MILWAUKEE, May 1, 2024
/PRNewswire/ -- Regal Rexnord Corporation (NYSE: RRX) announced
today an evolved business purpose that reflects its strategic
portfolio transformation over the last few years – now complete,
after closing yesterday on the sale of the Industrial Motors and
Generators businesses that comprised the substantial majority of
its Industrial Systems segment. In the last three years, the
Company also executed two other significant M&A transactions –
the 2021 merger with Rexnord's ~$1.2
billion industrial power transmission business, and the 2023
acquisition of Altra, with ~$1.9
billion in sales split between industrial power transmission
and automation.
Measured on sales by application, industrial power transmission
is now just under 45% of the Regal Rexnord portfolio, with the
remaining 55% split roughly equally between factory automation
solutions, and high-efficiency electric motors and air moving
subsystem offerings. Evidencing its progress on portfolio
diversification, the electric motors business represented over 70%
of the portfolio just five years ago.
The evolution of the Company's portfolio through merger,
acquisition and divestment transactions has been highly
intentional, and a critical driver of its strategy to become a more
innovative, industry leading, faster growing, higher margin, and
cash generative enterprise.
The Company's portfolio today is characterized by sales in
markets and applications with attractive strategic characteristics,
including 50% of sales into markets with secular demand tailwinds,
that continue to provide opportunities to accelerate key
capabilities to win and widen the competitive moat. Today, Regal
Rexnord's product offering has higher vitality than at any other
point in its history and is targeted to reach 25% in the next two
years. These traits are evident in the Company's adjusted gross
margins, which approached 36% in the fourth quarter of 2023, and
exceeded 36% excluding Industrial Systems, and are also expected to
contribute to the Company achieving a 40% adjusted gross margin
exiting 2025.
Consistent with Regal Rexnord's significant portfolio
re-balancing, the Company's purpose is also evolving, and is now
articulated as follows:
We Create a Better Tomorrow with
Sustainable Solutions that
Power, Transmit &
Control Motion
The new purpose captures the unifying characteristic of the
Company's evolved portfolio, which centers on motion:
- High-efficiency electric motors and air moving subsystems
provide the power to create motion.
- A portfolio of highly engineered power transmission components
and subsystems, which has unique scale and scope, efficiently
transmits motion to power industrial applications.
- The automation portfolio, comprised of controls, actuators,
drives, and small precision motors, controls motion in
applications ranging from factory automation to precision control
in surgical tools.
Regal Rexnord CEO, Louis Pinkham,
commented on the announcement: "Our new purpose reflects the
transformation of our portfolio into one characterized by more
differentiated products and technologies, many that help end users
reduce their environmental impact, and strong exposure to
attractive higher-growth, durable, secular markets – in particular,
factory automation, aerospace, medical, data center, food &
beverage, residential HVAC, warehouse and alternative
energy."
Pinkham continued, "With transformational portfolio
re-shaping M&A now behind us, our focus is capitalizing on the
many self-help opportunities in front of us. The inherent strengths
of our go-forward portfolio, plus our commitment to further raise
growth investments in secular markets and select strategic
applications, should enable consistent growth above market, and
support our financial goals to achieve 40% adjusted gross margins,
25% adjusted EBITDA margins and $1
billion of free cash flow, all on an annual run rate basis
exiting 2025. We believe our portfolio is now better positioned
than ever to deliver highly compelling value creation opportunities
for our key stakeholders – our associates, our customers and our
shareholders."
About Regal Rexnord
Regal Rexnord's 30,000 associates around the world help create a
better tomorrow by providing sustainable solutions that power,
transmit and control motion. The Company's electric motors and air
moving subsystems provide the power to create motion. A portfolio
of highly engineered power transmission components and subsystems
efficiently transmits motion to power industrial applications. The
Company's automation offering, comprised of controls, actuators,
drives, and small precision motors, controls motion in applications
ranging from factory automation to precision control in surgical
tools.
The Company's end markets benefit from meaningful secular demand
tailwinds, and include factory automation, food & beverage,
aerospace, medical, data center, warehouse, alternative energy,
residential and commercial buildings, general industrial,
construction, metals and mining, and agriculture.
Regal Rexnord is comprised of three operating segments:
Industrial Powertrain Solutions, Power Efficiency Solutions, and
Automation & Motion Control. Regal Rexnord is headquartered in
Milwaukee, Wisconsin and has
manufacturing, sales and service facilities worldwide. For more
information, including a copy of our Sustainability Report, visit
RegalRexnord.com.
Forward Looking Statements
All statements in this communication, other than those relating
to historical facts, are "forward-looking statements."
