructuring and other similar costs	$	0.8	$	0.7	$	0.8	$	6.9

The following table summarizes the activity in PMC's accrual for restructuring and other similar costs for the six months ended June 30, 2021 (in millions):

	Employee termination benefits		Contract termination and other associated costs		Total
Accrued Restructuring Costs, December 31, 2020 (1)	$	5.6	$	0.7	$	6.3
Charges	0.2		0.6		0.8
Cash payments	(3.7)		(1.0)		(4.7)
Accrued Restructuring Costs, June 30, 2021 (1)	$	2.1	$	0.3	$	2.4

____________________

(1)    The restructuring accrual is included in Other current liabilities on the condensed combined balance sheets.

PMC disposed of certain long-lived assets in connection with supply chain optimization and footprint repositioning initiatives. During the three and six months ended June 30, 2021, PMC recognized net gains on the disposal of assets of $9.4 million and $9.2 million, respectively. During the three and six months ended June 30, 2020, PMC recognized net gains on the disposal of assets of $0.5 million and $0.3 million, respectively. The aforementioned net gains on the disposal of assets are recorded within Cost of sales in the condensed combined statements of operations.

4. Revenue Recognition

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606, Revenue from Contracts with Customers ("ASC 606"). A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized when obligations under the terms of a contract with the customer are satisfied. For the majority of PMC's product sales, revenue is recognized at a point-in-time when control of the product is transferred to the customer, which generally occurs when the product is shipped from PMC's manufacturing facility to the customer. When contracts include multiple products to be delivered to the customer, generally each product is separately priced and is determined to be distinct within the context of the contract. Other than a standard assurance-type warranty that the product will conform to agreed-upon specifications, there are generally no other significant post-shipment obligations. The expected costs associated with standard warranties continues to be recognized as an expense when the products are sold.

When the contract provides the customer the right to return eligible products or when the customer is part of a sales rebate program, PMC reduces revenue at the point of sale using current facts and historical experience by using an estimate for expected product returns and rebates associated with the transaction. PMC adjusts these estimates at the earlier of when the most likely amount of consideration that is expected to be received changes or when the consideration becomes fixed. Accordingly, an increase or decrease to revenue is recognized at that time.

Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue. PMC has elected to recognize the cost for freight and shipping when control of products has transferred to the customer as a component of cost of sales in the condensed combined statements of operations. PMC classifies shipping and handling fees billed to customers as net sales and the corresponding costs are classified as cost of sales in the condensed combined statements of operations.

Revenue by Category

The following tables present PMC’s revenue disaggregated by customer type and geography (in millions):

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Original equipment manufacturers/end users	$	177.3	$	158.4	$	357.6	$	359.2
Maintenance, repair, and operations	147.3		116.0		287.9		278.8
Total	$	324.6	$	274.4	$	645.5	$	638.0
	Three Months Ended				Six Months Ended
---	---	---	---	---	---	---	---	---
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
United States and Canada	$	198.7	$	169.1	$	389.5	$	401.4
Europe	74.7		65.6		154.3		147.8
Rest of world	51.2		39.7		101.7		88.8
Total	$	324.6	$	274.4	$	645.5	$	638.0

Contract Balances

For substantially all of PMC's product sales, the customer is billed 100% of the contract value when the product ships and payment is generally due 30 days from shipment. Certain contracts include longer payment periods; however, PMC has elected to utilize the practical expedient in which PMC will only recognize a financing component to the sale if payment is due more than one year from the date of shipment.

PMC receives payment from customers based on the contractual billing schedule and specific performance requirements established in the contract. Billings are recorded as accounts receivable when an unconditional right to the contractual consideration exists. Contract assets arise when PMC performs by transferring goods or services to a customer before the customer pays consideration, or before the customer’s payment is due. A contract liability exists when PMC has received consideration or the amount is due from the customer in advance of revenue recognition. Contract liabilities and

contract assets are recognized in Other current liabilities and Receivables, net, respectively, in PMC's condensed combined balance sheets.

The following table presents changes in PMC’s contract assets and liabilities during the six months ended June 30, 2021 (in millions):

	Balance Sheet Classification	December 31, 2020		Additions		Deductions		June 30, 2021
Contract Assets	Receivables, net	$	—	$	—		—	$	—
Contract Liabilities (1)	Other current liabilities	$	3.9	$	1.4			$	4.8

All values are in US Dollars.

____________________

(1)    Contract liabilities are reduced when revenue is recognized.

Backlog

PMC has backlog of $355.2 million as of June 30, 2021, which represents the most likely amount of consideration expected to be received in satisfying the remaining backlog under open contracts. PMC has elected to use the optional exemption provided by ASC 606-10-50-14A for variable consideration, and has not included estimated rebates in the amount of unsatisfied performance obligations. PMC expects to recognize approximately 90% of the backlog as revenue in the year ending December 31, 2021, and the remaining 10% in the year ending December 31, 2022 and beyond.

Timing of Performance Obligations Satisfied at a Point in Time

PMC determined that the customer is able to control the product when it is delivered to them; thus, depending on the shipping terms, control will transfer at different points between PMC's manufacturing facility or warehouse and the customer’s location. PMC considers control to have transferred upon shipment or delivery because PMC has a present right to payment at that time, the customer has legal title to the asset, PMC has transferred physical possession of the asset and the customer has significant risks and rewards of ownership of the asset.

Variable Consideration

PMC provides volume-based rebates and the right to return product to certain customers, which are accrued for based on current facts and historical experience. Rebates are paid either on an annual or quarterly basis. There are no other significant variable consideration elements included in PMC's contracts with customers.

Contract Costs

PMC has elected to expense contract costs as incurred if the amortization period is expected to be one year or less. If the amortization period of these costs is expected to be greater than one year, the costs would be subject to capitalization. As of June 30, 2021, the contract assets capitalized, as well as amortization recognized in the three and six months ended June 30, 2021, are not significant and there have been no impairment losses recognized.

Allowance for Doubtful Accounts

PMC assesses the collectability of customer receivables based on the credit worthiness of a customer as determined by credit checks and analysis, as well as the customer’s payment history. In determining the allowance for doubtful accounts, PMC also considers various factors including the aging of customer accounts and historical write-offs. In addition, PMC monitors other risk factors, including forward-looking information when establishing adequate allowances for doubtful accounts, which reflects the current estimate of credit losses expected to be incurred over the life of the receivables.

5. Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss, net of tax, for the six months ending June 30, 2021 are as follows (in millions):

	Foreign Currency Translation and Other		Pension and Postretirement Plans		Total
Balance at December 31, 2020		(10.5)		1.8		(8.7)
Other comprehensive loss before reclassifications	(1.1)		—		(1.1)
Amounts reclassified from accumulated other comprehensive loss	—		—		—
Net current period other comprehensive loss	(1.1)		—		(1.1)
Balance at June 30, 2021

All values are in US Dollars.

6. Inventories

The major classes of inventories are summarized as follows (in millions):

	June 30,		December 31,
	2021		2020
Finished goods	$	47.1	$	52.9
Work in progress	37.0		36.4
Purchased components	82.5		70.6
Raw materials	55.7		41.1
Inventories at First-in, First-Out (“FIFO”) cost	222.3		201.0
Adjustment to state inventories at Last-in, First-Out (“LIFO”) cost	(7.3)		(7.0)
	$	215.0	$	194.0

7. Goodwill and Intangible Assets

The changes in the net carrying value of goodwill for the six months ended June 30, 2021, consisted of the following (in millions):

	Goodwill
Net carrying amount as of December 31, 2020	$	1,125.3
Currency translation adjustments	—
Net carrying amount as of June 30, 2021	$	1,125.3

The gross carrying amount and accumulated amortization for each major class of identifiable intangible assets as of June 30, 2021 and December 31, 2020 consisted of the following (in millions):

		June 30, 2021
	Weighted Average Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Patents	11 years	$	27.5	$	(20.4)	$	7.1
Customer relationships (including distribution network)	12 years	435.4		(336.3)		99.1
Tradenames	13 years	32.4		(15.0)		17.4
Intangible assets not subject to amortization - trademarks and tradenames		193.8		—		193.8
Total intangible assets, net	12 years	$	689.1	$	(371.7)	$	317.4
		December 31, 2020
	Weighted Average Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Patents	11 years	$	27.5	$	(20)	$	7.5
Customer relationships (including distribution network)	12 years	435.4		(331.1)		104.3
Tradenames	13 years	32.6		(13.9)		18.7
Intangible assets not subject to amortization - trademarks and tradenames		193.8		—		193.8
Total intangible assets, net	12 years	$	689.3	$	(365.0)	$	324.3

Intangible asset amortization expense totaled $3.3 million and $6.6 million for the three and six months ended June 30, 2021, respectively. Intangible asset amortization expense totaled $3.4 million and $7.0 million for the three and six months ended June 30, 2020, respectively. PMC expects to recognize amortization expense on the intangible assets subject to amortization of $13.3 million in 2021 (inclusive of $6.6 million of amortization expense recognized in the six months ended June 30, 2021), $13.2 million in 2022, $12.1 million in 2023, $12.0 million in 2024, $11.0 million in 2025 and $10.1 million in 2026.

8. Other Current Liabilities

Other current liabilities are summarized as follows (in millions):

	June 30, 2021		December 31, 2020
Contract liabilities	$	4.8	$	3.9
Sales rebates	7.1		7.7
Commissions	0.7		0.6
Restructuring and other similar charges (1)	2.4		6.3
Product warranty (2)	5.8		7.7
Risk management (3)	1.4		1.4
Legal and environmental	1.2		1.3
Taxes, other than income taxes	6.8		7.1
Income taxes payable	20.5		12.0
Interest payable	0.1		0.1
Current portion of operating lease liability	8.4		7.6
Other	6.5		9.1
	$	65.7	$	64.8

___________________

(1)    See more information related to the restructuring obligations balance within Note 3, Restructuring and Other Similar Charges.

(2)    See more information related to the product warranty obligations balance within Note 14, Commitments and Contingencies.

(3)    Includes projected liabilities related to losses arising from automobile, general and product liability claims.

9. Long-Term Debt

Long-term debt is summarized as follows (in millions):

	June 30, 2021		December 31, 2020
Finance Leases	$	72.8	$	73.2
Bank Loans and Other	0.1		0.1
Total		72.9		73.3
Less current maturities		2.3		2.1
Long-term debt	$	70.6	$	71.2

See Note 13, Leases, to the audited combined financial statements of PMC's December 31, 2020 fiscal year for further information regarding finance leases.

10. Fair Value Measurements

ASC 820, Fair Value Measurement (“ASC 820”) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC 820 also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed assumptions about the assumptions a market participant would use.

In accordance with ASC 820, fair value measurements are classified under the following hierarchy:

•    Level 1- Quoted prices for identical instruments in active markets.

•        Level 2- Quoted prices for similar instruments; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable.

•    Level 3- Model-derived valuations in which one or more inputs or value-drivers are both significant to the fair value measurement and unobservable.

If applicable, PMC uses quoted market prices in active markets to determine fair value, and therefore classifies such measurements within Level 1. In some cases where market prices are not available, PMC makes use of observable market based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based parameters. These measurements are classified within Level 3 if they use significant unobservable inputs.

Fair Value of Financial Instruments

There were no transfers of assets between levels as June 30, 2021 and December 31, 2020, respectively.

Rexnord has a nonqualified deferred compensation plan for certain executives and other highly compensated employees, including, during the periods covered by the condensed combined financial statements, PMC employees. Assets are invested primarily in mutual funds and corporate-owned life insurance contracts held in a Rabbi trust and restricted for payments to participants of the plan. The assets and liabilities are classified in Other assets and Other liabilities, respectively, on the condensed combined balance sheets. Changes in the values of the assets held by the rabbi trust and changes in the value of the deferred compensation liability are recorded in Other expense, net in the condensed combined statements of operations.

The fair values of deferred compensation plan assets and liabilities related to PMC employees are included in the tables below (in millions).

