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

 FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended October 2, 2021 or 
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-07283

REGAL REXNORD CORPORATION
(Exact name of registrant as specified in its charter)
 
Wisconsin 39-0875718
(State of other jurisdiction of
incorporation) 		(IRS Employer
Identification No.)
200 State Street, Beloit, Wisconsin 53511
(Address of principal executive office)
(608) 364-8800
Registrant’s telephone number, including area code

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
☒
Accelerated Filer
☐
Non-accelerated filer
☐
Smaller Reporting Company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No  ☒
On October 29, 2021 the registrant had outstanding 67,759,334 shares of common stock, $0.01 par value per share.



REGAL REXNORD CORPORATION
INDEX
 
  Page
Item 1 —
5
6
7
8
10
11
Item 2 —
38
Item 3 —
47
Item 4 —
50
Item 1 —
50
Item 1A —
50
Item 2 —
61
Item 6 —
62
63
 

2

CAUTIONARY STATEMENT

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

•risks related to any unforeseen changes to or the effects on liabilities, future capital expenditures, revenue, expenses, synergies, indebtedness, financial condition, losses and future prospects;
•the possibility that the conditions to the consummation of the Arrowhead transaction will not be satisfied;
•the possibility that the Company may be unable to achieve expected synergies and operating efficiencies in connection with the Transactions within the expected time-frames or at all and to successfully integrate the PMC Business and Arrowhead;
•expected or targeted future financial and operating performance and results;
•operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) being greater than expected following the Transactions;
•the Company's ability to retain key executives and employees;
•the continued financial and operational impacts of and uncertainties relating to the COVID-19 pandemic on customers and suppliers and the geographies in which they operate;
•uncertainties regarding the ability to execute restructuring plans within expected costs and timing;
•the ability to obtain the anticipated tax treatment of the Rexnord Transaction 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 marketplace acceptance of new and existing products, including products related to technology not yet adopted or utilized in geographic locations in which the Company does business;
•fluctuations in commodity prices and raw material costs;
•dependence on significant customers;
•seasonal impact on sales of products into HVAC systems and other residential applications;
•risks associated with global manufacturing, including risks associated with public health crises;
•issues and costs arising from the integration of acquired companies and businesses and the timing and impact of purchase accounting adjustments;
•the Company's overall debt levels and its ability to repay principal and interest on its outstanding debt, including debt assumed or incurred in connection with the Transactions;
•prolonged declines in one or more markets, such as heating, ventilation, air conditioning, refrigeration, power generation, oil and gas, unit material handling or water heating;
3

•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 and other litigation, or claims by end users, government agencies or others that products or customers' applications failed to perform as anticipated, particularly in high volume applications or where such failures are alleged to be the cause of property or casualty claims;
•unanticipated liabilities of acquired businesses;
•unanticipated adverse effects or liabilities from business exits or divestitures;
•unanticipated costs or expenses that may be incurred related to product warranty issues;
•dependence on key suppliers and the potential effects of supply disruptions;
•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 or intangible assets;
•losses from failures, breaches, attacks or disclosures involving information technology infrastructure and data;
•cyclical downturns affecting the global market for capital goods;
•changes in the method of determining London Interbank Offered Rate ("LIBOR"), or the replacement of LIBOR with an alternative reference rate;
•and other risks and uncertainties including, but not limited, to those described in the section entitled "Risk Factors" elsewhere in this report, in the Company's Annual Report on Form 10-K on file with the SEC and from time to time in other filed reports including the Company's Quarterly Reports on Form 10-Q. For a more detailed description of the risk factors associated with the Company, please refer to the section entitled "Risk Factors" elsewhere in this report, the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2021 on file with the SEC and subsequent SEC filings.
Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this report are made only as of the date of this report, and the Company undertakes no obligation to update any forward-looking information contained in this report to reflect subsequent events or circumstances. 

4

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

REGAL REXNORD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in Millions, Except Per Share Data)
 
  Three Months Ended Nine Months Ended
  October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020
Net Sales $ 892.7  $ 758.2  $ 2,593.7  $ 2,126.5 
Cost of Sales 638.1  536.6  1,842.2  1,531.3 
Gross Profit 254.6  221.6  751.5  595.2 
Operating Expenses 144.4  131.6  432.9  385.1 
Gain on Divestiture of Businesses —  —  —  (0.1)
Asset Impairments 2.8  —  5.1  4.3 
       Total Operating Expenses 147.2  131.6  438.0  389.3 
Income from Operations 107.4  90.0  313.5  205.9 
Other Income, Net (1.2) (1.1) (3.6) (3.3)
Interest Expense 22.0  9.0  46.1  31.2 
Interest Income (2.3) (1.3) (5.5) (3.8)
Income before Taxes 88.9  83.4  276.5  181.8 
Provision for Income Taxes 17.8  17.1  57.2  39.5 
Net Income 71.1  66.3  219.3  142.3 
Less: Net Income Attributable to Noncontrolling Interests 1.6  1.3  4.6  3.4 
Net Income Attributable to Regal Rexnord Corporation $ 69.5  $ 65.0  $ 214.7  $ 138.9 
Earnings Per Share Attributable to Regal Rexnord Corporation:
Basic $ 1.71  $ 1.60  $ 5.28  $ 3.42 
Assuming Dilution $ 1.70  $ 1.60  $ 5.24  $ 3.41 
Weighted Average Number of Shares Outstanding:
Basic 40.7  40.6  40.7  40.6 
Assuming Dilution 41.0  40.8  41.0  40.7 

See Accompanying Notes to Condensed Consolidated Financial Statements

5

REGAL REXNORD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in Millions)
 
  Three Months Ended Nine Months Ended
  October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020
Net Income $ 71.1  $ 66.3  $ 219.3  $ 142.3 
Other Comprehensive Income (Loss) Net of Tax:
Foreign Currency Translation Adjustments (15.6) 36.7  (27.3) (2.8)
Hedging Activities:
Increase (Decrease) in Fair Value of Hedging Activities, Net of Tax Effects of $(1.1) Million and $1.9 Million for the Three Months Ended October 2, 2021 and September 26, 2020 and $7.7 Million and $(3.9) Million for the Nine Months Ended October 2, 2021 and September 26, 2020, Respectively
(3.4) 6.0  24.5  (12.3)
Reclassification of (Gains) Losses included in Net Income, Net of Tax Effects of $(3.5) Million and $2.0 Million for the Three Months Ended October 2, 2021 and September 26, 2020 and $(9.0) Million and $1.9 Million for the Nine Months Ended October 2, 2021 and September 26, 2020, Respectively
(11.1) 6.2  (28.4) 5.8 
Pension and Post Retirement Plans:
Reclassification Adjustments for Pension and Post Retirement Benefits included in Net Income, Net of Tax Effects of $0.1 Million for the Three Months Ended October 2, 2021 and September 26, 2020 and $0.3 Million and $0.1 Million for the Nine Months Ended October 2, 2021 and September 26, 2020, Respectively
0.3  0.1  1.0  0.3 
Other Comprehensive Income (Loss) (29.8) 49.0  (30.2) (9.0)
Comprehensive Income 41.3  115.3  189.1  133.3 
Less: Comprehensive Income Attributable to Noncontrolling Interests 1.4  2.2  4.8  3.5 
Comprehensive Income Attributable to Regal Rexnord Corporation $ 39.9  $ 113.1  $ 184.3  $ 129.8 
        See Accompanying Notes to Condensed Consolidated Financial Statements

6

REGAL REXNORD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Millions, Except Per Share Data)
 