Forward-looking statements can generally be identified by their use
of terms such as "anticipate," "believe," "estimate," "expect,"
"intend," "plan," "may," "will," "project," "forecast," "would,"
"could," "should," and similar expressions, including references to
assumptions. Forward-looking statements are not guarantees of
future performance and are subject to a number of assumptions,
risks and uncertainties, many of which are beyond our control,
which could cause actual results to differ materially from such
statements. Forward-looking statements include, but are not limited
to, statements about future strategic plans and future financial
and operating results. Important factors that could cause actual
results to differ materially from those presented or implied in the
forward-looking statements in this communication include, without
limitation, the possibility that the Company may be unable to
achieve expected benefits, synergies and operating efficiencies in
connection with the sale of the Industrial Motors and Generators
businesses, the acquisition of Altra Industrial Motion Corp.
("Altra Transaction"), and the merger with the Rexnord Process
& Motion Control business (the "Rexnord PMC business") within
the expected time-frames or at all and to successfully integrate
Altra and the Rexnord PMC business; the Company's substantial
indebtedness as a result of the Altra Transaction and the effects
of such indebtedness on the Company's financial flexibility; the
Company's ability to achieve its objectives on reducing its
indebtedness on the desired timeline; dependence on key suppliers
and the potential effects of supply disruptions; fluctuations in
commodity prices and raw material costs; any unforeseen changes to
or the effects on liabilities, future capital expenditures,
revenue, expenses, synergies, indebtedness, financial condition,
losses and future prospects; unanticipated operating costs,
customer loss and business disruption; the Company's ability to
retain key executives and employees; uncertainties regarding the
ability to execute restructuring plans within expected costs and
timing; challenges to the tax treatment that was elected with
respect to the merger with the Rexnord PMC business and related
transactions; actions taken by competitors and their ability to
effectively compete in the increasingly competitive global electric
motor, drives and controls, power generation and power transmission
industries; the ability to develop new products based on
technological innovation, such as the Internet of Things and
artificial intelligence, and marketplace acceptance of new and
existing products; dependence on significant customers and
distributors; risks associated with climate change and uncertainty
regarding our ability to deliver on our climate commitments and/or
to meet related investor, customer and other third party
expectations relating to our sustainability efforts; risks
associated with global manufacturing, including risks associated
with public health crises and political, societal or economic
instability, including instability caused by ongoing geopolitical
conflicts; issues and costs arising from the integration of
acquired companies and businesses and the timing and impact of
purchase accounting adjustments; prolonged declines in one or more
markets; economic changes in global markets, such as reduced demand
for products, currency exchange rates, inflation rates, interest
rates, recession, government policies, including policy changes
affecting taxation, trade, tariffs, immigration, customs, border
actions and the like, and other external factors that the Company
cannot control; product liability, asbestos and other litigation,
or claims by end users, government agencies or others that products
or customers' applications failed to perform as anticipated;
unanticipated liabilities of acquired businesses; unanticipated
adverse effects or liabilities from business exits or divestitures;
the Company's ability to identify and execute on future M&A
opportunities, including significant M&A transactions; the
impact of any such M&A transactions on the Company's results,
operations and financial condition, including the impact from costs
to execute and finance any such transactions; unanticipated costs
or expenses that may be incurred related to product warranty
issues; infringement of intellectual property by third parties,
challenges to intellectual property, and claims of infringement on
third party technologies; effects on earnings of any significant
impairment of goodwill; losses from failures, breaches, attacks or
disclosures involving information technology infrastructure and
data; costs and unanticipated liabilities arising from rapidly
evolving laws and regulations; and other factors that can be found
in our filings with the Securities and Exchange Commission,
including our most recent periodic reports filed on Form 10-K and
Form 10-Q, which are available on our Investor Relations website.
Forward-looking statements are given only as of the date of this
communication and we disclaim any obligation to update or revise
any forward-looking statement, whether as a result of new
information, future events or otherwise, except as required by
law.
Non-GAAP Measures
This press release refers to adjusted gross margins for the
fourth quarter of 2023, which are non-GAAP financial measures.
Please refer to the Company's earnings release reporting fourth
quarter 2023 financial results issued on February 7, 2024 for further disclosure and a
reconciliation, a copy of which is available on our Investor
Relations website.
This press release also includes non-GAAP forward-looking
information. The Company believes that a quantitative
reconciliation of this forward-looking information to the most
comparable financial measure calculated and presented in accordance
with GAAP cannot be made available without unreasonable efforts. A
reconciliation of this non-GAAP financial measure would require the
Company to predict the timing and likelihood of future
restructurings and other charges. Accordingly, a reconciliation of
the most directly comparable forward-looking GAAP measure is not
provided.
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SOURCE Regal Rexnord Corporation