	June 30, 2021
	Quoted Prices in Active Market<br><br>(Level 1)		Significant Other Observable Inputs<br><br>(Level 2)		Significant Unobservable Inputs<br><br>(Level 3)		Total
Deferred compensation plan assets:
Mutual funds (1)	$	1.0	$	—	$	—	$	1.0
Corporate-owned life insurance policies (2)	—		4.2		—		4.2
Total assets at fair value	$	1.0	$	4.2	$	—	$	5.2
Deferred compensation liability at fair value (3):	$	5.2	$	—	$	—	$	5.2
	December 31, 2020
	Quoted Prices in Active Market<br><br>(Level 1)		Significant Other Observable Inputs<br><br>(Level 2)		Significant Unobservable Inputs<br><br>(Level 3)		Total
Deferred compensation plan assets:
Mutual funds (1)	$	0.4	$	—	$	—	$	0.4
Corporate-owned life insurance policies (2)	—		4.5		—		4.5
Total assets at fair value	$	0.4	$	4.5	$	—	$	4.9
Deferred compensation liability at fair value (3):	$	4.9	$	—	$	—	$	4.9

______________________

(1)    PMC has elected to use the fair value option for the mutual funds to better align the measurement of the assets with the measurement of the liability, which are measured using quoted prices of identical instruments in active markets and are categorized as Level 1.

(2)    The corporate-owned life insurance contracts are recorded at cash surrender value, which is provided by a third party and reflects the net asset value of the underlying publicly traded mutual funds, and are categorized as Level 2.

(3)    The deferred compensation liability is measured at fair value based on the quoted prices of identical instruments to the investment vehicles selected by the participants.

Fair Value of Non-Derivative Financial Instruments

The carrying amounts of cash, receivables, payables and accrued liabilities approximated fair value at June 30, 2021 and December 31, 2020 due to the short-term nature of those instruments. The carrying amount of long-term debt approximated fair value at June 30, 2021 and December 31, 2020 due to the nature of these obligations.

11. Stock-Based Compensation

Rexnord maintains long-term incentive plans for the benefit of its officers, directors and employees, including, during the periods covered by the condensed combined financial statements, certain PMC employees. The following disclosures represent the portion of the Rexnord Corporation Performance Incentive Plan (the "Plan") expenses maintained by Rexnord in which PMC employees participated. Compensation expense associated with Rexnord corporate employees is included within the general and administrative costs allocated to PMC by Rexnord, as discussed in Note 15, Related Party Transactions. All stock based awards granted under the Plan relate to Rexnord’s stock. As such, all related equity account balances are reflected in Rexnord’s consolidated statements of stockholders’ equity and have not been reflected in PMC’s condensed combined financial statements. During the three and six months ended June 30, 2021, PMC recorded $5.1 million and $10.8 million of stock-based compensation expense, respectively. During the three and six months ended June 30, 2020, PMC recorded $5.0 million and $7.2 million of stock-based compensation expense, respectively.

During the six months ended June 30, 2021, PMC granted the following stock options, restricted stock units and common stock to directors, executive officers, and certain other employees:

Award Type	Number of Awards	Weighted Average Grant-Date Fair Value
Stock options	205,852	$	15.39
Restricted stock units	134,557	$	45.09
Common stock	31,670	$	47.76

See Note 14, Stock-Based Compensation, to the audited combined financial statements of PMC's December 31, 2020 fiscal year for further information regarding stock-based compensation.

12. Retirement Benefits

Single Employer Plans

The components of net periodic benefit cost are as follows (in millions):

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Pension Benefits:
Service cost	$	0.1	$	0.1	$	0.2	$	0.2
Interest cost	0.2		0.4		0.4		0.8
Expected return on plan assets	(0.1)		(0.2)		(0.2)		(0.4)
Recognition of actuarial losses	—		—		—		0.7
Net periodic benefit cost	$	0.2	$	0.3	$	0.4	$	1.3

Multi-Employer Plans

The pension and other postretirement benefit plan expenses are comprised of the following (in millions):

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Proportionate share of income	$	(0.6)	$	(0.3)	$	(1.2)
Proportionate share of net actuarial losses	—		—		—		15.0
Total	$	(0.6)	$	(0.3)	$	(1.2)		14.4

All values are in US Dollars.

The service cost component of net periodic benefits is presented within cost of sales and selling, general and administrative expenses in the condensed consolidated statements of operations, while the other components of net periodic benefit cost are presented within Other expense, net. PMC recognizes the net actuarial gains or losses in excess of the corridor in operating results during the final quarter of each fiscal year (or upon any required remeasurement event). During the three months ended March 31, 2020, PMC performed its annual remeasurement as of the fiscal year ended March 31, 2020, which resulted in the recognition of a $15.7 million non-cash actuarial loss during the six months ended June 30, 2020. This amount is recorded within Actuarial loss on pension and postretirement benefit obligations in the condensed consolidated statements of operations.

See Note 15, Retirement Benefits, to the audited combined financial statements of PMC's December 31, 2020 fiscal year for further information regarding retirement benefits.

13. Income Taxes

Although certain PMC entities were historically included in consolidated income tax returns of Rexnord, PMC’s income taxes are computed and reported herein utilizing the separate return methodology. Under this methodology, such PMC entities are assumed to file hypothetical PMC-only consolidated returns with the applicable tax authorities; however, any such related tax due or receivable are not reflected as accrued income taxes herein but rather are treated as due to or from Rexnord. Use of this methodology may also result in differences when the sum of the amounts allocated to standalone tax provisions are compared with amounts presented in consolidated financial statements. In that event, the related deferred tax assets and liabilities could be significantly different from those presented herein. Certain tax attributes, such as net operating loss carryforwards, which were reflected in Rexnord’s consolidated financial statements may or may not exist at the standalone PMC level.

PMC's income tax expense is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are generally higher than the U.S. federal statutory rate, state tax rates in the jurisdictions where PMC conducts business and PMC's ability to utilize various tax credits, capital loss and net operating loss (“NOL”) carryforwards. PMC regularly reviews its deferred tax assets for recoverability and valuation allowances are established based on historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences, as deemed appropriate. In addition, all other available positive and negative evidence is taken into consideration for purposes of determining the proper balances of such valuation allowances. As a result of this review, PMC continues to maintain a valuation allowance against certain foreign NOL carryforwards and other related foreign deferred tax assets. Future changes to the balances of these valuation allowances, as a result of this continued review and analysis, could result in a material impact to the financial statements for such period of change.

The income tax provision was $12.9 million in the three months ended June 30, 2021, compared to $9.9 million in the three months ended June 30, 2020. The effective income tax rate for the three months ended June 30, 2021 was 22.1% versus 32.8% in the three months ended June 30, 2020. The effective income tax rate for the three months ended June 30, 2021 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of unrecognized income tax benefits in which such realization is not deemed more-likely-than-not, the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code and the accrual of various state income taxes, offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and the recognition of income tax benefits associated with share-based payments and foreign-derived intangible income (“FDII”). The effective income tax rate for the three months ended June 30, 2020 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of withholding taxes associated with foreign dividends, and the accrual of various state income taxes, partially offset by the recognition of income tax benefits associated with share-based payments and FDII.

The income tax provision was $23.8 million in the six months ended June 30, 2021, compared to $14.2 million in the six months ended June 30, 2020. The effective income tax rate for the six months ended June 30, 2021 was 23.5% versus 22.8% in the six months ended June 30, 2020. The effective income tax rate for the six months ended June 30, 2021 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of unrecognized income tax benefits in which such realization is not deemed more-likely-than-not, the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code and the accrual of various state income taxes, partially offset by the recognition of a discrete foreign financing-related income tax benefit, the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and the recognition of income tax benefits associated with share-based payments and FDII. The effective income tax rate for the six months ended June 30, 2020 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of withholding taxes associated with foreign dividends, and the accrual of various state income taxes, offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations as well as the recognition of income tax benefits associated with share-based payments and FDII.

PMC’s total liability for net unrecognized tax benefits as of June 30, 2021 and December 31, 2020 was $9.2 million and $9.3 million, respectively. PMC recognizes accrued interest and penalties related to unrecognized income tax benefits in income tax expense. As of June 30, 2021 and December 31, 2020, the total amount of unrecognized tax benefits includes $1.1 million and $1.6 million of gross accrued interest and penalties, respectively. PMC recognized $0.1 million and $(0.4) million of net interest and penalties as income tax expense (benefit) during the six months ended June 30, 2021 and June 30, 2020, respectively.

PMC conducts business in multiple locations within and outside the U.S. Consequently, Rexnord and certain PMC entities are subject to periodic income tax examinations by domestic and foreign income tax authorities. During the periods covered by the condensed combined financial statements, Rexnord, including PMC businesses, were undergoing routine, periodic income tax examinations in both domestic and foreign jurisdictions. During the three months ended March 31, 2020, the German tax authorities concluded an examination of the corporate income and trade tax returns for PMC’s CENTA German subsidiary for the tax years ended December 31, 2014 through December 31, 2017. The conclusion of the tax examination resulted in additional tax liabilities of approximately $1.7 million, all of which was subject to indemnification under the terms of the applicable purchase agreement or otherwise appropriately accrued in the financial statements. During the three months ended March 31, 2020, the Italian tax authorities began conducting an income tax examination of the income tax return of one of PMC’s Italian subsidiaries for the tax year ended March 31, 2018. In addition, certain of PMC’s German subsidiaries are currently undergoing a corporate income and trade tax examination by the German tax authorities for the tax years or period ended March 31, 2015 through March 31, 2018. During the three months ended September 30, 2018, the IRS completed an income tax examination of Rexnord’s amended U.S. consolidated federal income tax return for the tax year ended March 31, 2015, and Rexnord paid approximately $0.4 million upon conclusion of such examination. It appears reasonably possible that the amounts of unrecognized income tax benefits could change in the next twelve months upon conclusion of current ongoing examinations; however, any potential payments of income tax, interest and penalties are not expected to be significant to PMC's consolidated financial statements. With certain exceptions, PMC is no longer subject to U.S. federal income tax examinations for tax years ending prior to March 31, 2018, state and local income tax examinations for years ending prior to March 31, 2017 or significant foreign income tax examinations for years ending prior to March 31, 2016.

14. Commitments and Contingencies

Warranties:

PMC offers warranties on the sales of certain of its products and records an accrual for estimated future claims. Such accruals are based upon historical experience and management’s estimate of the level of future claims. The following table presents changes in PMC’s product warranty liability during each of the periods presented (in millions):

	Six Months Ended
	June 30, 2021		June 30, 2020
Balance at beginning of period	$	7.7	$	5.0
Charged to operations		1.4	2.4
Claims settled		(3.3)	(0.7)
Balance at end of period	$	5.8	$	6.7

Contingencies:

PMC's subsidiaries are involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business involving, among other things, product liability, commercial, employment, workers' compensation, intellectual property claims and environmental matters. PMC establishes accruals in a manner that is consistent with accounting principles generally accepted in the United States for costs associated with such matters when liability is probable and those costs are capable of being reasonably estimated. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss or recovery, based upon current information, management believes the eventual outcome of these unresolved legal actions, either individually or in the aggregate, will not have a material adverse effect on the financial position, results of operations or cash flows of PMC.

In connection with its sale, Invensys plc ("Invensys") provided PMC with indemnification against certain contingent liabilities, including certain pre-closing environmental liabilities. PMC believes that, pursuant to such indemnity obligations, Invensys is obligated to defend and indemnify PMC 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 million. The following paragraphs summarize the most significant actions and proceedings:

In 2002, Rexnord Industries, LLC ("Rexnord Industries"), a PMC entity, 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, allegedly including but not limited to a release or threatened release on or from PMC's property, at the Site. 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. Rexnord Industries' allocated share of past and future costs related to the Site, including for investigation and/or remediation, could be significant. All previously pending property damage and personal injury lawsuits against PMC related to the Site have been settled or dismissed. Pursuant to its indemnity obligation, Invensys continues to defend PMC 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.

Multiple lawsuits (with approximately 300 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 PMC's Stearns division 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, PMC's Prager business 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 PMC does not believe that they will become active in the future. To date, PMC's insurance providers have paid 100% of the costs related to the Prager asbestos matters. PMC believes that the combination of its insurance coverage and the Invensys indemnity obligations will cover any future costs of these matters.