October 2, 2021 January 2, 2021
ASSETS
Current Assets:
Cash and Cash Equivalents $ 328.6  $ 611.3 
Trade Receivables, Less Allowances of $18.0 Million and $18.3 Million in 2021 and 2020, Respectively
560.9  432.0 
Inventories 808.2  690.3 
Prepaid Expenses and Other Current Assets 127.4  108.6 
Assets Held for Sale 11.4  9.1 
Total Current Assets 1,836.5  1,851.3 
Net Property, Plant and Equipment 514.1  555.5 
Operating Lease Assets 71.4  73.4 
Goodwill 1,506.2  1,518.2 
Intangible Assets, Net of Amortization 492.0  530.3 
Deferred Income Tax Benefits 44.2  43.9 
Other Noncurrent Assets 20.6  16.4 
Total Assets $ 4,485.0  $ 4,589.0 
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable $ 512.7  $ 360.1 
Dividends Payable 13.4  12.2 
Accrued Compensation and Employee Benefits 85.5  76.6 
Other Accrued Expenses 135.5  120.5 
Current Operating Lease Liabilities 20.8  21.6 
Current Maturities of Long-Term Debt 1.0  231.0 
Total Current Liabilities 768.9  822.0 
Long-Term Debt 647.3  840.4 
Deferred Income Taxes 167.1  172.0 
Pension and Other Post Retirement Benefits 60.7  69.5 
Noncurrent Operating Lease Liabilities 54.7  55.1 
Other Noncurrent Liabilities 58.6  53.0 
Contingencies (see Note 13)
Equity:
Regal Rexnord Corporation Shareholders' Equity:
Common Stock, $0.01 par value, 100.0 Million Shares Authorized, 40.7 Million and 40.6 Million Shares Issued and Outstanding for 2021 and 2020, Respectively
0.4  0.4 
Additional Paid-In Capital 701.7  696.6 
Retained Earnings 2,186.4  2,010.7 
Accumulated Other Comprehensive Loss (193.7) (163.3)
Total Regal Rexnord Corporation Shareholders' Equity 2,694.8  2,544.4 
Noncontrolling Interests 32.9  32.6 
Total Equity 2,727.7  2,577.0 
Total Liabilities and Equity $ 4,485.0  $ 4,589.0 
See Accompanying Notes to Condensed Consolidated Financial Statements.
7

REGAL REXNORD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(Dollars in Millions, Except Per Share Data)
 
Three Months Ended
Common Stock $0.01 Par Value Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolling Interests Total Equity
July 3, 2021 $ 0.4  $ 698.4  $ 2,130.3  $ (164.1) $ 31.5  $ 2,696.5 
Net Income —  —  69.5  —  1.6  71.1 
Other Comprehensive Loss —  —  —  (29.6) (0.2) (29.8)
Dividends Declared ($0.33 Per Share)
—  —  (13.4) —  —  (13.4)
Stock Options Exercised —  (0.4) —  —  —  (0.4)
Share-Based Compensation —  3.7  —  —  —  3.7 
October 2, 2021 $ 0.4  $ 701.7  $ 2,186.4  $ (193.7) $ 32.9  $ 2,727.7 
June 27, 2020 $ 0.4  $ 694.0  $ 1,919.7  $ (295.0) $ 27.9  $ 2,347.0 
Net Income —  —  65.0  —  1.3  66.3 
Other Comprehensive Income —  —  —  48.1  0.9  49.0 
Dividends Declared ($0.30 Per Share)
—  —  (12.2) —  —  (12.2)
Stock Options Exercised —  (0.8) —  —  —  (0.8)
Share-Based Compensation —  2.7  —  —  —  2.7 
Dividends Declared to Noncontrolling Interests —  —  —  —  (0.1) (0.1)
September 26, 2020 $ 0.4  $ 695.9  $ 1,972.5  $ (246.9) $ 30.0  $ 2,451.9 
 
8

Nine Months Ended
Common Stock $0.01 Par Value Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interests Total Equity
January 2, 2021 $ 0.4  $ 696.6  $ 2,010.7  $ (163.3) $ 32.6  $ 2,577.0 
Net Income —  —  214.7  —  4.6  219.3 
Other Comprehensive Income (Loss) —  —  —  (30.4) 0.2  (30.2)
Dividends Declared ($0.96 Per Share)
—  —  (39.0) —  —  (39.0)
Stock Options Exercised —  (6.4) —  —  —  (6.4)
Share-Based Compensation —  11.5  —  —  —  11.5 
Dividends Declared to Noncontrolling Interests —  —  —  —  (4.5) (4.5)
October 2, 2021 $ 0.4  $ 701.7  $ 2,186.4  $ (193.7) $ 32.9  $ 2,727.7 
December 28, 2019 $ 0.4  $ 701.8  $ 1,886.7  $ (237.8) $ 29.3  $ 2,380.4 
Net Income —  —  138.9  —  3.4  142.3 
Other Comprehensive Income (Loss) —  —  —  (9.1) 0.1  (9.0)
Dividends Declared ($0.90 Per Share)
—  —  (36.5) —  —  (36.5)
Stock Options Exercised —  (3.0) —  —  —  (3.0)
Stock Repurchase —  (11.1) (13.9) —  —  (25.0)
Share-Based Compensation —  8.2  —  —  —  8.2 
Adoption of Credit Losses ASU 2016-13 —  —  (2.7) —  —  (2.7)
Dividends Declared to Noncontrolling Interests —  —  —  —  (2.8) (2.8)
September 26, 2020 $ 0.4  $ 695.9  $ 1,972.5  $ (246.9) $ 30.0  $ 2,451.9 
See Accompanying Notes to Condensed Consolidated Financial Statements.

9

REGAL REXNORD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Millions)
  Nine Months Ended
October 2, 2021 September 26, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 219.3  $ 142.3 
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities (Net of Acquisitions and Divestitures):
Depreciation and Amortization 92.8  98.8 
Asset Impairments 5.1  4.3 
Noncash Lease Expense 18.3  18.3 
(Gain) /Loss on Sale or Disposition of Assets, Net (1.1) 2.7 
Share-Based Compensation Expense 11.5  8.2 
Financing Fees Amortization 12.5  1.1 
Early Debt Extinguishment Charge 12.7  — 
Gain on Divestiture of Businesses —  (0.1)
Change in Operating Assets and Liabilities (113.0) 34.3 
Net Cash Provided by Operating Activities 258.1  309.9 
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant and Equipment (37.5) (29.7)
Proceeds Received from Sales of Property, Plant and Equipment 4.1  7.6 
Business Acquisitions, Net of Cash Acquired (4.1) — 
Proceeds from Divestiture of Businesses —  0.3 
Net Cash Used in Investing Activities (37.5) (21.8)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings Under Revolving Credit Facility 433.7  898.1 
Repayments Under Revolving Credit Facility (405.9) (915.8)
Proceeds from Short-Term Borrowings 10.2  2.3 
Repayments of Short-Term Borrowings (10.1) (2.3)
Proceeds from Long-Term Borrowings —  0.1 
Repayments of Long-Term Borrowings (450.3) (50.2)
Dividends Paid to Shareholders (37.8) (36.5)
Shares Surrendered for Taxes (6.5) (3.3)
Proceeds from the Exercise of Stock Options 0.1  0.2 
Early Debt Extinguishment Payments (12.7) — 
Repurchase of Common Stock —  (25.0)
Distributions to Noncontrolling Interests (4.5) (2.8)
Financing Fees Paid (17.0) — 
Net Cash Used in Financing Activities (500.8) (135.2)
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS (2.5) 3.2 
Net Increase in Cash and Cash Equivalents (282.7) 156.1 
Cash and Cash Equivalents at Beginning of Period 611.3  331.4 
Cash and Cash Equivalents at End of Period $ 328.6  $ 487.5 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid For:
 Interest $ 29.8  $ 36.2 
 Income taxes $ 70.2  $ 20.4 

See Accompanying Notes to Condensed Consolidated Financial Statements.
10

REGAL REXNORD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 2, 2021
(Unaudited)

1. BASIS OF PRESENTATION
The accompanying (a) Condensed Consolidated Balance Sheet of Regal Rexnord Corporation, formerly known as Regal Beloit Corporation (the “Company”), as of January 2, 2021, which has been derived from audited Consolidated Financial Statements, and (b) unaudited interim Condensed Consolidated Financial Statements as of October 2, 2021 and for the three and nine months ended October 2, 2021 and September 26, 2020, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.
It is suggested that these Condensed Consolidated Financial Statements be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in the Company’s 2020 Annual Report on Form 10-K filed on March 2, 2021.
In the opinion of management, all adjustments considered necessary for a fair presentation of financial results have been made. Except as otherwise discussed, such adjustments consist of only those of a normal recurring nature. Operating results for the three and nine months ended October 2, 2021 are not necessarily indicative of the results that may be expected for the entire fiscal year ending January 1, 2022.
The Condensed Consolidated Financial Statements have been prepared in accordance with GAAP, which requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Condensed Consolidated Financial Statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. The Company uses estimates in accounting for, among other items, allowance for doubtful accounts; excess and obsolete inventory; share-based compensation; acquisitions; product warranty obligations; pension and post retirement assets and liabilities; derivative fair values; goodwill and other asset impairments; health care reserves; retirement benefits; rebates and incentives; litigation claims and contingencies, including environmental matters; and income taxes. The Company accounts for changes to estimates and assumptions when warranted by factually based experience.
The Company operates on a 52/53 week fiscal year ending on the Saturday closest to December 31.
Adopted Accounting Standards
In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, and clarifies and amends existing guidance to improve consistent application. This ASU becomes effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted the standard as of January 3, 2021, the beginning of fiscal 2021, with no material impact on the Company's Condensed Consolidated Financial Statements.

