Regal Rexnord Corporation

Regal Rexnord Corporation (NYSE: RRX) supplies equipment that powers, transmits and controls motion. Its segments are Automation & Motion Control, Industrial Powertrain Solutions and Power Efficiency Solutions, serving markets including factories, buildings, data centers and aerospace.

September-quarter results

Three months ended September 30. USD millions, except diluted earnings per share.

Adjusted results remove selected acquisition accounting, impairment, restructuring, financing and other items. Adjusted EBITDA also removes interest, taxes, depreciation and amortization. Net tariff benefits of $14.7 million remain in quarterly adjusted EBITDA. Excluding them gives $336.6 million, while adjusted EPS excluding refunds was $2.72 versus $2.51 a year earlier.

Sales against the August promises

Automation & Motion Control sales of $500.6 million exceeded the earlier $455 million to $465 million range. Industrial Powertrain Solutions sales of $649.5 million fell below its $655 million to $670 million range. Power Efficiency Solutions sales of $437.9 million were inside its $435 million to $445 million range.

Data-center sales rose 307%, or 169% excluding E-Pods. E-Pods are modular electrical systems in the automation segment, with $25 million of quarterly recognized sales. The growth comparison concerns the data-center end market, rather than all group sales.

Portfolio review and planned AMS sale

Chief Executive Officer Aamir Paul has started a comprehensive review with the board and outside advisers. Separately, the quarterly filing records a commitment during Q3 to sell autonomous mobile solutions, or AMS, and classifies its assets and liabilities as held for sale.

AMS provides hardware and navigation software for autonomous guided vehicles. The company expects a sale within twelve months. It has not disclosed an agreed buyer, sale price or completed disposal.

The prospective sale triggered a $95.5 million goodwill impairment at the broader reporting unit containing AMS. After allocating goodwill to the business being sold and the retained business, a further $23.8 million charge fully impaired the goodwill allocated to AMS. Together the noncash charges were $119.3 million.

Annual financial plan

Adjusted EPS guidance rose to $10.60 to $10.90 from August's $10.35 to $10.85. The midpoint increased to $10.75 from $10.60. The enterprise adjusted EBITDA outlook remained unchanged.

Sales are expected around $6.22 billion versus $6.20 billion previously. The new plan assumes depreciation of $152 million versus $161 million and an adjusted tax rate of 20.8% versus 21.5%.

GAAP EPS guidance fell to $3.76 to $4.06 from $5.42 to $5.92, with a $1.78-per-share goodwill charge included. Annual free cash-flow guidance remains approximately $600 million, the same level shown in August.

Cash-flow comparison and debt

Nine-month operating cash flow was $411.4 million versus $823 million. Most of that decline reflects a change in net cash from receivables sales: $3.3 million this year versus $398.3 million last year. These are sales of receivables, with separate accounting from ordinary borrowings.

At September 30, debt was $4.452 billion, including finance leases. Cash on the balance sheet was $449.6 million, with a further $1.6 million classified as held for sale. The company's net-debt measure was $4.001 billion.

The September 25 term-loan prepayment was $350 million, leaving $500 million outstanding under that facility. The remaining $18.1 million of Altra notes was repaid at its October 1 maturity.

The reported 2.9-times net-debt ratio includes expected synergies in its earnings denominator. The comparable ratio before those prospective synergies is approximately three times.

Next operating milestones

Future results can test whether strong data-center demand continues, whether industrial powertrain sales recover and how the portfolio review translates into transactions and capital allocation.