In connection with Rexnord's acquisition of The Falk Corporation ("Falk"), Hamilton Sundstrand provided PMC with indemnification against certain products-related asbestos exposure liabilities. PMC believes that, pursuant to such indemnity obligations, Hamilton Sundstrand is obligated to defend and indemnify PMC with respect to the 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:

Falk, through its successor entity, 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 Falk. There are approximately 100 claimants in these suits. The ultimate outcome of these lawsuits cannot presently be determined. Hamilton Sundstrand is defending PMC in these lawsuits pursuant to its indemnity obligations and has paid 100% of the costs to date.

15. Related Party Transactions

PMC has historically operated as part of the Parent and not as a stand-alone company. Accordingly, the Parent has allocated certain account balances and costs to PMC that are reflected within these condensed combined financial statements. Management considers the allocation methodologies used by the Parent to be reasonable and to appropriately reflect the related expenses attributable to PMC for purposes of the carve-out financial statements; however, the expenses reflected in these condensed combined financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if PMC had operated as a separate stand-alone entity. In addition, the expenses reflected in the condensed

combined financial statements may not be indicative of expenses PMC will incur in the future. Actual costs that would have been incurred if PMC had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including PMC’s capital structure, information technology and infrastructure.

Related party transactions in the condensed combined statements of operations between PMC and Rexnord are summarized in the following table:

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Selling, general and administrative expenses	$	9.0	$	7.8	$	19.3	$	18.3
Other expense, net	—		0.2		0.2		0.2
Total related party expenses, net	$	9.0	$	8.0	$	19.5	$	18.5

Shared Services and Stock-Based Compensation

Rexnord provides PMC certain shared services in the form of Allocated corporate costs. Some of these services may continue to be provided to PMC on a temporary basis following the RMT transaction.

Rexnord maintains long-term incentive plans for the benefit of its officers, directors and employees, including, during the periods covered by the condensed combined financial statements, certain PMC employees. Stock-based compensation expense associated with Rexnord corporate employees is included within the selling, general and administrative expenses allocated to PMC by Rexnord.

PMC determined that it is not practicable to determine the cost of these Allocated corporate costs on a standalone basis for the periods presented. Therefore, expenses for Corporate allocated costs and stock-based compensation for corporate employees were allocated to PMC based on appropriate methods, depending on the nature of the expense to be allocated. The allocations herein may not reflect the combined financial position, results of operations and cash flows of PMC in the future or what they would have been had PMC been a separate, standalone entity during the periods presented. Management believes that the methods used to allocate expenses to PMC are reasonable.

Treasury Functions

Cash and cash equivalents held by Rexnord at the corporate level were not allocated to PMC in any of the periods presented. PMC participates in Rexnord’s centralized cash management and financing programs. Disbursements are made through centralized accounts payable systems that are operated by Rexnord. Cash receipts are transferred to centralized accounts, also maintained by Rexnord. As cash is disbursed and received by Rexnord, it is accounted for by PMC through net Rexnord investment. Rexnord’s third party long-term debt, and the related interest expense, have not been allocated to PMC for any of the periods presented. The components of Net transfers to Parent included within Net Parent investment were as follows:

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Cash pooling and general financing activities, net	$	(58.0)	$	(17.9)	$	(98.6)	$	(68.1)
Corporate allocated costs	9.0		8.0		19.5		18.5
Net transfers to parent per condensed combined statement of changes in parent equity	$	(49.0)	$	(9.9)	$	(79.1)	$	(49.6)

Accounts Receivable Securitization Program

On May 17, 2021, Rexnord terminated it's $100.0 million accounts receivable securitization facility with Mizuho Bank, Ltd (the “Securitization”). Any borrowings under the Securitization were accounted for as secured borrowings on Rexnord's consolidated balance sheets and not specific to PMC, and as such, were not reflected in the condensed combined financial statements.

See Note 11, Long-Term Debt, to the audited combined financial statements of PMC's December 31, 2020 fiscal year for further information regarding long-term debt.

Product Sales

PMC did not sell or purchase product from other businesses of Rexnord during the periods covered by the condensed combined financial statements.

16. Subsequent Events

On October 4, 2021, Rexnord and Regal closed the RMT transaction to separate PMC from Rexnord and combine it with Regal.

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Document

COMBINED COMPANY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following combined company unaudited pro forma condensed combined financial information and notes thereto have been prepared by Regal Rexnord Corporation in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses”, in order to give effect to the Transactions (as defined below). The Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on October 7, 2021, sets forth certain additional information regarding the Transactions.

On October 4, 2021 (the “Closing Date”), in accordance with the terms and conditions of the Agreement and Plan of Merger, dated as of February 15, 2021 (as amended, supplemented or modified from time to time, the “Merger Agreement”), Regal Beloit Corporation (which changed its name on October 4, 2021 to Regal Rexnord Corporation) (the “Company” or “Regal”) completed its previously announced combination with the Process & Motion Control business (“PMC Business”) of Rexnord Corporation (which changed its name on October 4, 2021 to Zurn Water Solutions Corporation) (“Rexnord”) in a Reverse Morris Trust transaction (the “Transactions”). Pursuant to the Transactions and subject to the terms and conditions of the Merger Agreement and the other definitive agreements entered into in connection therewith, (i) Rexnord transferred to its then-subsidiary Land Newco, Inc. (“Land”) substantially all of the assets, and Land assumed substantially all of the liabilities, of the PMC Business (the “Reorganization”), (ii) 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 were 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 was made pro rata for no consideration, the “Spin-Off”) and (iii) immediately after the Spin-Off, a subsidiary of Regal (“Merger Sub”) merged 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) were converted as of the effective time of the Merger (the “Effective Time”) into the right to receive 0.22296103 shares of common stock, $0.01 par value per share, of the Company (“Company common stock”), as calculated in the Merger Agreement.

As of the Effective Time, Land, which held the PMC Business, became a wholly owned subsidiary of the Company.

Pursuant to the Merger, the Company issued approximately 27,055,945 shares of Company common stock to holders of Land common stock, which represents approximately 39.9% of the approximately 67,756,732 outstanding shares of Company common stock immediately following the Effective Time. The Merger Agreement provides that, in order to preserve the tax-free nature of the Transactions, in the event that Rexnord stockholders and Regal shareholders who own shares of Rexnord common stock and Regal common stock (“Overlap Shareholders”) are to be counted by the parties in order to satisfy applicable tax requirements (“Overlap Shares”), the number of shares of Regal common stock issued in the Transactions is subject to increase at closing such that former stockholders of Land (together with the Overlap Shareholders), own at least 50.8% (“Threshold Percentage”) of the issued and outstanding shares of Regal common stock immediately following consummation of the Merger for tax purposes. In addition, holders of record of Company common stock as of October 1, 2021 received $6.99 per share of Company common stock pursuant to a previously announced special dividend in connection with the Transactions (the “Special Dividend”).

In addition, Regal, Rexnord, Land or their respective affiliates entered into a series of ancillary agreements in connection with the Transactions, and in connection with the separation of the operations of the PMC Business from Rexnord entered into a Transition Services Agreement, pursuant to which Rexnord will provide certain transition services to Regal for a period of time following the Merger in exchange for certain transition services charges. The total amount of such separation charges to be incurred is not material to the combined company unaudited pro forma condensed combined financial information.

The Merger Agreement and Separation and Distribution Agreement (“Separation Agreement”) also provided for closing working capital and other adjustments to the purchase price, which are not reflected in the combined company unaudited pro forma condensed combined financial information at July 3, 2021. The total assets and

liabilities assumed will be adjusted, based on the final balances per the terms included within the Separation Agreement.

The combined company unaudited pro forma condensed combined financial information and related notes were prepared using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with Regal as the accounting acquirer of the PMC Business. In a business combination effected through an exchange of equity interests, such as the Merger, the entity that issues the interests is generally the accounting acquirer. In identifying Regal as the accounting acquirer, the Company’s conclusion is based primarily on (1) the current chief executive officer of Regal continued as the chief executive officer of the combined company after the Transactions, (2) nine of 11 members of the board of directors of the combined company after the Transactions, are existing Regal directors, and (3) Regal issued its equity interests as consideration for the Merger.

The combined company unaudited pro forma condensed combined financial information is based on the historical consolidated financial statements of Regal and historical combined financial statements of the PMC Business as adjusted to give effect to the Transactions. The combined company unaudited pro forma condensed combined balance sheet as of July 3, 2021 gives effect to the Transactions as if they had occurred on July 3, 2021. The combined company unaudited pro forma condensed combined statement of income for the six months ended July 3, 2021 and the fiscal year ended January 2, 2021 gives effect to the Transactions as if they had occurred on December 29, 2019. Refer to Note 2 - Basis of Presentation for additional information.

The combined company unaudited pro forma condensed combined financial information and related notes should be read in conjunction with the historical financial statements of Regal and the PMC Business referenced below:

•The financial statements included in Regal’s Annual Report on Form 10-K, for the year ended January 2, 2021, which was filed with the SEC on March 2, 2021;

•Regal’s unaudited condensed consolidated financial statements for the six months ended July 3, 2021 included in Regal’s Current Report on Form 10-Q which was filed with the SEC on August 11, 2021;

•The PMC Business’s audited combined financial statements and the accompanying notes as of and for the nine months ended December 31, 2020 and as of and for the twelve months ended March 31, 2020, which was filed with the SEC on July 21, 2021; and

•The PMC Business’s unaudited condensed combined financial statements as of and for the six months ended June 30, 2021, which are incorporated by reference to Exhibit 99.1 of this Current Report on Form 8-K/A.

The historical combined financial statements of the PMC Business have been derived from the consolidated financial statements and accounting records of Rexnord, as if its operations had been conducted independently from those of Rexnord. The combined financial statements of the PMC Business are presented on a carve-out basis in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).

The historical combined statement of income includes all revenues and costs directly attributable to the PMC Business as well as an allocation of expenses related to executive management, finance, legal, tax, information technology, human resources and other shared services. Expenses that are specifically identifiable to the PMC Business are directly recorded to the combined statement of income. The remaining expenses are primarily allocated on the basis of revenues generated or headcount. The PMC Business considers these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to, the PMC Business. The combined financial statements include all assets and liabilities that reside within the PMC Business legal entities. Assets and liabilities in shared entities were included in the standalone financial statements to the extent the asset is primarily used by the PMC Business. The allocations may not reflect the expenses the PMC Business would have incurred as a standalone entity for the periods presented. As a result, the combined financial statements may not be indicative of the PMC Business’s financial condition, results of operations or cash flows had it operated as a standalone entity during the periods presented, and the results stated in the combined financial statements are not indicative of the PMC Business’s future financial condition, results of operations or cash flows.

The combined company unaudited pro forma adjustments represent management’s estimates based on information available as of the date of the combined company unaudited pro forma condensed combined financial information and are subject to change as additional information becomes available and analyses are performed. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects of the Transactions, and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the combined company unaudited pro forma condensed combined financial information. The Transaction Accounting Adjustments are intended to represent the necessary adjustments to account for the Transactions. Autonomous Entity Adjustments are adjustments that are necessary to reflect the operations and financial position of the registrant as an autonomous entity when the registrant was previously part of another entity. There are no Autonomous Entity Adjustments included in the combined company unaudited pro forma condensed combined financial information.

The combined company unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the financial position or results that would have occurred had the events been consummated as of the dates indicated, nor is it indicative of any future results. The combined company unaudited pro forma condensed combined financial information does not give effect to the potential impact of current financial conditions, or any anticipated revenue enhancements, cost savings or operating synergies that may result from the Transactions.