2. OTHER FINANCIAL INFORMATION
Inventories
The following table presents approximate percentage distribution between major classes of inventories:
October 2, 2021 January 2, 2021
Raw Material and Work in Process 48.5% 48.7%
Finished Goods and Purchased Parts 51.5% 51.3%

Inventories are stated at cost, which is not in excess of market. Cost for approximately 48.2% of the Company's inventory at October 2, 2021, and 50.0% at January 2, 2021 was determined using the last-in, first-out ("LIFO") method.
11

Property, Plant, and Equipment
The following table presents property, plant, and equipment by major classification (dollars in millions):
Useful Life in Years October 2, 2021 January 2, 2021
Land and Improvements $ 72.3  $ 76.1 
Buildings and Improvements
3 - 50
275.8  290.7 
Machinery and Equipment
3 - 15
980.1  978.2 
Property, Plant and Equipment 1,328.2  1,345.0 
Less: Accumulated Depreciation (814.1) (789.5)
Net Property, Plant and Equipment $ 514.1  $ 555.5 

For the three and nine months ended October 2, 2021, the Company recognized $2.8 million and $5.1 million, respectively, of asset impairment related to the transfer of assets to held for sale. For the nine months ended September 26, 2020, the Company recognized $4.3 million of asset impairments related to the transfer of assets to held for sale.

Revenue Recognition

The Company recognizes revenue from the sale of electric motors, electrical motion controls, power generation and power transmission products. The Company recognizes revenue when control of the product passes to the customer or the service is provided and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services.
Nature of Goods and Services
The Company sells products with multiple applications as well as customized products that have a single application such as those manufactured for its OEM customers. The Company reports in four operating segments: Commercial Systems, Industrial Systems, Climate Solutions and Power Transmission Solutions. Effective as of October 4, 2021, the Company's Power Transmissions Solutions operating segment was renamed Motion Control Solutions. See Note 17 for detailed discussion on the subsequent event. See Note 6 for a description of the different segments.
Nature of Performance Obligations
The Company’s contracts with customers typically consist of purchase orders, invoices and master supply agreements. At contract inception, across all four segments, the Company assesses the goods and services promised in its sales arrangements with customers and identifies a performance obligation for each promise to transfer to the customer a good or service that is distinct. The Company’s primary performance obligations consist of product sales and customized system/solutions.
Product:
The nature of products varies from segment to segment but across all segments, individual products are not integrated and represent separate performance obligations.
Customized system/solutions:
The Company provides customized system/solutions which consist of multiple products engineered and designed to specific customer specification, combined or integrated into one combined solution for a specific customer application. The goods are transferred to the customer and revenue is typically recognized over time as the performance obligations are satisfied.
When Performance Obligations are Satisfied
For performance obligations related to substantially all of the Company's product sales, the Company determines that the customer obtains control upon shipment and recognizes revenue accordingly. Once a product has shipped, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from the asset. The Company considers control to have transferred upon shipment because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.
12

For a limited number of contracts, the Company transfers control and recognizes revenue over time. The Company satisfies its performance obligations over time and the Company uses a cost-based input method to measure progress. In applying the cost-based method of revenue recognition, the Company uses actual costs incurred to date relative to the total estimated costs for the contract in conjunction with the customer's commitment to perform in determining the amount of revenue and cost to recognize. The Company has determined that the cost-based input method provides a faithful depiction of the transfer of goods to the customer.
Payment Terms
The arrangement with the customer states the final terms of the sale, including the description, quantity, and price of each product or service purchased. Payment terms vary by customer but typically range from due upon delivery to 120 days after delivery. For contracts recognized at a point in time, revenue and billing typically occur simultaneously. The Company generally has payment terms with its customers of one year or less and has elected the practical expedient applicable to such contracts not to consider the time value of money. For contracts recognized using the cost-based input method, revenue recognized in excess of customer billings and billings in excess of revenue recognized are reviewed to determine the net asset or net liability position and classified as such on the Condensed Consolidated Balance Sheets.
Returns, Refunds, and Warranties
The Company’s contracts do not explicitly offer a “general” right of return to its customers (e.g., customers ordered excess products and return unused items). Warranties are classified as either assurance type or service type warranties. A warranty is considered an assurance type warranty if it provides the customer with assurance that the product will function as intended. A warranty that goes above and beyond ensuring basic functionality is considered a service type warranty. The Company generally only offers limited warranties which are considered to be assurance type warranties and are not accounted for as separate performance obligations. Customers generally receive repair or replacement on products that do not function to specification. Estimated product warranties are provided for specific product groups and the Company accrues for estimated future warranty cost in the period in which the sale is recognized. The Company estimates the accrual requirements based on historical warranty loss experience and the cost is included in Cost of Sales.
Volume Rebates
In some cases, the nature of the Company’s contract may give rise to variable consideration including volume based sales incentives. If the customer achieves specific sales targets, they are entitled to rebates. The Company estimates the projected amount of the rebates that will be achieved and recognizes the estimated costs as a reduction to Net Sales as revenue is recognized.
13

Disaggregation of Revenue
The following tables presents the Company’s revenues disaggregated by geographical region (in millions):
Three Months Ended
October 2, 2021 Commercial Systems Industrial Systems Climate Solutions Power Transmission Solutions Total
North America $ 189.5  $ 74.8  $ 236.7  $ 165.1  $ 666.1 
Asia 41.8  49.9  8.3  8.0  108.0 
Europe 26.1  11.5  11.0  26.2  74.8 
Rest-of-World 11.3  11.8  12.4  8.3  43.8 
Total $ 268.7  $ 148.0  $ 268.4  $ 207.6  $ 892.7 
September 26, 2020 Commercial Systems Industrial Systems Climate Solutions Power Transmission Solutions Total
North America $ 156.9  $ 71.1  $ 210.7  $ 133.5  $ 572.2 
Asia 35.4  35.7  9.7  7.4  88.2 
Europe 8.0  6.4  7.7  20.1  42.2 
Rest-of-World 18.2  25.6  5.9  5.9  55.6 
Total $ 218.5  $ 138.8  $ 234.0  $ 166.9  $ 758.2 
Nine Months Ended
October 2, 2021 Commercial Systems Industrial Systems Climate Solutions Power Transmission Solutions Total
North America $ 519.7  $ 219.8  $ 673.1  $ 502.1  $ 1,914.7 
Asia 141.3  140.0  25.3  22.3  328.9 
Europe 77.5  35.2  30.9  74.8  218.4 
Rest-of-World 36.5  34.6  35.5  25.1  131.7 
Total $ 775.0  $ 429.6  $ 764.8  $ 624.3  $ 2,593.7 
September 26, 2020 Commercial Systems Industrial Systems Climate Solutions Power Transmission Solutions Total
North America $ 412.8  $ 213.2  $ 554.1  $ 417.6  $ 1,597.7 
Asia 87.7  109.1  19.3  19.8  235.9 
Europe 62.0  34.3  22.8  66.2  185.3 
Rest-of-World 31.3  32.4  26.1  17.8  107.6 
Total $ 593.8  $ 389.0  $ 622.3  $ 521.4  $ 2,126.5 
14

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

The balances that were classified as Assets Held for Sale as of October 2, 2021 and January 2, 2021 were $11.4 million and $9.1 million, respectively.

Acquisition

On October 4, 2021, in accordance with the terms and conditions of the Agreement and Plan of Merger, dated February 15, 2021 (the "Merger Agreement"), the Company completed its combination with the Process & Motion Control business ("PMC Business") of Zurn Water Solutions Corporation (formerly known as Rexnord Corporation) ("Zurn") in a Reverse Morris Trust transaction (the “Rexnord Transaction”). See Note 17 for further discussion.


4. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments, hedging activities and pension and post retirement benefit adjustments are included in Accumulated Other Comprehensive Income (Loss) ("AOCI") a component of Total Equity.
The following tables present changes in AOCI by component for the three and nine months ended October 2, 2021 and September 26, 2020 (in millions):
Three Months Ended
October 2, 2021 Hedging Activities Pension and Post Retirement Benefit Adjustments Foreign Currency Translation Adjustments Total
Beginning Balance $ 34.1  $ (30.4) $ (167.8) $ (164.1)
Other Comprehensive Income(Loss) before Reclassifications (4.5) 0.1  (15.5) (19.9)
Tax Impact 1.1  —  —  1.1 
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) (14.6) 0.4  —  (14.2)
Tax Impact 3.5  (0.1) —  3.4 
Net Current Period Other Comprehensive Income (Loss) (14.5) 0.4  (15.5) (29.6)
Ending Balance $ 19.6  $ (30.0) $ (183.3) $ (193.7)
September 26, 2020 Hedging Activities Pension and Post Retirement Benefit Adjustments Foreign Currency Translation Adjustments Total
Beginning Balance $ (10.7) $ (30.5) $ (253.8) $ (295.0)
Other Comprehensive Income (Loss) before Reclassifications 7.9  (0.1) 35.9  43.7 
Tax Impact (1.9) —  —  (1.9)
Amounts Reclassified from Accumulated Other Comprehensive Income 8.2  0.1  —  8.3 
Tax Impact (2.0) —  —  (2.0)
Net Current Period Other Comprehensive Income 12.2  —  35.9  48.1 
Ending Balance $ 1.5  $ (30.5) $ (217.9) $ (246.9)
15

Nine Months Ended
October 2, 2021
Hedging Activities Pension and Post Retirement Benefit Adjustments Foreign Currency Translation Adjustments Total
Beginning Balance $ 23.5  $ (31.1) $ (155.7) $ (163.3)
Other Comprehensive Income (Loss) before Reclassifications 32.2  0.1  (27.6) 4.7 
Tax Impact (7.7) —  —  (7.7)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) (37.4) 1.3  —  (36.1)
Tax Impact 9.0  (0.3) —  8.7 
Net Current Period Other Comprehensive Income (Loss) (3.9) 1.1  (27.6) (30.4)
Ending Balance $ 19.6  $ (30.0) $ (183.3) $ (193.7)
Nine Months Ended
September 26, 2020
Hedging Activities Pension and Post Retirement Benefit Adjustments Foreign Currency Translation Adjustments Total
Beginning balance $ 8.0  $ (31.0) $ (214.8) $ (237.8)
Other Comprehensive Income (Loss) before Reclassifications (16.2) 0.2  (3.1) (19.1)
Tax Impact 3.9  —  —  3.9 
Amounts Reclassified from Accumulated Other Comprehensive Income 7.7  0.4  —  8.1 
Tax Impact (1.9) (0.1) —  (2.0)
Net Current Period Other Comprehensive Income (Loss) (6.5) 0.5  (3.1) (9.1)
Ending Balance $ 1.5  $ (30.5) $ (217.9) $ (246.9)

The Condensed Consolidated Statements of Income line items affected by the hedging activities reclassified from AOCI in the tables above are disclosed in Note 14.

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


5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

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

16

The following table presents changes to goodwill during the nine months ended October 2, 2021 (in millions):
Total Commercial Systems Industrial Systems Climate Solutions Power Transmission Solutions
Balance as of January 2, 2021 $ 1,518.2  $ 433.3  $ 163.7  $ 330.8  $ 590.4 
Translation Adjustments (12.0) (3.7) (1.5) (0.3) (6.5)
Balance as of October 2, 2021 $ 1,506.2  $ 429.6  $ 162.2  $ 330.5  $ 583.9 
Cumulative Goodwill Impairment Charges $ 295.7  $ 183.2  $ 72.1  $ 17.2  $ 23.2 
Intangible Assets
The following table presents intangible assets (in millions):
  October 2, 2021 January 2, 2021
  Weighted Average Amortization Period (Years) Gross Value Accumulated Amortization Gross Value Accumulated Amortization
Amortizable Intangible Assets:
  Customer Relationships 17 $ 700.1  $ 373.2  $ 708.6  $ 349.4 
  Technology 14 145.5  110.8  146.3  108.0 
  Trademarks 14 36.5  28.2  37.7  27.7 
882.1  512.2  892.6  485.1 
Non-Amortizable Trade Name 122.1  —  122.8  — 
$ 1,004.2  $ 512.2  $ 1,015.4  $ 485.1 
Intangible Assets, Net of Amortization $ 492.0  $ 530.3 

Amortization expense recorded for the three and nine months ended October 2, 2021 was $10.5 million and $32.8 million, respectively. Amortization expense recorded for the three and nine months ended September 26, 2020 was $11.9 million and $36.3 million, respectively. Amortization expense for fiscal year 2021 is estimated to be $43.0 million. There were no intangible asset impairments during the three and nine months ended October 2, 2021 and September 26, 2020, respectively.
The following table presents future estimated annual amortization for intangible assets (in millions):
 Year Estimated Amortization
2022 $ 41.3 
2023 41.2 
2024 40.6 
2025 38.5 
2026 35.0 


6. SEGMENT INFORMATION

The Company is comprised of four operating segments: Commercial Systems, Industrial Systems, Climate Solutions and Power Transmission Solutions. Effective as of October 4, 2021, the Company's Power Transmissions Solutions operating segment was renamed Motion Control Solutions.

17

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

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

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

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

The Company evaluates performance based on the segment's income from operations. Corporate costs have been allocated to each segment based on the net sales of each segment. The reported external net sales of each segment are from external customers.
The following sets forth certain financial information attributable to the Company's operating segments for the three and nine months ended October 2, 2021 and September 26, 2020 (in millions):
Three Months Ended
October 2, 2021 Commercial Systems Industrial Systems Climate Solutions Power Transmission Solutions Eliminations Total
External Sales $ 268.7  $ 148.0  $ 268.4  $ 207.6  $ —  $ 892.7 
Intersegment Sales 22.5  7.7  4.4  0.7  (35.3) — 
 Total Sales 291.2  155.7  272.8  208.3  (35.3) 892.7 
Gross Profit 70.8  25.9  81.2  76.7  —  254.6 
Operating Expenses 40.4  19.5  29.1  55.4  —  144.4 
Asset Impairments —  —  —  2.8  —  2.8 
Total Operating Expenses 40.4  19.5  29.1  58.2  —  147.2 
Income from Operations 30.4  6.4  52.1  18.5  —  107.4 
Depreciation and Amortization 7.2  5.8  4.4  13.1  —  30.5 
Capital Expenditures 4.8  2.3  2.5  3.6  —  13.2 
September 26, 2020
External Sales $ 218.5  $ 138.8  $ 234.0  $ 166.9  $ —  $ 758.2 
Intersegment Sales 14.5  7.4  4.6  0.6  (27.1) — 
 Total Sales 233.0  146.2  238.6  167.5  (27.1) 758.2 
Gross Profit 60.7  31.9  69.1  59.9  —  221.6 
Operating Expenses 36.1  24.6  29.9  41.0  —  131.6 
Income from Operations 24.6  7.3  39.2  18.9  —  90.0 
Depreciation and Amortization 7.9  6.0  5.0  14.0  —  32.9 
Capital Expenditures 3.2  1.7  1.8  2.6  —  9.3 

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Nine Months Ended
October 2, 2021 Commercial Systems Industrial Systems Climate Solutions Power Transmission Solutions Eliminations Total
External Sales $ 775.0  $ 429.6  $ 764.8  $ 624.3  $ —  $ 2,593.7 
Intersegment Sales 59.9  18.7  13.8  2.2  (94.6) — 
  Total Sales 834.9  448.3  778.6  626.5  (94.6) 2,593.7 
Gross Profit 203.8  78.9  229.2  239.6  —  751.5 
Operating Expenses 118.7  65.7  86.8  161.7  —  432.9 
Asset Impairments 1.8  —  0.5  2.8  —  5.1 
Total Operating Expenses 120.5  65.7  87.3  164.5  —  438.0 
Income from Operations 83.3  13.2  141.9  75.1  —  313.5 
Depreciation and Amortization 22.8  17.4  12.5  40.1  —  92.8 
Capital Expenditures 12.6  8.0  8.7  8.2  —  37.5 
September 26, 2020
External Sales $ 593.8  $ 389.0  $ 622.3  $ 521.4  $ —  $ 2,126.5 
Intersegment Sales 43.2  23.2  13.0  1.9  (81.3) — 
  Total Sales 637.0  412.2  635.3  523.3  (81.3) 2,126.5 
Gross Profit 153.4  79.8  175.9  186.1  —  595.2 
Operating Expenses 107.8  69.2  85.9  122.2  —  385.1 
Gain on Divestiture of Businesses (0.1) —  —  —  —  (0.1)
Asset Impairments 2.8  0.2  1.3  —  —  4.3 
Total Operating Expenses 110.5  69.4  87.2  122.2  —  389.3 
Income from Operations 42.9  10.4  88.7  63.9  —  205.9 
Depreciation and Amortization 24.5  17.9  14.7  41.7  —  98.8 
Capital Expenditures 8.5  6.0  8.0  7.2  —  29.7 