COMBINED COMPANY UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of July 3, 2021

(Dollars in millions, except share and per share data)

	As of July 3, 2021	As of June 30, 2021	Transaction Accounting Adjustments		Transaction Accounting Adjustments
	Regal	PMC After Reclassification (Note 3)	Pre-Merger Adjustments (Note 4)	PMC After Pre- Merger Adjustments	Merger Adjustments (Note 6)	Pro Forma Combined
Assets
Current assets:
Cash and Cash Equivalents	$ 618.5	$      217.8	—	$ 217.8	(49.6)	$ 786.7
Trade Receivables, Less Allowances	558.0	186.1	—	186.1	(0.7)	743.4
Inventories	759.2	215.0	—	215.0	46.7	1,020.9
Prepaid Expenses and Other Current Assets	141.0	39.0	—	39.0	(4.9)	175.1
Assets Held for Sale	7.5	—	—	—	—	7.5
Total Current Assets	2,084.2	657.9	—	657.9	(8.5)	2,733.6
Net Property, Plant and Equipment	534.1	347.4	—	347.4	76.0	957.5
Operating Lease Assets	71.8	50.2	—	50.2	—	122.0
Goodwill	1,511.8	1,125.3	—	1,125.3	1,203.0	3,840.1
Intangible Assets, Net of Amortization	504.9	317.4	—	317.4	1,518.6	2,340.9
Deferred Income Tax Benefits	45.3	7.7	7.3	15.0	10.4	70.7
Other Noncurrent Assets	21.6	11.3	(5.2)	6.1	(1.7)	26.0
Total Assets	$ 4,773.7	$ 2,517.2	2.1	$ 2,519.3	2,797.8	$ 10,090.8
Liabilities and Equity
Current Liabilities:
Accounts Payable	$ 461.4	$ 120.4	—	$ 120.4	(0.7)	$ 581.1
Dividends Payable	13.4	—	—	—	—	13.4
Accrued Compensation and Benefits	77.4	39.9	—	39.9	—	117.3
Other Accrued Expenses	133.7	58.7	0.3	59.0	(2.6)	190.1
Current Operating Lease Liabilities	22.0	8.4	—	8.4	—	30.4
Current Maturities of Long-Term Debt	230.9	2.3	—	2.3	—	233.2
Total Current Liabilities	938.8	229.7	0.3	230.0	(3.3)	1,165.5
Non-Current Liabilities:
Long-Term Debt	789.0	70.6	486.8	557.4	284.5	1,630.9
Deferred Income Taxes	175.3	117.1	—	117.1	365.5	657.9
Pension and Other Post Retirement Benefits	63.7	50.1	39.0	89.1	—	152.8
Noncurrent Operating Lease Liabilities	53.2	44.0	—	44.0	—	97.2
Other Noncurrent Liabilities	57.2	26.3	(5.2)	21.1	—	78.3
Equity
Shareholders’ Equity
Common Stock, $0.01 Par Value, 100.0 million Shares Authorized; 40.7 million Shares Issued and Outstanding, Historical Regal; 67.7 million Shares Issued and Outstanding, Pro Forma Combined	$ 0.4	$ —	—	$ —	0.3	$0.7
Additional Paid-In Capital	698.4	—	—	—	3,942.4	4,640.8
Retained Earnings	2,130.3	—	—	—	(334.2)	1,796.1
Net Parent Investment	—	1,986.0	(518.8)	1,467.2	(1,467.2)	—
Accumulated Other Comprehensive Loss	(164.1)	(9.8)	—	(9.8)	9.8	(164.1)
Total Shareholders' Equity	2,665.0	1,976.2	(518.8)	1,457.4	2,151.1	6,273.5
Noncontrolling Interests	31.5	3.2	—	3.2	—	34.7
Total Equity	2,696.5	1,979.4	(518.8)	1,460.6	2,151.1	6,308.2
Total Liabilities and Equity	$ 4,773.7	$ 2,517.2	2.1	$ 2,519.3	2,797.8	$ 10,090.8

All values are in US Dollars.

See accompanying notes to combined company unaudited pro forma condensed combined financial information.

COMBINED COMPANY UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

For the Six Months Ended July 3, 2021

(Dollars in millions, except share and per share data)

	Six Months EndedJuly 3, 2021	Transaction Accounting Adjustments
	Regal After Reclassification (Note 3)	Pre-Merger Adjustments(Note 4)	Merger Adjustments(Note 7)	Pro Forma Combined
Net Sales	1,701.0	—	(2.7)	$2,343.8
Cost of Sales	1,201.8	(0.1)	(0.6)	1,595.2
Gross Profit	499.2	0.1	(2.1)	748.6
Operating Expenses	287.6	—	45.0	480.8
Asset Impairments	2.3	—	—	2.3
Restructuring and Other Similar Charges	3.2	—	—	4.0
Total Operating Expenses	293.1	—	45.0	487.1
Income from Operations	206.1	0.1	(47.1)	261.5
Other (Income) Expenses, net	(2.4)	—	(19.8)	(23.7)
Interest Expense	24.1	3.7	(5.6)	24.7
Interest Income	3.2	—	—	3.2
Income before Taxes	187.6	(3.6)	(21.7)	263.7
Provision (Benefit) for Income Taxes	39.4	(0.8)	(9.1)	53.3
Equity method investment income	—	—	—	0.3
Net Income	148.2	(2.8)	(12.6)	210.7
Less: Net Income Attributable to Noncontrolling Interests	3.0	—	—	3.2
Net Income Attributable to Regal Beloit Corporation	145.2	(2.8)	(12.6)	$207.5
Earnings Per Share Attributable to Common Shareholders
Basic	3.57			$3.07
Assuming Dilution	3.54			$3.04
Weighted Average Number of Shares Outstanding:
Basic	40.6			67.7
Assuming Dilution	41.0			68.2

All values are in US Dollars.

See accompanying notes to combined company unaudited pro forma condensed combined financial information.

COMBINED COMPANY UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

For the Year Ended January 2, 2021

(Dollars in millions, except share and per share data)

	Year EndedJanuary 2, 2021	Transaction Accounting Adjustments
	Regal After Reclassification (Note 3)	Pre-Merger Adjustments(Note 4)	Merger Adjustments(Note 7)	Pro Forma Combined
Net Sales	2,907.0	—	(4.0)	$4,136.8
Cost of Sales	2,080.1	(0.1)	46.8	2,930.6
Gross Profit	826.9	0.1	(50.8)	1,206.2
Operating Expenses	504.5	—	89.7	872.3
Goodwill Impairment	10.5	—	—	10.5
Asset Impairments	5.3	—	—	5.3
Restructuring and Other Similar Charges	26.6	—	—	45.8
Gain on Sale of Businesses	(0.1)	—	—	(0.1)
Total Operating Expenses	546.8	—	89.7	933.8
Income from Operations	280.1	0.1	(140.5)	272.4
Other (Income) Expenses, net	(4.4)	—	60.6	70.0
Interest Expense	39.8	9.2	21.4	74.4
Interest Income	5.9	—	—	5.9
Income before Taxes	250.6	(9.1)	(222.5)	133.9
Provision (Benefit) for Income Taxes	56.8	(2.3)	(45.4)	37.6
Net Income	193.8	(6.8)	(177.1)	96.3
Less: Net Income Attributable to Noncontrolling Interests	4.5	—	—	5.0
Net Income Attributable to Regal Beloit Corporation	189.3	(6.8)	(177.1)	$91.3
Earnings Per Share Attributable to Common Shareholders
Basic	4.66			$1.35
Assuming Dilution	4.64			$1.34
Weighted Average Number of Shares Outstanding:
Basic	40.6			67.6
Assuming Dilution	40.8			68.0

All values are in US Dollars.

See accompanying notes to combined company unaudited pro forma condensed combined financial information.

NOTES TO COMBINED COMPANY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Note 1 - Description of Transaction

On October 4, 2021, Regal and Rexnord consummated the Transactions to effect the transfer of the PMC Business to Regal in accordance with the Merger Agreement and Separation Agreement, pursuant to which and subject to the terms and conditions therein:

•Rexnord transferred the PMC Business to Land;

•Concurrently with the execution of the Merger Agreement, Regal and the PMC Business entered into a debt commitment letter to provide senior bridge loans under a 364-day senior bridge loan credit facility in an aggregate principal amount of approximately $486.8 million (“Land Bridge Facility”). Upon effectiveness of the delayed draw term loan facility (“DDTL Facility”) commitment, the Land Bridge Facility commitment was terminated. Land incurred debt equal to $486.8 million through the DDTL Facility. The proceeds were used by Land to make a cash distribution to Rexnord equal to $486.8 million (“Land Cash Payment”) in accordance with the calculation prescribed in the Separation Agreement;

•As previously announced, concurrently with the execution of the Merger Agreement, Regal entered into a commitment letter dated as of February 15, 2021 (as modified pursuant to the terms of that certain Joinder to Commitment Letter dated as of March 17, 2021, the “Regal Commitment Letter”) pursuant to which certain financial institutions party thereto committed to provide senior bridge loans under a 364-day senior bridge loan credit facility in an aggregate principal amount of up to $2.126 billion (which we refer to as the “Regal Bridge Facility”), subject to the terms and conditions of the Regal Commitment Letter. As the Merger was consummated and the payment of amounts in connection therewith occurred without the use of the Regal Bridge Facility, the commitments under the Regal Commitment Letter were terminated in connection with the closing of the Transactions. As previously disclosed, on March 17, 2021, the Company entered into an amendment (the “First Amendment”) with the Company's lenders to the Amended and Restated Credit Agreement, dated August 27, 2018 (the “Existing Credit Agreement” and, as amended by the First Amendment, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent and the lenders named therein. The First Amendment amended the Credit Agreement to, among other things, (i) permit the consummation of the Transactions, (ii) permit the incurrence of indebtedness to finance the Special Dividend; and (iii) provide an increase of $250 million in the aggregate principal amount of the revolving commitments under the Existing Credit Agreement. In connection with the closing of the Transactions, the Company drew upon the Credit Agreement to finance the payment of the Special Dividend.

•Rexnord distributed to its stockholders all of the issued and outstanding shares of Land common stock in the Spin-Off; and

•Merger Sub merged with and into Land, with Land as the surviving corporation.

As a result of the Merger, the existing shares of Land common stock were automatically converted into the right to receive 0.22296103 shares of Regal common stock. Pursuant to the Merger, holders of Rexnord’s common stock that received shares of the PMC Business common stock in the Spin-Off were also issued approximately 39.9%. of the issued and outstanding shares of Regal common stock and existing holders of Regal common stock immediately prior to the Merger represented approximately 60.1% of the issued and outstanding shares of Regal common stock, in each case, excluding any overlaps in the pre-Merger stockholder bases. The Distribution and the Merger is a Reverse Morris Trust transaction and is intended to be tax-free to Rexnord stockholders for U.S. federal income tax purposes..

As described above, prior to the Distribution, the PMC Business made the Land Cash Payment to Rexnord amounting to $486.8 million in cash, in accordance with the calculation prescribed in the Separation Agreement.

The Land Cash Payment was funded by newly issued debt and became debt of the combined company following the Merger pursuant to ASC 805. Refer to Note 4 – Transaction Accounting Adjustments - Pre-Merger Adjustments for additional information.

Note 2 - Basis of Presentation

The combined company unaudited pro forma condensed combined financial statements are based on the historical consolidated financial statements of Regal and historical carve-out combined financial statements of the PMC Business. The combined company unaudited pro forma condensed combined balance sheet as of July 3, 2021 gives effect to the Transactions as if they had occurred on July 3, 2021. The combined company unaudited pro forma condensed combined statement of income for the six months ended July 3, 2021 and the fiscal year ended January 2, 2021 gives effect to the Transactions as if they had occurred on December 29, 2019. Regal has historically operated on a 52/53-week fiscal year on the Saturday nearest to the last day of the year or the quarter, which was December 28, 2019 for fiscal year 2019, January 2, 2021 for the fiscal year 2020, and July 3, 2021 for the second quarter of 2021. Following the end of Rexnord's fiscal year ended March 31, 2020, Rexnord transitioned to a December 31 fiscal year-end date. As a result, the combined financial statements of the PMC Business include financial information for the nine-month period from April 1, 2020 to December 31, 2020 (the "Transition Period"). Prior to the Transition Period, Rexnord’s fiscal year ended on March 31 of each year. For example, fiscal 2020 represents the period from April 1, 2019 to March 31, 2020. As a result of the Transition Period, the PMC Business’s historical combined statement of operations have been aligned to the fiscal year of Regal as follows:

•For the fiscal year ended January 2, 2021 , the Company adjusted the PMC Business's audited combined statement of operations for the year ended March 31, 2020, to (i) include the PMC Business's audited combined statement of operations data for the nine months ended December 31, 2020, and to (ii) exclude the PMC Business's unaudited combined statement of operations data for the nine months ended December 31, 2019 incorporated by reference to the Company’s joint proxy statement/prospectus-information statement on Form S-4, as amended (Registration No. 333-255982), which was declared effective by the SEC on July 20, 2021.

•The following table presents the reconciliation of the PMC Business’s historical unaudited financial data for the 12 months ended December 31, 2020 presented in the combined company unaudited pro forma consolidated statement of income.

	Audited		Unaudited
	Nine Months Ended December 31, 2020	Plus	Less	LTM Period Ended December 31, 2020
Net Sales	870.3	1,358.2	$ 994.7	$ 1,233.8
Cost of Sales	571.9	862.9	631.0	803.8
Gross profit	298.4	495.3	363.7	430.0
Selling, general and administrative expenses	194.1	271.3	201.0	264.4
Restructuring and other similar charges	13.0	14.3	8.1	19.2
Amortization of intangible assets	10.1	14.4	10.8	13.7
Income from Operations	81.2	195.3	143.8	132.7
Non-operating (expense) income:
Interest expense, net	(3.3)	(2.0)	(1.3)	(4.0)
Gain on the extinguishment of debt	-	3.0	3.0	-
Actuarial loss on pension and postretirement benefit obligations	(1.3)	(16.5)	(0.8)	(17.0)
Other income (expense), net	6.3	(2.7)	0.4	3.2
Income from operations before income taxes	82.9	177.1	145.1	114.9
Provision for Income Taxes	(24.2)	(34.8)	(30.5)	(28.5)
Equity method investment income	0.2	-	0.2	-
Net Income	58.9	142.3	114.8	86.4
Less: Non-controlling interest income	0.4	0.3	0.2	0.5
Net Income Attributable to Common Shareholders	58.5	142.0	$ 114.6	$ 85.9

All values are in US Dollars.

The historical financial statements have been adjusted in the combined company unaudited pro forma condensed combined financial information to give pro forma effect to Transaction Accounting Adjustments that reflect the accounting for the Transactions under U.S. GAAP.

The combined company unaudited pro forma condensed combined financial information and related notes were prepared using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with Regal as the accounting acquirer of the PMC Business. ASC 805 requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. For purposes of the combined company unaudited pro forma condensed combined balance sheet, the estimated purchase consideration has been allocated to the assets acquired and liabilities assumed of the PMC Business based upon Regal management’s preliminary estimate of their fair values. Accordingly, the preliminary purchase price allocation and related adjustments reflected in this combined company unaudited pro forma condensed combined financial information are subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed. There can be no assurances that these additional analyses and final valuations will not result in significant changes to the estimates of fair value set forth below.

The Merger Agreement provided that, in order to preserve the tax-free nature of the Transactions, the Exchange Ratio would be increased if and to the extent necessary so that the number of shares of Regal common stock issued in the Merger would result in holders of issued and outstanding shares of Land common stock immediately prior to the Merger, taking into account in the case of Overlap Shareholders their Overlap Shares, receiving shares of Regal common stock that in the aggregate represent 50.8% of the issued and outstanding shares of Regal common stock immediately following the Merger for tax purposes. In certain other circumstances in which the Overlap Shareholders are not being counted for this purpose, the Merger Agreement provides that the number of shares of Regal common stock that would have been issued in the Merger to former holders of Land common stock would equal 50.1% of the issued and outstanding shares of Regal common stock immediately following the Effective Time of the Merger. In connection with the Merger, the Overlap Shares held by Overlap Shareholders were counted and therefore the parties applied the Threshold Percentage.

In addition, in connection with the Transactions, Rexnord sought an IRS Ruling with respect to certain tax aspects of the Transactions, including matters relating to the nature and extent of shareholders who may be counted as Overlap Shareholders for purposes of determining the Exchange Ratio. On August 16, 2021, Rexnord received a private letter ruling from the IRS. The IRS Ruling addresses, among other things, the manner in which certain Overlap Shareholders may be identified and their respective ownership percentages may be determined for purposes of determining which categories of shareholders may be counted as Overlap Shareholders for purposes of Section 355(e) of the Internal Revenue Code (we refer to such categories of shareholders as “Qualifying Overlap Shareholders”).

The combined company unaudited pro forma condensed combined financial information and related notes were prepared in accordance with the assumptions outlined below. Based on the IRS Ruling and on Regal’s and Rexnord’s calculation of the shareholdings of such Qualifying Overlap Shareholders using the information set forth in the Regal 8-K Filing dated October 4, 2021, as of closing of the Merger:

•The Exchange Ratio was adjusted so that Regal would issue in the Merger shares of Regal common stock that would represent 39.9% of the issued and outstanding Regal common stock immediately following the Merger, which resulted in the issuance of 27,055,945 shares of Regal common stock

•Regal paid to the owners of Regal common stock in respect of their shares of Regal common stock owned as of the Regal Special Dividend Record Date a cash dividend of $6.99 per share (or approximately $284.5 million in the aggregate)

Additional shares of Regal common stock were required to be issued as a result of the Exchange Ratio adjustment mechanism described above and in accordance with the Merger Agreement, prior to the closing of the Merger, the Regal board of directors declared the Regal Special Dividend in an amount equal to the Baseline Regal Value (as defined below) minus the Adjusted Regal Value (as defined below), rounded to the nearest whole cent.

The “Baseline Regal Value” means an amount equal to the product of (i) the number of shares of Regal common stock issued and outstanding as of the record date for the Regal Special Dividend and (ii) $128.8215.

The “New Share Issuance” is determined by multiplying the number of shares of Regal common stock issued and outstanding as of October 4, 2021 of 40,700,787, by a fraction, the numerator of which is 38.6 and the denominator of which is 61.4 (0.6287), such that the New Share Issuance is equal to 25,587,140.

The “Adjusted Regal Value” means an amount equal to (i) the Baseline Regal Value multiplied by a fraction obtained by dividing (A) without giving effect to the adjustment mechanism, the New Share Issuance by (B) the total number of shares of Regal common stock to be issued in the Merger after giving effect to the adjustment mechanism.

As such, the Baseline Regal Value is calculated by multiplying 40,700,787 (Regal shares issued and outstanding as of October 4, 2021), by $128.8215, which equals $5,243,136,432.52.

The Adjusted Regal Value was calculated by multiplying $5,243,136,432.52 (the Baseline Regal Value), by the fraction obtained by dividing 25,587,140 (the New Share Issuance without giving effect to the adjustment mechanism) by 27,055,945 (the total number of shares of Regal common stock to be issued in the Merger after giving effect to the adjustment mechanism) (0.9457 rounded), which equals $4,958,498,619.73.

Therefore, the Regal Special Dividend (prior to rounding) is equal to $5,243,136,432.52 (the Baseline Regal Value), minus $4,958,498,619.73 (the Adjusted Regal Value), which equals $284,637,812.79. The amount of the Regal Special Dividend paid per share was rounded to the nearest whole cent, or $6.99 per share. Accordingly, the amount of the Regal Special Dividend that was paid to shareholders equals $284,498,501.13.

These combined company unaudited pro forma condensed combined financial information, including the preliminary purchase price allocation, are presented for illustrative purposes only and do not necessarily reflect the operating results or financial position that would have occurred if the Transactions had been consummated on the dates indicated, nor is it necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. Accordingly, such information should not be relied upon as an indicator of future performance, financial condition or liquidity.

Note 3 - Conforming Accounting Policies and Reclassification Adjustments

Based on a preliminary review of the accounting policies of Regal and the PMC Business, Regal is not aware of any differences that would have a material impact on the combined company unaudited pro forma condensed combined financial information. Regal is currently performing a full and detailed review of the PMC Business’s accounting policies and financial statements. As a result of the review, accounting policy differences may be identified and these differences, when identified, could have a material impact on the combined company unaudited pro forma condensed combined financial information.

Certain items included in the PMC Business's historical combined financial information have been reclassified to conform the PMC Business's financial statement presentation to Regal’s financial statement presentation.

PMC Business Condensed Combined Balance Sheet reclassifications:

The following items represent certain reclassification adjustments to conform the PMC Business's combined balance sheet presentation to Regal’s condensed consolidated balance sheet presentation, which have no impact on net assets and are summarized below (in millions):

As of June 30, 2021

Regal Presentation	PMC Business Presentation	PMC Business<br><br>(Historical)	Reclassifications to conform to Regal’s presentation	PMC Business (Historical, as adjusted)
Assets	Assets
Current Assets:	Current Assets:
Cash and Cash<br><br>Equivalents	Cash and cash<br><br>equivalents	$ 217.8	—	$ 217.8
Trade Receivables, Less<br><br>Allowances	Receivables, net	186.1	—	186.1
Inventories	Inventories	215.0	—	215.0
Prepaid Expenses and<br><br>Other Current Assets	Other current assets	39.0	—	39.0
Total Current Assets	Total current assets	657.9	—	657.9
Net Property, Plant and Equipment	Property, plant and equipment, net	347.4	—	347.4
Operating Lease Assets		—	50.2	50.2
Intangible Assets, net of amortization	Intangible assets, net	317.4	—	317.4
Deferred Income Tax Benefits		—	7.7	7.7
Goodwill	Goodwill	1,125.3	—	1,125.3
Other Noncurrent Assets	Other assets	69.2	(57.9)	11.3
Total Assets	Total assets	$ 2,517.2	—	2,517.2
Liabilities and Equity	Liabilities and Parent Equity
Current Liabilities:	Current Liabilities:
Current Maturities of Long-Term Debt	Current maturities of debt	2.3	—	2.3
Accounts Payable	Trade payables	120.4	—	120.4
Accrued Compensation and Benefits	Compensation and<br><br>benefits	39.9	—	39.9
Other Accrued Expenses		—	58.7	58.7
	Current portion of pension<br><br>obligations	1.4	(1.4)	—
Current Operating Lease Liabilities		—	8.4	8.4
	Other current liabilities	65.7	(65.7)	—
	Total Current Liabilities	229.7	—	229.7
Long-Term Debt	Long-term debt	70.6	—	70.6
Pension and Other Post Retirement Benefits	Pension obligations	50.1	—	50.1
Deferred Income Taxes	Deferred income taxes	117.1	—	117.1
Noncurrent Operating Lease Liabilities		—	44.0	44.0
Other Noncurrent Liabilities	Other liabilities	70.3	(44.0)	26.3
Total Liabilities	Total Liabilities	$ 537.8	—	$ 537.8

All values are in US Dollars.

(i) To reclassify $7.7 million of deferred tax assets and $50.2 million operating lease ROU assets from Other assets, to Deferred Income Tax Benefits and Operating Lease Assets, respectively.

(ii) To reclassify $8.4 million of current operating lease liabilities from Other current liabilities to Current Operating Lease Liabilities.

(iii) To reclassify $57.3 million from Other current liabilities and $1.4 million from Current portion of pension obligations, to Other Accrued Expenses.

(iv) To reclassify $44.0 million of non-current operating lease liabilities from Other liabilities to Noncurrent Operating Lease Liabilities.

PMC Business Condensed Combined Statement of Operations reclassifications:

For the PMC Business Six Months Ended June 30, 2021

Regal Presentation	PMC Business Presentation	PMC Business (Historical)	Reclassifications to conform to Regal’s presentation	PMC Business (Historical, as adjusted)
Net Sales	Net sales	$ 645.5	—	$ 645.5
Cost of Sales	Cost of sales	394.1	—	394.1
Gross Profit	Gross profit	251.4	—	251.4
Operating Expenses		—	148.2	148.2
	Selling, general and administrative expenses	141.6	(141.6)	—
Restructuring and Other Similar Charges	Restructuring and other similar charges	0.8	—	0.8
	Amortization of intangible assets	6.6	(6.6)	—
Income from Operations	Income from operations	102.4	—	102.4
	Non-operating (expense) income:
Interest Expense	Interest expense, net	(2.5)	—	2.5
	Gain on extinguishment of<br><br>debt	—	—	—
	Actuarial loss on pension<br><br>and postretirement benefit<br><br>obligations	—	—	—
Other (Income) Expenses, net	Other income (expense), net	1.5	—	(1.5)
Income before Taxes	Income from operations before income taxes	101.4	—	101.4
Provision (Benefit) for Income Taxes	Provision for income taxes	(23.8)	—	23.8
	Equity method investment income	0.3	—	0.3
Net Income	Net income	77.9	—	77.9
Less: Net Income Attributable to Noncontrolling Interests	Non-controlling interest income	0.2	—	0.2
Net Income Attributable to Regal Beloit Corporation	Net income attributable to Process & Motion Control	$ 77.7	—	$ 77.7

All values are in US Dollars.