The following table presents identifiable assets information attributable to the Company's operating segments as of October 2, 2021 and January 2, 2021 (in millions):
Commercial Systems Industrial Systems Climate Solutions Power Transmission Solutions Total
Identifiable Assets as of October 2, 2021 $ 1,217.1  $ 846.2  $ 924.6  $ 1,497.1  $ 4,485.0 
Identifiable Assets as of January 2, 2021 1,319.6  837.5  890.4  1,541.5  4,589.0 

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7. DEBT AND BANK CREDIT FACILITIES

The following table presents the Company’s indebtedness as of October 2, 2021 and January 2, 2021 (in millions):
October 2, 2021 January 2, 2021
Term Facility $ 620.0  $ 670.0 
Senior Notes —  400.0 
Multicurrency Revolving Facility 27.8  — 
Other 4.3  4.6 
Less: Debt Issuance Costs (3.8) (3.2)
Total 648.3  1,071.4 
Less: Current Maturities 1.0  231.0 
Long-Term Debt $ 647.3  $ 840.4 
Credit Agreement
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 “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 Rexnord Transaction, (ii) permit the incurrence of indebtedness to finance the special dividend that was paid in connection with the Rexnord Transaction (the "Special Dividend"), and (iii) provide an increase of $250.0 million in the aggregate principal amount of the revolving commitments under the Credit Agreement. The amendment is subject to customary and market provisions.
Prior to the First Amendment, the Credit Agreement provided for a (i) 5-year unsecured term loan facility in an original aggregate principal amount of $900.0 million (the “Term Facility”) and (ii) a 5-year unsecured multicurrency revolving facility in an aggregate principal amount of $500.0 million (increased as of the effectiveness of the First Amendment to $750.0 million) (the “Multicurrency Revolving Facility”), including a $50.0 million letter of credit sub facility, available for general corporate purposes. Borrowings under the Credit Agreement bear interest at floating rates based upon indices determined by the currency of the borrowing, plus an applicable margin determined by reference to the Company's consolidated funded debt to consolidated EBITDA ratio or at an alternative base rate.
The Term Facility under the Credit Agreement was drawn in full on August 27, 2018 with the proceeds settling the amounts owed under prior borrowings. The Term Facility requires quarterly amortization at a rate starting at 5.0% per annum, increasing to 7.5% per annum after three years and further increasing to 10.0% per annum for the last year of the Term Facility, unless previously prepaid. Per the terms of the agreement, prepayments can be made without penalty and be applied to the next payment due. After the prepayment is considered, the next payment in the amortization schedule is not due within one year and therefore no current maturities of debt will be recognized for this agreement. The weighted average interest rate on the Term Facility for the three months ended October 2, 2021 and September 26, 2020 was 1.3% and 1.5%, respectively. The weighted average interest rate on the Term Facility for the nine months ended October 2, 2021 and September 26, 2020 was 1.4% and 2.1%, respectively. The Credit Agreement requires that the Company prepay the loans under the Term Facility with 100% of the net cash proceeds received from specified asset sales and borrowed money indebtedness, subject to certain exceptions.
At October 2, 2021, the Company had $27.8 million borrowings under the Multicurrency Revolving Facility, $0.2 million of standby letters of credit issued under the facility, and $722.0 million of available borrowing capacity. For the three months ended October 2, 2021 and September 26, 2020 under the Multicurrency Revolving Facility, the average daily balance in borrowings was $106.5 million and $51.4 million, respectively, and the weighted average interest rate was 1.3% and 1.5%, respectively. For the nine months ended October 2, 2021 and September 26, 2020 under the Multicurrency Revolving Facility, the average daily balance in borrowings was $38.8 million and $189.7 million, respectively, and the weighted average interest rate was 1.4% and 2.1%, respectively. The Company pays a non-use fee on the aggregate unused amount of the Multicurrency Revolving Facility at a rate determined by reference to its consolidated funded debt to consolidated EBITDA ratio.

20

Senior Notes
In anticipation of the closing of the Rexnord Transaction, on September 30, 2021, the Company redeemed in full its senior notes due 2023 under the note purchase agreement, dated July 14, 2011 (as amended), by and between the Company and the purchasers thereto (the "Note Purchase Agreement"). Inclusive of principal, interest and the applicable make-whole payment, the total amount paid by the Company to redeem such senior notes was approximately $184.0 million. The make-whole payment of $12.7 million was included in interest expense. The Company funded this amount with a combination of cash on hand and drawings under the Credit Agreement. The Company also redeemed in the quarter its senior notes due July 2021 under the Note Purchase Agreement with a combination cash on hand and drawings under the Multicurrency Revolving Facility.

Compliance with Financial Covenants

The Credit Agreement requires the Company to meet specified financial ratios and to satisfy certain financial condition tests. The Company was in compliance with all financial covenants contained in the Credit Agreement as of October 2, 2021.
Other Notes Payable

At October 2, 2021, other notes payable of approximately $4.3 million were outstanding with a weighted average interest rate of 4.9%. At January 2, 2021, other notes payable of approximately $4.6 million were outstanding with a weighted average rate of 4.9%.

Financing Arrangements Related to Rexnord Transaction

In connection with the Rexnord Transaction, on February 15, 2021, the Company entered into a debt commitment letter (the “Bridge Commitment Letter”) and related fee letters with Barclays Bank PLC (“Barclays”), pursuant to which, and subject to the terms and conditions set forth therein, Barclays committed to provide approximately $2.1 billion in an aggregate principal amount of senior bridge loans under a 364-day senior bridge loan credit facility (the “Bridge Facility”). As the Rexnord Transaction was consummated and the payments of amounts in connection therewith occurred without the use of the Bridge Facility, the commitments under the Bridge Commitment Letter were terminated in connection with the closing of the Rexnord Transaction.

In connection with the Rexnord Transaction, on May 14, 2021, Land Newco, Inc. ("Land") entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as Administrative Agent and the lenders named therein (the "Land Credit Agreement"), providing for a delayed draw term loan facility with commitments thereunder in an aggregate principal amount of $487.0 million, maturing on August 25, 2023 (the "DDTL Facility"). Upon the consummation the Rexnord Transaction, the indebtedness contemplated by the Land Commitment Letter and DDTL Facility became indebtedness of a wholly-owned subsidiary of the Company. See Note 17 for further discussion.

Other Disclosures

Based on rates for instruments with comparable maturities and credit quality, which are classified as Level 2 inputs (see also Note 15), the approximate fair value of the Company's total debt was $648.3 million and $1,085.8 million as of October 2, 2021 and January 2, 2021, respectively.

21

8. RETIREMENT AND POST RETIREMENT HEALTH CARE PLANS

The following table presents the Company’s net periodic benefit cost (income) components (in millions):
  Three Months Ended Nine Months Ended
  October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020
Service Cost $ 0.3  $ 0.4  $ 0.9  $ 1.5 
Interest Cost 1.5  2.1  4.4  6.2 
Expected Return on Plan Assets (3.1) (3.3) (9.3) (9.9)
Amortization of Prior Service Cost and Net Actuarial Loss 0.4  0.1  1.3  0.4 
Net Periodic Benefit Income $ (0.9) $ (0.7) $ (2.7) $ (1.8)

The service cost component is included in Cost of Sales and Operating Expenses. All other components of net periodic benefit costs are included in Other Income, Net on the Company's Condensed Consolidated Statements of Income.
For the three months ended October 2, 2021 and September 26, 2020, the Company contributed $1.3 million, respectively, to post retirement plans. For the nine months ended October 2, 2021 and September 26, 2020, the Company contributed $4.1 million and $3.6 million, respectively. The Company expects to make total contributions of $5.8 million in 2021. The Company contributed a total of $8.5 million in fiscal 2020.