(v) To reclassify $141.6 million of Selling, general, and administrative expenses, and $6.6 million of Amortization of intangible assets to Operating Expenses.

(vi) To reclassify amounts in the PMC Business's Interest expense, net to Interest Expense to conform with Regal's financial statement presentation.

(vii) To reclassify amounts in the PMC Business's Other income (expense), net to Other (Income) Expenses, net to conform with the presentation of Regal's financial statement presentation.

(viii) To reclassify amounts in the PMC Business's Provision for income taxes to Provision (Benefit) for Income Taxes to conform with the presentation of Regal's financial statement presentation.

Regal Condensed Consolidated Statement of Income reclassification:

In order to align the presentation of expenses as they are expected to be presented as a combined company, Regal has elected to disaggregate restructuring charges that were previously recognized in the Operating Expenses and Cost of Sales line items in Regal’s Condensed Consolidated Statement of Income. This presentation is consistent with the presentation of similar expenses in the PMC Business’s historical Combined Statement of Operations.

The reclassification of these expenses is as follows (in millions):

For the Regal Six Months Ended July 3, 2o21

	Regal (Historical)	Reclassification Adjustments	Regal (Historical, as adjusted)
Net Sales	$ 1,701.0	—	$ 1,701.0
Cost of Sales	1,204.1	(2.3)	1,201.8
Gross Profit	496.9	2.3	499.2
Operating Expenses	288.5	(0.9)	287.6
Goodwill Impairment	—	—	—
Asset Impairments	2.3	—	2.3
Restructuring and Other Similar Charges	—	3.2	3.2
Gain on Sale of Businesses	—	—	—
Total Operating Expenses	290.8	2.3	293.1
Income from Operations	206.1	—	206.1
Other (Income) Expenses, net	(2.4)	—	(2.4)
Interest Expense	24.1	—	24.1
Interest Income	(3.2)	—	3.2
Income before Taxes	187.6	—	187.6
Provision for Income Taxes	39.4	—	39.4
Net Income	148.2	—	148.2
Less: Net Income Attributable to Noncontrolling Interests	3.0	—	3.0
Net Income Attributable to Regal Beloit<br><br>Corporation	$ 145.2	—	$ 145.2

All values are in US Dollars.

(ix) To reclassify $2.3 million of restructuring charges from Cost of Sales and $0.9 million of restructuring charges from Operating Expenses to Restructuring and Other Similar Charges.

(x) To reclassify amounts in Regal’s Interest Income for the six months ended July 3, 2021 to conform with Regal's financial statement presentation for the year ended January 2, 2021.

PMC Business Combined Statement of Operations reclassifications:

The following items represent certain reclassification adjustments to conform the PMC Business's Combined Statement of Operations presentation to Regal’s Consolidated Statement of Income presentation, which have no impact on net income and are summarized below (in millions):

For the PMC Business Twelve Months Ended December 31, 2020

Regal Presentation	PMC Business Presentation	PMC Business (Historical)	Reclassifications to conform to Regal’s presentation	PMC Business (Historical, as adjusted)
Net Sales	Net sales	$ 1,233.8	—	$ 1,233.8
Cost of Sales	Cost of sales	803.8	—	803.8
Gross Profit	Gross profit	430.0	—	430.0
Operating Expenses		—	278.1	278.1
	Selling, general and administrative expenses	264.4	(264.4)	—
Restructuring and Other Similar Charges	Restructuring and other similar charges	19.2	—	19.2
	Amortization of intangible assets	13.7	(13.7)	—
Income from Operations	Income from operations	132.7	—	132.7
	Non-operating (expense) income:
Interest Expense	Interest expense, net	(4.0)	—	4.0
	Gain on extinguishment of<br><br>debt	—	—	—
	Actuarial loss on pension<br><br>and postretirement benefit<br><br>obligations	(17.0)	17.0	—
Other (Income) Expenses, net	Other income (expense), net	3.2	(17.0)	13.8
Income before Taxes	Income from operations before income taxes	114.9	—	114.9
Provision (Benefit) for Income Taxes	Provision for income taxes	(28.5)	—	28.5
	Equity method investment income	—	—	—
Net Income	Net income	86.4	—	86.4
Less: Net Income Attributable to Noncontrolling Interests	Non-controlling interest income	0.5	—	0.5
Net Income Attributable to Regal Beloit Corporation	Net income attributable to Process & Motion Control	$ 85.9	—	$ 85.9

All values are in US Dollars.

(xi) To reclassify $264.4 million of Selling, general, and administrative expenses, and $13.7 million of Amortization of intangible assets to Operating Expenses.

(xii) To reclassify amounts in the PMC Business's Interest expense, net to Interest Expense to conform with Regal's financial statement presentation.

(xiii) To reclassify $17.0 million of actuarial loss on pension and postretirement benefit obligations from Actuarial loss on pension and postretirement benefit obligations to Other (Income) Expenses, net.

(xiv) To reclassify amounts in the PMC Business's Other income (expense), net to Other (Income) Expenses, net to conform with the presentation of Regal's financial statement presentation.

(xv) To reclassify amounts in the PMC Business's Provision for income taxes to Provision (Benefit) for Income Taxes to conform with the presentation of Regal's financial statement presentation.

Regal Consolidated Statement of Income reclassification:

In order to align the presentation of expenses as they are expected to be presented as a combined company, Regal has elected to disaggregate restructuring charges that were previously recognized in the Operating Expenses and Cost of Sales line items in Regal’s Consolidated Statement of Income. This presentation is consistent with the presentation of similar expenses in the PMC Business’s historical Combined Statement of Operations.

The reclassification of these expenses is as follows (in millions):

For the Regal Fiscal Year Ended January 2, 2o21

	Regal (Historical)	Reclassification Adjustments	Regal (Historical, as adjusted)
Net Sales	$ 2,907.0	—	$ 2,907.0
Cost of Sales	2,098.3	(18.2)	2,080.1
Gross Profit	808.7	18.2	826.9
Operating Expenses	512.9	(8.4)	504.5
Goodwill Impairment	10.5	—	10.5
Asset Impairments	5.3	—	5.3
Restructuring and Other Similar Charges	—	26.6	26.6
Gain on Sale of Businesses	(0.1)	—	(0.1)
Total Operating Expenses	528.6	18.2	546.8
Income from Operations	280.1	—	280.1
Other (Income) Expenses, net	(4.4)	—	(4.4)
Interest Expense	39.8	—	39.8
Interest Income	5.9	—	5.9
Income before Taxes	250.6	—	250.6
Provision for Income Taxes	56.8	—	56.8
Net Income	193.8	—	193.8
Less: Net Income Attributable to Noncontrolling Interests	4.5	—	4.5
Net Income Attributable to Regal Beloit<br><br>Corporation	$ 189.3	—	$ 189.3

All values are in US Dollars.

(xvi) To reclassify $18.2 million of restructuring charges from Cost of Sales and $8.4 million of restructuring charges from Operating Expenses to Restructuring and Other Similar Charges.

Note 4 - Transaction Accounting Adjustments - Pre-Merger Adjustments

In accordance with the Separation Agreement, certain assets and liabilities will be transferred by Rexnord to the PMC Business that are currently not reflected in the historical combined balance sheet of the PMC Business, and the historical combined balance sheet of the PMC Business reflects certain assets that will not be acquired and certain liabilities that will not be assumed as part of the Merger.

In addition, prior to the Effective Time of the Merger and as a condition to the Spin-Off, the PMC Business was required to make a cash payment to Rexnord pursuant to the Separation Agreement. The amount of the Land Cash Payment was equal to a cash dividend of $486.8 million. To fund the Land Cash Payment, the PMC Business with coordination from Regal, entered into a DDTL Facility in the aggregate principal amount of $486.8 million. The proceeds of the DDTL Facility were drawn by the PMC Business in a single drawing.

The following adjustments are included in the combined company unaudited pro forma condensed combined balance sheet and in the combined company unaudited pro forma condensed combined statement of income to reflect the impact of these pre-merger transactions.

a)Combined Company Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments

The following summarizes the Pre-Merger pro forma adjustments to give effect as if the Merger had been completed on July 3, 2021 for the purposes of the combined company unaudited pro forma condensed combined balance sheet.

i.Represents an adjustment to reflect Rexnord’s retention of the deferred compensation plan assets and liabilities of $5.2 million as discussed in the Separation Agreement, that is currently included in Other Noncurrent Assets and Other Noncurrent Liabilities, related to PMC Business employees. The adjustment reflects the following impact on the combined company unaudited pro forma condensed combined balance sheet:

•A decrease of $5.2 million in Other Noncurrent Liabilities related to deferred compensation plan liabilities;

•A decrease of $5.2 million in Other Noncurrent Assets related to deferred compensation plan assets;

•A decrease of $1.3 million in Deferred Income Tax Benefits; and

•A decrease of $1.3 million in Net Parent Investment for the related impact of the aforementioned plans.

ii.Represents an adjustment to include the domestic pension plans that were excluded from the PMC Business carve-out financial statements and will be transferred to the PMC Business as part of the Separation. The estimated tax impacts of the pro forma adjustments have been reflected in the combined company unaudited pro forma condensed combined balance sheet by using a tax rate of 22.0% for the six months ended June 30, 2021. The adjustment reflects the following impact on the unaudited pro forma condensed combined balance sheet:

•A net increase of $39.0 million in Pension and Other Post Retirement Benefits and an increase of $0.3 million in Other Accrued Expenses ($241.4 million in liability and $202.1 million in assets) related to the transfer of domestic pension plans;

•An increase of $8.6 million in Deferred Income Tax Benefits; and

•A net decrease of $30.7 million in Net Parent Investment for the related impact of the aforementioned plans (consisting of a $39.0 million decrease related to the Pension and Other Post Retirement Benefits, a $0.3 million decrease related to Other Accrued Expense, and a $8.6 million increase related to the Deferred Income Tax Benefits).

iii.Represents adjustments related to the debt issuance and cash payment in connection with the Land Cash Payment to Rexnord. The adjustment reflects the following impact on the combined company unaudited pro forma condensed combined balance sheet:

•Pro forma adjustments related to Cash and Cash Equivalents:

(in millions)		As of July 3, 2021
Proceeds from issuance of the DDTL Facility
Land Cash Payment to Rexnord		(486.8)
Net adjustment to Cash and Cash Equivalents		—

All values are in US Dollars.

•Pro forma adjustment to increase Long-Term Debt to reflect the execution of the DDTL Facility of $486.8 million. Unamortized debt issuance costs related to the DDTL Facility do not meet the definition of an asset and, therefore, would not be recognized in connection with the Merger.

•Pro forma adjustment to reduce Net Parent Investment to reflect the Land Cash Payment to Rexnord of $486.8 million.

b)Combined Company Unaudited Pro Forma Condensed Combined Statement of Income Adjustments

The following summarizes the Pre-Merger pro forma adjustments to give effect as if the Merger had been completed on December 29, 2019 for the purposes of the combined company unaudited pro forma condensed combined statement of income.

i.Represents an adjustment to remove historical depreciation relating to the one property not acquired by Regal as part of the Transactions. As of July 3, 2021, the one property not acquired by Regal as part of the Transactions was sold and therefore not reflected in the PMC Business condensed combined balance sheet.

ii.Represents an adjustment of $3.7 million and $7.3 million for the six months ended July 3, 2021 and the year ended January 2, 2021, respectively, for the incremental Interest Expense in relation to the DDTL Facility, and an adjustment to Interest Expense of $1.9 million for the year ended January 2, 2021 relating to the recognition of the financing fees associated with the Land Bridge Facility. The Interest Expense related to the DDTL Facility will affect the statement of income until the maturity of the term loan in 2023 or repayment, if earlier. The Interest Expense associated with the Land Bridge Facility financing fees will not affect the combined statements of income beyond twelve months after the acquisition date.

The interest rate on the DDTL Facility reflects a three-month LIBOR rate of 0.130% as of September 30, 2021 plus a Eurodollar margin of 1.375%, for an all-in rate of 1.505%. A sensitivity analysis on interest expense has been performed to assess the effect of a change of 0.125% of the hypothetical interest rate would have on Interest Expense. A 0.125% increase or decrease in interest rates would result in a change in Interest Expense of approximately $0.3 million and $0.6 million for the six months ended July 3, 2021 and the year ended January 2, 2021, respectively.

iii.Represents an adjustment to reflect the estimated tax impacts of the pro forma adjustments in Provision (Benefit) for Income Taxes in the combined company unaudited pro forma condensed combined statement of income by using a blended statutory tax rate of 22.0% and 24.6% for the six months ended July 3, 2021 and the year ended January 2, 2021, respectively. During the first fiscal quarter of 2021, Regal underwent tax planning which impacted the blended statutory rate for the six months ended July 3, 2021. The total effective tax rate of the combined company could be significantly different depending on the post-acquisition geographical mix of income and other factors. Because the tax rate used for the combined company unaudited pro forma condensed combined financial information is an estimate, it will likely vary from the actual rate in periods subsequent to the completion of the Transactions and those differences may be material.

Note 5 - The Merger

Pursuant to the Transactions, the Land shares of common stock held by Rexnord's stockholders were converted into the number of shares of Regal common stock such that immediately after the Merger such shares issued to former Rexnord stockholders represented approximately 39.9% of Regal common stock issued and outstanding immediately following the Merger, and the shareholders of Regal common stock issued and outstanding immediately prior to the Merger collectively owned approximately 60.1% of Regal common stock issued and outstanding immediately following the Merger.

Estimated preliminary purchase consideration

The following table represents the preliminary estimate of the purchase consideration paid in the Merger. Information included in tables may not foot due to rounding.

(in millions, except share and per share data)
Land common stock issued and outstanding immediately prior to the Merger (a)		121,348,314
Exchange Ratio (Rounded) (b)		0.2230
Number of shares of Regal common stock to be issued in the Merger		27,055,945
Regal share price as of October 4, 2021
Less: Regal Special Dividend per share		(6.99)
Regal share price after Regal Special Dividend (c)
Fair value of Regal common stock to be issued
Estimated fair value of share-based compensation awards attributable to precombination services (d)		47.2
Land financing fees paid by Regal (e)
Effective settlement of pre-existing relationship (f)
Estimated preliminary purchase consideration

All values are in US Dollars.

(a) Based on Land common stock distributed to Rexnord stockholders as part of the Spin-Off of Land as of October 4, 2021.

(b) Exchange Ratio, calculated pursuant to the terms of the Merger Agreement, as follows:

Shares of Land common stock issued and outstanding immediately prior to the Merger	121,348,314
Regal common stock issued and outstanding immediately prior to the Effective Time	40,700,787
Share issuance ratio pursuant to the terms of the Merger Agreement	0.6287
New Share Issuance of Regal common stock	25,587,140
Additional shares of Regal common stock to be issued to maintain Threshold Percentage	1,468,805
Shares of Regal common stock to be issued in the Merger	27,055,945
Exchange Ratio (Rounded)	0.2230

The New Share Issuance is determined by multiplying the number of shares of Regal common stock issued and outstanding as of October 4, 2021 of 40,700,787, by a fraction, the numerator of which is 38.6 and the denominator of which is 61.4 (0.6287, rounded), such that the New Share Issuance is equal to 25,587,140.

Based on the analysis of the Overlap Shareholders, the Exchange Ratio was adjusted in order for the holders of issued and outstanding shares of Land common stock immediately prior to the Merger to receive shares of Regal common stock that in the aggregate represent, for tax purposes, and taking into account in the case of Overlap Shareholders their Overlap Shares, at least 50.8% of the issued and outstanding shares of Regal common stock immediately following the Merger.

The final Overlap Shares of 7,364,475 was determined based on the IRS Ruling received on August 16, 2021. The number of shares of Regal common stock issued in the Merger was determined by calculating the number of shares required to be issued to Rexnord shareholders such that the number of shares of Regal common stock to be issued in the Merger plus Overlap Shares are equal to the Threshold Percentage of the pro forma shares outstanding ((number of shares of Regal common stock to be issued in the Merger + Overlap Shares) / ( number of shares of Regal common stock to be issued in the Merger + Regal Shares issued and outstanding as of October 4, 2021) = 50.8%). The number of shares of Regal common stock to be issued in the Merger resulting from the Overlap Shares is equal to 27,055,945 ((27,055,945 + 7,364,475) / (27,055,945 + 40,700,787) = 50.8%).

The difference between the New Share Issuance of 25,587,140 (as defined above) and the number of shares of Regal common stock issued in the Merger of 27,055,945, equals 1,468,805, which represents the additional shares of Regal common stock issued to maintain the Threshold Percentage.

The Exchange Ratio was calculated by dividing 27,055,945 (the number of shares of Regal common stock t issued in the Merger), by 121,348,314 (which is the number of shares of Land common stock issued and outstanding as of October 4, 2021), which equals 0.22296103.

(c) Closing price of one share of Regal common stock on the New York Stock Exchange on October 4, 2021 and adjusted for the Regal Special Dividend. The Regal Special Dividend was paid to holders of Regal common stock as of a record date prior to the Merger Closing Date. Because the payment of the Regal Special Dividend was conditioned on the closing of the Merger, it is assumed that the market value of Regal common stock declined as a result of the Regal Special Dividend such that the Special Dividend was reflected in the combined company’s opening share price on October 5, 2021. The Regal Special Dividend per share is derived by the total amount of the Regal Special Dividend over the number of Regal common stock issued and outstanding immediately prior to the Effective Time. Refer to Note 2 - Basis of Presentation for additional information on the calculation of the Regal Special Dividend paid.

(d) The consideration for replacement of the outstanding equity awards held by employees of the PMC Business. Certain outstanding equity-based awards held by employees of the PMC Business that related to shares of Rexnord common stock were replaced by equity-based awards of Regal relating to shares of Regal common stock with substantially similar terms and conditions, except that Rexnord accelerated the vesting and settlement of most of the performance share units ("PSU") held by PMC Business employees prior to the consummation of the Transaction. The remaining PSUs relating to shares of Rexnord common stock were replaced by restricted stock units (“RSU”) relating to shares of Regal common stock subject to substantially the same terms and conditions as the PSUs other than performance goals, which were deemed satisfied in connection with the Transaction. A portion of the fair value of the PMC Business’s equity-based awards issued represents consideration transferred, while a portion represents future compensation expense based on the vesting terms of the equity-based awards. The amount attributable to consideration transferred for pre-combination services was calculated based on the ratio of the pre-combination service period (grant date until Closing Date) to the longer of the original total service period or the modified service period, if any. The aggregate fair value of outstanding awards was reduced to reflect an estimate of future forfeitures. As the Regal Special Dividend was paid pursuant to the terms of the Merger Agreement; holders of Regal equity-based awards outstanding after the Merger (including those granted in connection with the Merger to former holders of PMC Business equity-based awards) were kept whole pursuant to the existing anti-dilution provisions in the applicable plan documents. In connection with the Special Dividend, outstanding equity-based awards relating to Regal common stock were adjusted in accordance with the adjustment provisions of the applicable Regal equity incentive plan documents to increase the number of shares subject to such awards and, in the case of stock appreciation rights, to adjust the strike price per share, in each case to preserve the intrinsic value of such awards. The impact of the make-whole provision was deemed to have an immaterial impact; thus, no adjustment has been reflected in the unaudited pro forma condensed combined financial information. Additionally, the fair value of share-based awards attributable the post-combination period is not reflected as an incremental adjustment in the combined company unaudited pro forma condensed combined statement of income, as such additional expense was not deemed material in relation to historical amounts recorded in the PMC Business condensed combined statement of operations.

(e) Represents financing fees paid by Regal for the Land Bridge Facility and DDTL Facility that were determined to be costs of Rexnord.

(f) Effective settlement of Accounts Payable owed by Regal to the PMC Business as of the acquisition date.

Preliminary purchase price allocation

The table below summarizes the preliminary allocation of purchase price to the assets acquired and liabilities assumed, as if the Merger had been completed on July 3, 2021. The allocation has not been finalized. The final determination of these estimated fair values, the assets’ useful lives and the amortization methods are dependent upon certain valuations and other analyses that have not yet been completed, and as previously stated could differ

materially from the amounts presented in the combined company unaudited pro forma condensed combined financial information. The final determination will be completed as soon as practicable but no later than one year after the consummation of the Merger.

The preliminary purchase price allocation is presented below:

(in millions)
Preliminary estimated fair value of total acquisition consideration	$	3,946.6
Plus: Fair Value of Noncontrolling Interest acquired			3.2
	$	3,949.8
Assets:
Cash and Cash Equivalents			217.8
Trade Receivables, Less Allowances			186.1
Inventories			261.7
Prepaid Expenses and Other Current Assets			39.0
Net Property, Plant and Equipment			423.4
Operating Lease Assets			50.2
Intangible Assets, Net of Amortization			1,836.0
Deferred Income Tax Benefits			25.4
Other Noncurrent Assets			6.1
Total Assets			3,045.7
Liabilities:
Total Current Liabilities			230.0
Long-Term Debt (g)			557.4
Pension and Other Post Retirement Benefits			89.1
Deferred Income Taxes			482.6
Noncurrent Operating Lease Liabilities			44.0
Other Noncurrent Liabilities			21.1
Total Liabilities			1,424.2
Net Assets Acquired			1,621.5
Goodwill	$	2,328.3

(g) Includes the assumption of $486.8 million of long-term debt incurred by Land to make the Land Cash Payment to Rexnord prior to completion of the Merger.

Any increase or decrease in the fair value of the net assets acquired, as compared to the information shown herein, could also change the portion of the purchase consideration allocable to goodwill and could impact the operating results of the combined company following the Transactions due to differences in the allocation of the purchase consideration, and changes in the depreciation and amortization related to some of these assets and liabilities.

Note 6 - Transaction Adjustments to the Combined Company Unaudited Pro Forma Condensed Combined Balance Sheet

The following summarizes the Transaction Accounting Adjustments to give effect as if the Transactions had been completed on July 3, 2021 for the purposes of the combined company unaudited pro forma condensed combined balance sheet.

(a)Represents an adjustment to Cash and Cash Equivalents consisting of the following:

(in millions)			As of July 3, 2021
Proceeds from debt drawn from Regal's Existing Credit Agreement (i)	$	284.5
Special Cash Dividend to Regal shareholders (ii)			(284.5)
Transaction Fees and Expenses (iii)			(43.4)
Debt Issuance Costs (iv)			(6.2)
Net adjustment to Cash and Cash Equivalents	$	(49.6)

(i)Represents the proceeds from Regal’s Existing Credit Agreement obtained to fund the Regal Special Dividend of $284.5 million to Regal’s shareholders.

(ii)Represents the Regal Special Dividend of $284.5 million paid to Regal shareholders as part of the Transactions. The Regal Special Dividend was paid to holders of Regal common stock as of October 1, the record date.

(iii)Represents the payment of transaction costs related to the Transactions for legal fees, advisory services, and accounting and other professional fees related to the Merger, which had not been paid as of July 3, 2021.

(iv)Represents the debt issuance costs associated with the Regal Bridge Facility and ticking fees on the DDTL Facility incurred in connection with the Transactions of $6.2 million which had not been paid as of July 3, 2021.

(b)Represents an adjustment of $0.7 million to Accounts Payable and $0.7 million to Trade Receivables, Less Allowances to eliminate the outstanding balances between Regal and the PMC Business that are effectively settled following the Merger.

(c)Represents an adjustment of $46.7 million to Inventories to reflect the estimated step-up in fair value of PMC Business's inventory acquired, valued using a comparative sales method. The calculated value is preliminary and subject to change and could vary materially from the final purchase price allocation.

(d)Represents an adjustment of $97.7 million and $(21.7) million to Net Property, Plant and Equipment to reflect the estimated step-up in fair value of Property, Plant and Equipment acquired and to reflect the unfavorable terms of acquired finance leases when compared to market terms, respectively. The estimated adjustment to Net Property, Plant and Equipment was determined based on assumptions that market participants would use in pricing an asset. These calculated values are preliminary and subject to change and could vary materially from the final purchase price allocation.