9. LEASES

The Company leases certain manufacturing facilities, warehouses/distribution centers, office space, machinery, equipment, IT assets, and vehicles. If the contract provides the Company the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, it is considered to be or contain a lease. Right-of-use ("ROU") assets and lease liabilities are recognized at lease commencement date based on the present value of the future lease payments over the expected lease term.

As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The incremental borrowing rate is calculated based upon the sovereign treasury rate for the currency in which the lease liability is denominated when the Company takes possession of the leased asset, adjusted for various factors, such as term and internal credit spread. The ROU asset also includes any lease payments made and excludes lease incentive and initial direct costs incurred.

Leases entered into may include one or more options to renew. The renewal terms can extend the lease term from one to twenty-five years. The exercise of lease renewal options is at the Company's sole discretion. Renewal option periods are included in the measurement of the ROU asset and lease liability when the exercise is reasonably certain to occur. Some leases include options to terminate the lease upon breach of contract and are remeasured at that point in time.

The depreciable life of leased assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Some of the Company's lease agreements include rental payments adjusted periodically for inflation or are based on an index rate. These increases are reflected as variable lease payments and are included in the measurement of the ROU asset and lease liability. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating leases are included in the following asset and liability accounts on the Company's Condensed Consolidated Balance Sheet: Operating Lease Assets, Current Operating Lease Liabilities, and Noncurrent Operating Lease Liabilities. ROU assets and liabilities arising from finance leases are included in the following asset and liability accounts on the Company's Condensed Consolidated Balance Sheet: Net Property, Plant and Equipment, Current Maturities of Long-Term Debt, and Long-Term Debt.

22

Short-term and variable lease expenses were immaterial. The components of lease expense were as follows (in millions):
Three Months Ended Nine Months Ended
October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020
Operating Lease Cost $ 7.3  $ 7.5  $ 22.7  $ 22.8 
Finance Lease Cost:
   Amortization of ROU Assets 0.1  0.1  0.3  0.2 
   Interest on Lease Liabilities —  —  0.1  0.1 
Total Lease Expense $ 7.4  7.6  $ 23.1  $ 23.1 

Maturity of lease liabilities as of October 2, 2021 were as follows (in millions):
Operating Leases Finance Leases Total
Remainder of 2021 $ 7.1  $ 0.1  $ 7.2 
2022 23.4  0.5  23.9 
2023 16.9  0.6  17.5 
2024 11.9  0.6  12.5 
2025 9.2  0.6  9.8 
Thereafter 21.1  1.3  22.4 
Total Lease Payments $ 89.6  $ 3.7  $ 93.3 
Less: Interest (14.1) (0.6) (14.7)
Present Value of Lease Liabilities $ 75.5  $ 3.1  $ 78.6 

Other information related to leases was as follows (in millions):
Nine Months Ended
Supplemental Cash Flows Information October 2, 2021 September 26, 2020
Cash Paid for Amounts Included in the Measurement of Lease Liabilities:
  Operating Cash Flows Used For Operating Leases $ 28.6  $ 21.8 
  Operating Cash Flows Used For Finance Leases 0.1  0.1 
  Financing Cash Flows Used For Finance Leases 0.3  0.2 
Leased Assets Obtained in Exchange for New Operating Lease Liabilities 15.8  21.3 
Weighted Average Remaining Lease Term
Operating Leases 4.6 years 5.2 years
Finance Leases 6.5 years 7.5 years
Weighted Average Discount Rate
Operating Leases 6.6  % 8.2  %
Finance Leases 5.9  % 5.9  %

As of October 2, 2021, the Company had no additional operating leases that have not yet commenced for future lease payments. The Company had no finance leases that had not yet commenced nor entered into during the quarter.

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10. SHAREHOLDERS’ EQUITY

Repurchase of Common Stock

At a meeting of the Board of Directors on October 25, 2019, the Company's Board of Directors approved the authorization to purchase up to $250.0 million of shares. The Company did not repurchase and retire any common stock during the three and nine months ended October 2, 2021. For the nine months ended September 26, 2020, the Company repurchased and retired 315,072 shares of its common stock at an average cost of $79.38 for a total cost of $25.0 million.

As of October 2, 2021, there was approximately $210.0 million in common stock available for repurchase under the October 2019 program.

Share-Based Compensation

The Company recognized approximately $3.7 million and $2.7 million in share-based compensation expense for the three months ended October 2, 2021 and September 26, 2020, respectively. Share-based compensation expense was $11.5 million and $8.2 million for the nine months ended October 2, 2021 and September 26, 2020, respectively. The total income tax benefit recognized in the Condensed Consolidated Statements of Income for share-based compensation expense was $0.7 million and $0.6 million for the three months ended October 2, 2021 and September 26, 2020, respectively. The total income tax benefit recognized in the Condensed Consolidated Statements of Income for share-based compensation expense was $2.0 million and $1.7 million for the nine months ended October 2, 2021 and September 26, 2020, respectively. The Company recognizes compensation expense on grants of share-based compensation awards on a straight-line basis over the vesting period of each award. As of October 2, 2021, total unrecognized compensation cost related to share-based compensation awards was approximately $21.1 million, net of estimated forfeitures, which the Company expects to recognize over a weighted average period of approximately 1.8 years.

Approximately 1.6 million shares were available for future grant under the 2018 Equity Incentive Plan as of October 2, 2021.

Stock Appreciation Rights
The Company uses stock settled stock appreciation rights (“SARs”) as a form of share-based incentive awards. SARs are the right to receive stock in an amount equal to the appreciation in value of a share of stock over the base price per share. Shares granted prior to fiscal 2020 generally vest over five years on the anniversary date while shares granted in or after fiscal 2020 generally vest over three years on the anniversary date of the grant date. Generally all grants expire 10 years from the grant date. All grants are made at prices equal to the fair market value of the stock on the grant date. For the nine months ended October 2, 2021 and September 26, 2020, expired and canceled shares were immaterial.
The following table presents share-based compensation activity for the nine months ended October 2, 2021 and September 26, 2020 (in millions):
October 2, 2021 September 26, 2020
Total Intrinsic Value of Share-Based Incentive Awards Exercised $ 7.5  $ 5.7 
Cash Received from Stock Option Exercises 0.1  0.2 
Income Tax Benefit from the Exercise of SARs 2.2  0.4 
Total Fair Value of Share-Based Incentive Awards Vested 4.2  1.8 

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The following table presents assumptions used in the Company's Black-Scholes valuation related to grants of SARs:
2021 2020
Per share weighted average fair value of grants $ 37.43  $ 21.23 
Risk-free interest rate 0.6  % 1.5  %
Expected life (years) 5.0 7.0
Expected volatility 32.5  % 25.2  %
Expected dividend yield 0.9  % 1.4  %

The average risk-free interest rate is based on the US Treasury security rate as of the grant date. The expected dividend yield is based on the projected annual dividend as a percentage of the estimated market value of the Company's common stock as of the grant date. The Company estimated the expected volatility using a weighted average of daily historical volatility of the Company's stock price over the expected term of the award. The Company estimated the expected term using historical data.

The following table presents a summary of share-based incentive plan grant activity for the nine months ended October 2, 2021.
Number of Shares Under SARs Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in millions)
Outstanding as of January 2, 2021 577,509  $ 79.35  7.0 $ 25.1 
Granted 114,099  134.18 
Exercised (112,276) 76.76 
Forfeited (31,164) 91.20 
Expired (4,050) 72.29 
Outstanding as of October 2, 2021 544,118  $ 87.72  7.3 $ 34.2 
Exercisable as of October 2, 2021 233,107  $ 72.40  5.8 $ 18.2 

Compensation expense recognized related to SARs was $3.1 million for the nine months ended October 2, 2021.
As of October 2, 2021, there was $6.4 million of unrecognized compensation cost related to non-vested SARs that is expected to be recognized as a charge to earnings over a weighted average period of 2.1 years.

The number of SARs expected to vest is materially consistent with those outstanding and not yet exercisable.
Restricted Stock Awards and Restricted Stock Units
Restricted stock awards ("RSA") and restricted stock units ("RSU") consist of shares or the rights to shares of the Company's stock. The awards are restricted such that they are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer. As defined in the individual grant agreements, acceleration of vesting may occur under a change in control, death or disability.
The following table presents a summary of RSA award activity for the nine months ended October 2, 2021:
Shares Weighted Average Fair Value at Grant Date Weighted Average Remaining Contractual Term (Years)
Unvested RSAs as of January 2, 2021 16,280  $ 70.05  0.3
Granted 7,760  149.50 
Vested (16,280) 70.05 
Unvested RSAs as of October 2, 2021 7,760  $ 149.50  0.6

RSAs vest on the first anniversary of the grant date, provided the holder of the shares is continuously employed by or in the service of the Company until the vesting date. Compensation expense recognized related to the RSAs was $0.9 million for the nine months ended October 2, 2021.
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As of October 2, 2021, there was $0.7 million of unrecognized compensation cost related to non-vested RSAs that is expected to be recognized as a charge to earnings over a weighted average period of 0.6 years.
The following table presents a summary of RSU award activity for the nine months ended October 2, 2021:
Shares Weighted Average Fair Value at Grant Date Weighted Average Remaining Contractual Term (Years)
Unvested RSUs as of January 2, 2021 164,398  $ 81.16  1.7
Granted 50,186  136.07 
Vested (65,708) 79.64 
Forfeited (10,041) 88.57 
Unvested RSUs as of October 2, 2021 138,835  $ 100.54  1.9
RSUs granted prior to fiscal 2020 vest on the third anniversary of the grant date while RSUs granted in or after fiscal 2020 vest one third each year on the anniversary of the grant date, provided the holder of the RSUs is continuously employed by the Company until the vesting date. Compensation expense recognized related to the RSUs was $4.8 million for the nine months ended October 2, 2021.
As of October 2, 2021, there was $8.7 million of unrecognized compensation cost related to non-vested RSUs that is expected to be recognized as a charge to earnings over a weighted average period of 1.9 years.
Performance Share Units
Performance share units ("PSU") consist of shares or the rights to shares of the Company's stock which are awarded to employees of the Company. These shares are payable upon the determination that the Company achieved certain established performance targets and can range from 0% to 200% of the targeted payout based on the actual results. PSUs have a performance period of 3 years and vest 3 years from the grant date and are issued at a performance target of 100%. The PSUs have performance criteria based on a return on invested capital metric or they have performance criteria using returns relative to the Company's peer group. As set forth in the individual award agreements, acceleration of vesting may occur under a change in control, death or disability. There are no voting rights associated with these instruments until vesting occurs and a share of stock is issued. Some of the PSU awards are valued using a Monte Carlo simulation method as of the grant date while others are valued using the closing market price as of the grant date depending on the performance criteria for the award.

The assumptions used in the Company's Monte Carlo simulation were as follows:
2021 2020
Risk-free interest rate 0.2  % 1.4  %
Expected life (years) 3.0 3.0
Expected volatility 37.0  % 24.0  %
Expected dividend yield 0.9  % 1.4  %

The following table presents a summary of PSU activity for the nine months ended October 2, 2021:
Shares Weighted Average Fair Value at Grant Date Weighted Average Remaining Contractual Term (Years)
Unvested PSUs as of January 2, 2021 87,522  $ 97.59  1.8
Granted 33,343  121.56 
Vested (10,891) 91.65 
Forfeited (14,316) 87.15 
Unvested PSUs as of October 2, 2021 95,658  $ 109.70  1.7
Compensation expense for awards granted is recognized based on the grant issuance value or the expected payout ratio depending upon the performance criterion for the award, net of estimated forfeitures. Compensation expense recognized related to PSUs was $2.7 million for the nine months ended October 2, 2021. Total unrecognized compensation expense for all PSUs granted as of October 2, 2021 is estimated to be $5.3 million which is expected to be recognized as a charge to earnings over a weighted average period of 1.7 years.
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11. INCOME TAXES
The effective tax rate for the three months ended October 2, 2021 was 20.0% versus 20.5% for the three months ended September 26, 2020. The effective tax rate for the nine months ended October 2, 2021 and September 26, 2020 was 20.7% and 21.7%, respectively. The change in the effective tax rate for the three and nine months ended October 2, 2021 was primarily driven by the mix of earnings.
As of October 2, 2021 and January 2, 2021, the Company had approximately $9.3 million and $6.8 million of unrecognized tax benefits, all of which would impact the effective income tax rate if recognized. Potential interest and penalties related to unrecognized tax benefits are recorded in income tax expense. The Company had approximately $3.0 million and $2.7 million of accrued interest as of October 2, 2021 and January 2, 2021, respectively.
With few exceptions, the Company is no longer subject to US Federal and state/local income tax examinations by tax authorities for years prior to 2015, and the Company is no longer subject to non-US income tax examinations by tax authorities for years prior to 2013.

12. EARNINGS PER SHARE

Diluted earnings per share is calculated based upon earnings applicable to common shares divided by the weighted-average number of common shares outstanding during the period adjusted for the effect of other dilutive securities. The amount of the anti-dilutive shares were 0.1 million and 0.3 million for the three months ended October 2, 2021 and September 26, 2020, respectively. The amount of the anti-dilutive shares were 0.1 million and 0.4 million for the nine months ended October 2, 2021 and September 26, 2020, respectively. The following table reconciles the basic and diluted shares used in earnings per share calculations for the three and nine months ended October 2, 2021 and September 26, 2020 (in millions):
  Three Months Ended Nine Months Ended
  October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020
Denominator for Basic Earnings Per Share 40.7  40.6  40.7  40.6 
Effect of Dilutive Securities 0.3  0.2  0.3  0.1 
Denominator for Diluted Earnings Per Share 41.0  40.8  41.0  40.7 

13. CONTINGENCIES
One of the Company's subsidiaries that it acquired in 2007 is subject to numerous claims filed in various jurisdictions relating to certain sub-fractional motors that were primarily manufactured through 2004 and that were included as components of residential and commercial ventilation units manufactured and sold in high volumes by a third party. These ventilation units are subject to product safety requirements and other potential regulation of their performance by government agencies such as the US Consumer Product Safety Commission (“CPSC”). The claims generally allege that the ventilation units were the cause of fires. The Company has recorded an estimated liability for incurred claims. Based on the current facts, the Company cannot assure that these claims, individually or in the aggregate, will not have a material adverse effect on its subsidiary's financial condition. The Company's subsidiary cannot reasonably predict the outcome of these claims, the nature or extent of any CPSC or other remedial actions, if any, that the Company's subsidiary may need to undertake with respect to motors that remain in the field, or the costs that may be incurred, some of which could be significant.
The Company is, from time to time, party to litigation and other legal or regulatory proceedings that arise in the normal course of its business operations and the outcomes of which are subject to significant uncertainty, including product warranty and liability claims, contract disputes and environmental, asbestos, intellectual property, employment and other litigation matters. The Company's products are used in a variety of industrial, commercial and residential applications that subject the Company to claims that the use of its products is alleged to have resulted in injury or other damage. Many of these matters will only be resolved when one or more future events occur or fail to occur. Management conducts regular reviews, including updates from legal counsel, to assess the need for accounting recognition or disclosure of these contingencies, and such assessment inherently involves an exercise in judgment. The Company accrues for exposures in amounts that it believes are adequate, and the Company does not believe that the outcome of any such lawsuit individually or collectively will have a material effect on the Company's financial position, its results of operations or its cash flows.
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The Company recognizes the cost associated with its standard warranty on its products at the time of sale. The amount recognized is based on historical experience. The following table presents a reconciliation of the changes in accrued warranty costs for the three and nine months ended October 2, 2021 and September 26, 2020 (in millions):
  Three Months Ended Nine Months Ended
  October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020
Beginning Balance $ 16.7  $ 15.7  $ 15.5  $ 15.1 
Less: Payments (3.8) (3.7) (12.5) (10.6)
Provisions 5.7  4.4  15.7  11.9 
Translation Adjustments —  —  (0.1) — 
Ending Balance $ 18.6  $ 16.4  $ 18.6  $ 16.4 
These liabilities are included in Other Accrued Expenses and Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets.