(e)The adjustment to Operating Lease Assets to reflect favorable and unfavorable terms of the leases when compared with market terms was determined to not significantly impact the financial statements. The calculated value is preliminary and subject to change and could vary materially from the final purchase price allocation.

(f)Represents an adjustment to Goodwill to reflect the resulting goodwill that would have been recorded if the Merger occurred on July 3, 2021.

(in millions)			As of July 3, 2021
Goodwill resulting from the Merger	$	2,328.3
Less: Historical Goodwill of the PMC Business			(1,125.3)
Net adjustment to Goodwill	$	1,203

(g)Represents an adjustment to Intangible Assets, Net of Amortization to reflect the estimated fair value of intangible assets acquired consisting of the following:

(in millions)	Estimated useful life (in years)		As of July 3, 2021
Trade name portfolio	12
Technology portfolio	12		87.0
Customer relationships	20		1,524.0
Less: Historical Intangible Assets, Net of Amortization of the PMC Business			(317.4)
Net adjustment to Intangible Assets, Net of Amortization			1,518.6

All values are in US Dollars.

The fair value estimates for identifiable intangible assets are preliminary and are based upon assumptions that market participants would use in pricing an asset. 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 the PMC Business's existing customer base. The PMC Business trade name and technology were valued using the relief from royalty method, which considers both the market approach and the income approach. The calculated value is preliminary and subject to change and could vary materially from the final purchase price allocation.

A 10% change in the valuation of intangible assets would cause a corresponding increase or decrease in the balance of Goodwill by $143.3 million and the amount of amortization expense by $5.1 million and $10.2 million for the six months ended July 3, 2021 and the year ended January 2, 2021, respectively.

(h)Represents an adjustment of $284.5 million to Long-Term Debt to reflect the draw on Regal’s Existing Credit Agreement to finance the Regal Special Dividend.

(i)Represents an adjustment for the estimated tax impacts of the pro forma adjustments to Deferred Income Taxes as a result of purchase accounting in the combined company unaudited pro forma condensed combined balance sheet by using a blended statutory tax rate of 22.0% for the six months ended July 3, 2021. The total effective tax rate of the combined company could be significantly different depending on the post-acquisition geographical mix of income and other factors. Because the tax rate used for this combined company unaudited pro forma condensed combined financial information is an estimate, it will likely vary from the actual rate in periods subsequent to the completion of the business combination and those differences may be material.

(j)Represents an adjustment to Total Shareholders’ Equity consisting of the following:

(in millions)		Common Stock		Additional<br><br>Paid-<br><br>In Capital			Retained Earnings		Net Parent<br><br>Investment		Accumulated<br><br>Other<br><br>Comprehensive<br><br>Loss
Regal Special Dividend (i)		—		—	$	(284.5)			—		—
Elimination of total PMC Business Net Parent Investment and Accumulated Other Comprehensive Loss (ii)		—		—			—		(1,467.2)		9.8
Issuance of shares of Regal common stock (iii)		0.3		3,942.4			—		—		—
Transaction costs (iv)		—		—			(40.8)		—		—
Regal Bridge Facility debt issuance costs (v)		—		—			(8.9)		—		—
Net adjustment to Total Shareholders’ Equity					$	(334.2)

All values are in US Dollars.

i.Represents the Regal Special Dividend of $284.5 million paid to Regal shareholders as part of the Transactions. The total amount of the Regal Special Dividend was calculated pursuant to the terms of the Merger Agreement and as further described in Note 2 – Basis of Presentation. The Regal Special Dividend was paid to holders of Regal common stock as of a record date on October 1, 2021.

ii.Represents the elimination of the PMC Business's Net Parent Investment of $1,467.2 million and Accumulated Other Comprehensive Loss of $9.8 million.

iii.Represents the shares of Regal common stock to be issued as purchase consideration.

iv.Represents transaction fees and expenses incurred related to the Transactions which were not expensed as of July 3, 2021.

v.Represents debt issuance costs related to the Regal Bridge Facility which were not expensed as of July 3, 2021.

(k)Represents an adjustment to Prepaid Expenses and Other Current Assets of $4.9 million to remove the financing fees paid and capitalized for the Land Bridge Facility that were determined to be costs of Rexnord reimbursed by Regal of $1.9 million, and to remove the financing fees paid and capitalized for the Rover Bridge Facility of $3.0 million.

(l)Represents an adjustment to pay accrued transaction expenses of $2.6 million recorded in Other Accrued Expenses as of July 3, 2021.

(m)Represents an adjustment to Other Noncurrent Assets of $1.7 million to remove financing fees paid and capitalized for the DDTL Facility that were determined to be costs of Rexnord reimbursed by Regal.

Note 7 - Transaction Adjustments to the Combined Company Unaudited Pro Forma Condensed Combined Statement of Income

The following summarizes the Transaction Accounting Adjustments to give effect as if the Transactions had been completed on December 29, 2019 for the purposes of the combined company unaudited pro forma condensed combined statement of income:

(a)Represents adjustments to Net Sales and Cost of Sales of $2.7 million and $2.7 million, respectively, for the six months ended July 3, 2021 and $4.0 million and $4.0 million, respectively, for the year ended January 2, 2021 to remove the effect of transactions between Regal and the PMC Business that would be intercompany transactions following completion of the Merger.

(b)Represents an adjustment to Cost of Sales of $46.7 million for the year ended January 2, 2021 resulting from the run-off of the estimated step-up in fair value of inventory acquired. This adjustment will not affect the combined statement of income beyond twelve months after the acquisition date.

(c)Represents the net adjustment to Operating Expenses and Cost of Sales of $45.0 million and $2.1 million, respectively, for the six months ended July 3, 2021 and $89.7 million and $4.1 million, respectively, for the year ended January 2, 2021. This results from the incremental depreciation expense relating to the estimated step-up in fair value of the PMC Business’s Net Property, Plant and Equipment, reduction of depreciation expense related to the net unfavorable terms of acquired finance leases, and incremental amortization expense relating to the estimated fair values of the Intangible assets recognized in the Merger. These calculated values are preliminary and subject to change and could vary materially from the final purchase price allocation.

Depreciation expense for Net Property, Plant and Equipment was estimated based on a straight-line methodology, using useful lives ranging from 3 to 20 years. The vast majority of Net Property, Plant and Equipment is attributable to Machinery and Equipment, and Buildings and Improvements assets which have estimated useful lives of 10 years and 20 years, respectively.

(in millions)			Six months ended July 3, 2021			Year ended January 2, 2021
Depreciation expense on Net Property, Plant and Equipment	$	26		$	50.1
Less: Historical depreciation expense related to Net Property, Plant and Equipment			(23.4)			(45.0)
Net adjustment to depreciation expense	$	2.6		$	5.1
Net adjustment reflected in Cost of Sales	$	2.1		$	4.1
Net adjustment reflected in Operating Expenses	$	0.5		$	1.1
(in millions)			Six months ended July 3, 2021			Year ended January 2, 2021
---	---	---	---	---	---	---
Amortization expense on Trade name portfolio	$	9.4		$	18.8
Amortization on Technology portfolio			3.6			7.3
Amortization on Customer relationships			38.1			76.2
Less: Historical Intangible Asset amortization			(6.6)			(13.7)
Net adjustment to Operating Expenses related to amortization expense	$	44.5		$	88.6

(d)The adjustment to Operating Expenses resulting from the amortization of the net unfavorable and favorable terms of the leases was determined to not significantly impact unaudited pro forma condensed combined statement of income.

(e)Represents an adjustment to Other (Income) Expenses, net of $60.6 million for the year ended January 2, 2021 resulting from estimated transaction related costs that are not currently reflected in the historical financial statements of Regal, which consist of professional, legal, and other acquisition related fees. Included within the $60.6 million adjustment for the year ended January 2, 2021 are $19.8 million of transaction related costs which were recognized by Regal during the six months ended July 3, 2021. These expenses are removed from the combined company unaudited pro forma condensed combined statement of income for the six months ended July 3, 2021 as these costs will not affect the combined statement of income beyond twelve months after the acquisition date.

(f)Represents an adjustment to Interest Expense of $(5.6) million and $21.4 million for the six months ended July 3, 2021 and the year ended January 2, 2021, respectively, to reflect additional Interest Expense related to the financing incurred by Regal to pay the Regal Special Dividend in connection with the Transactions. The Interest Expense associated with the Regal Bridge Facility debt issuance costs will not affect the combined statements of income beyond twelve months after the acquisition date.

(in millions)		Six months ended July 3, 2021		Year ended January 2, 2021
Interest Expense on additional debt to finance the Regal Special Dividend		2.2		4.3
Amortization of debt issuance costs related to the amendment of Regal’s Existing Credit Agreement		—		0.4
Interest expense related to Regal Bridge Facility debt issuance costs (i)		(7.8)		16.7
Net adjustment to Interest Expense

All values are in US Dollars.

(i) $7.8 million of expense related to the Regal Bridge Facility was recognized by Regal during the six months ended July 3, 2021. These expenses are removed from the combined company unaudited pro forma condensed combined statement of income for the six months ended July 3, 2021 and recognized in the combined company unaudited pro forma combined statement of income for the year ended January 2, 2021 as these costs will not affect the combined statement of income beyond twelve months after the acquisition date.

The interest rate on Regal’s Existing Credit Agreement reflects a three-month LIBOR rate of 0.130% as of September 30, 2021 plus a Eurodollar margin of 1.375%, for an all-in rate of 1.505%. A sensitivity analysis on interest expense has been performed to assess the effect of a change of 0.125% of the hypothetical interest rate would have on interest expense. A 0.125% increase or decrease in interest rates would result in a change

in interest expense of approximately $0.2 million and $0.4 million for the six months ended July 3, 2021 and the year ended January 2, 2021, respectively.

(g)Represents an adjustment for the estimated tax impacts of the pro forma adjustments in Taxes on income (loss) in the combined company unaudited pro forma condensed combined statement of income by using a blended statutory tax rate of 22.0% and 24.6% for the six months ended July 3, 2021 and the year ended January 2, 2021, respectively. Based on a preliminary analysis of each component of the estimated $49.6 million of transaction costs reflected in the combined company unaudited pro forma condensed combined statement of income for the year ended January 2, 2021, $22.5 million was deemed to be deductible for income tax purposes, resulting in a $5.6 million benefit to Taxes on income (loss) when multiplied by the blended statutory tax rate.

The total effective tax rate of the combined company could be significantly different depending on the post-acquisition geographical mix of income and other factors. Because the tax rate used for these pro forma financial statements is an estimate, it will likely vary from the actual rate in periods subsequent to the completion of the business combination and those differences may be material.

(h)Represents the adjustment to EPS for the six months ended July 3, 2021 and the year ended January 2, 2021 to present pro forma basic and diluted weighted average shares of the combined company using the historical weighted average shares of Regal common stock outstanding combined with the additional Regal equity awards issued in conjunction with the Transaction. The following table sets forth a reconciliation of the numerators and denominators used to compute pro forma basic and diluted earnings per share (in millions, except share and per share data):

Pro Forma Basic Weighted Average Shares			Six Months Ended July 3, 2021			Year Ended January 2, 2021
Pro forma net income (loss) attributable to common shareholders	$	207.5		$	91.3
Historical weighted average Regal common stock shares outstanding - Basic			40,642,121			40,592,636
Issuance of shares to Rexnord common stock shareholders			27,055,945			27,055,945
Pro forma weighted average shares (basic)			67,698,066			67,648,581
Pro forma basic EPS	$	3.07		$	1.35
Pro Forma Diluted Weighted Average Shares			Six Months Ended July 3, 2021			Year Ended January 2, 2021
---	---	---	---	---	---	---
Historical weighted average Regal common stock shares outstanding - Diluted			40,984,794			40,768,972
Issuance of shares to Rexnord common stock shareholders Regal shares issued to Rexnord shareholders as consideration			27,055,945			27,055,945
Dilutive impact of Regal’s RSUs to replace PMC Business’s RSUs			72,304			72,304
Dilutive impact of Regal’s stock options to replace PMC Business’s stock options			123,459			123,459
Pro forma weighted average shares (diluted)			68,236,502			68,020,680
Pro forma diluted EPS	$	3.04		$	1.34

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