14. DERIVATIVE FINANCIAL INSTRUMENTS
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative instruments are commodity price risk, currency exchange risk, and interest rate risk. Forward contracts on certain commodities are entered into to manage the price risk associated with forecasted purchases of materials used in the Company's manufacturing process. Forward contracts on certain currencies are entered into to manage forecasted cash flows in certain foreign currencies. Interest rate swaps are utilized to manage interest rate risk associated with the Company's floating rate borrowings.
The Company is exposed to credit losses in the event of non-performance by the counterparties to various financial agreements, including its commodity hedging transactions, foreign currency exchange contracts and interest rate swap agreements. Exposure to counterparty credit risk is managed by limiting counterparties to major international banks and financial institutions meeting established credit guidelines and continually monitoring their compliance with the credit guidelines. The Company does not obtain collateral or other security to support financial instruments subject to credit risk. The Company does not anticipate non-performance by its counterparties, but cannot provide assurances.
The Company recognizes all derivative instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets. The Company designates commodity forward contracts as cash flow hedges of forecasted purchases of commodities, currency forward contracts as cash flow hedges of forecasted foreign currency cash flows and interest rate swaps as cash flow hedges of forecasted LIBOR-based interest payments. There were no significant collateral deposits on derivative financial instruments as of October 2, 2021 or September 26, 2020.
Cash Flow Hedges
The effective portion of the gain or loss on the derivative is reported as a component of AOCI and reclassified into the same line within the Condensed Consolidated Statement of Income as the earnings effect of the hedged item in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or changes in market value of derivatives not designated as hedges are recognized in current earnings.
At October 2, 2021, the Company had $8.7 million, net of tax, of derivative gains on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings. At January 2, 2021, the Company had $3.7 million, net of tax, of derivative gains on closed hedge instruments in AOCI that was subsequently realized in earnings when the hedged items impacted earnings.
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As of October 2, 2021, the Company had the following currency forward contracts outstanding (with maturities extending through December 2022) to hedge forecasted foreign currency cash flows (in millions):
  Notional Amount (in US Dollars)
Chinese Renminbi $ 242.2 
Mexican Peso 183.1 
Indian Rupee 58.0 
Canadian Dollar 0.6 
Australian Dollar 28.8 
British Pound 4.0 
Thai Baht 4.0 

As of October 2, 2021, the Company had the following commodity forward contracts outstanding (with maturities extending through December 2022) to hedge forecasted purchases of commodities (notional amounts expressed in terms of the dollar value of the hedged item (in millions)):
  Notional Amount
Copper $ 122.0 
Aluminum 8.6 

The Company entered into two receive variable/pay-fixed forward starting non-amortizing interest rate swaps in June 2020, with a total notional amount of $250.0 million. These swaps became effective July 2021 and will expire in July 2025.
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The following table presents the fair values of derivative instruments as of October 2, 2021 and January 2, 2021 (in millions):
  October 2, 2021
  Prepaid Expenses and Other Current Assets Other Noncurrent Assets Other Accrued Expenses Other Noncurrent Liabilities
Designated as Hedging Instruments:
Interest Rate Swap Contracts $ —  $ 1.8  $ —  $ — 
Currency Contracts 8.7  0.2  1.8  0.2 
Commodity Contracts 8.8  —  2.6  0.7 
Not Designated as Hedging Instruments:
Currency Contracts 0.2  —  0.2  — 
Commodity Contracts 0.6  —  —  — 
Total Derivatives $ 18.3  $ 2.0  $ 4.6  $ 0.9 
  January 2, 2021
  Prepaid Expenses and Other Current Assets Other Noncurrent Assets Other Accrued Expenses Other Noncurrent Liabilities
Designated as Hedging Instruments:
Interest Rate Swap Contracts $ —  $ —  $ 0.7  $ 1.4 
Currency Contracts 16.4  1.6  1.0  0.1 
Commodity Contracts 11.3  0.1  —  — 
Not Designated as Hedging Instruments:
Currency Contracts 0.2  —  —  — 
Commodity Contracts 0.1  —  —  — 
Total Derivatives $ 28.0  $ 1.7  $ 1.7  $ 1.5 

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The following table presents the effect of derivative instruments on the Condensed Consolidated Statements of Income and Condensed Consolidated Statement of Comprehensive Income (pre-tax) (in millions):
Derivatives Designated as Cash Flow Hedging Instruments
Three Months Ended
October 2, 2021 September 26, 2020
Commodity Forwards Currency Forwards Interest Rate Swaps Total Commodity Forwards Currency Forwards Interest Rate Swaps Total
Gain (Loss) Recognized in Other Comprehensive Income (Loss) $ (2.6) $ (1.7) $ (0.2) $ (4.5) $ 5.8  $ 2.4  $ (0.3) $ 7.9 
Amounts Reclassified from Other Comprehensive Income (Loss):
Gain recognized in Net Sales —  0.1  —  0.1  —  —  —  — 
Gain (Loss) Recognized in Cost of Sales 11.4  3.3  —  14.7  (0.4) (4.9) —  (5.3)
Loss Recognized in Operating Expenses —  —  —  —  —  (3.1) —  (3.1)
Gain Recognized in Interest Expense —  —  (0.2) (0.2) —  —  0.2  0.2 
Nine Months Ended
October 2, 2021 September 26, 2020
Commodity Forwards Currency Forwards Interest Rate Swaps Total Commodity Forwards Currency Forwards Interest Rate Swaps Total
Gain (Loss) Recognized in Other Comprehensive Income (Loss) $ 22.4  $ 6.0  $ 3.8  $ 32.2  $ 5.1  $ (19.9) $ (1.4) $ (16.2)
Amounts Reclassified from Other Comprehensive Income (Loss):
Gain Recognized in Net Sales —  0.2  —  0.2  —  —  —  — 
Gain (Loss) Recognized in Cost of Sales 25.2  9.9  —  35.1  (2.4) (2.1) —  (4.5)
Gain (Loss) Recognized in Operating Expenses —  2.2  —  2.2  —  (4.0) —  (4.0)
Gain (Loss) Recognized in Interest Expense —  —  (0.1) (0.1) —  —  0.8  0.8 
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Derivatives Not Designated as Cash Flow Hedging Instruments (in millions):
Three Months Ended
October 2, 2021 September 26, 2020
Commodity Forwards Currency Forwards Commodity Forwards Currency Forwards
Gain recognized in Cost of Sales $ 0.1  $ —  $ 0.1  $ — 
Gain (Loss) recognized in Operating Expenses —  1.8  —  (2.4)
Nine Months Ended
October 2, 2021 September 26, 2020
Commodity Forwards Currency Forwards Commodity Forwards Currency Forwards
Gain recognized in Cost of Sales $ 0.5  $ —  $ 0.1  $ — 
Gain (Loss) recognized in Operating Expenses —  3.9  —  (3.7)

The net AOCI hedging component balance of a $19.6 million gain at October 2, 2021 includes $9.9 million of net current deferred gain expected to be realized in the next twelve months. The gain/loss reclassified from AOCI into earnings on such derivatives will be recognized in the same period in which the related item affects earnings.
The Company's commodity and currency derivative contracts are subject to master netting agreements with the respective counterparties which allow the Company to net settle transactions with a single net amount payable by one party to another party. The Company has elected to present the derivative assets and derivative liabilities on the Condensed Consolidated Balance Sheets on a gross basis for the periods ended October 2, 2021 and January 2, 2021.
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The following table presents the derivative assets and derivative liabilities presented on a net basis under enforceable master netting agreements (in millions):
October 2, 2021
Gross Amounts as Presented in the Condensed Consolidated Balance Sheet Derivative Contract Amounts Subject to Right of Offset Derivative Contracts as Presented on a Net Basis
Prepaid Expenses and Other Current Assets:
Derivative Currency Contracts $ 8.9  $ (2.0) $ 6.9 
Derivative Commodity Contracts 9.4  (1.7) 7.7 
Other Noncurrent Assets:
Derivative Currency Contracts 0.2  (0.2) — 
Other Accrued Expenses:
Derivative Currency Contracts 2.0  (2.0) — 
Derivative Commodity Contracts 2.6  (1.7) 0.9 
Other Noncurrent Liabilities:
Derivative Currency Contracts 0.2  (0.2) — 
Derivative Commodity Contracts 0.7  —  0.7 
January 2, 2021
Gross Amounts as Presented in the Condensed Consolidated Balance Sheet Derivative Contract Amounts Subject to Right of Offset Derivative Contracts as Presented on a Net Basis
Prepaid Expenses and Other Current Assets:
Derivative Currency Contracts $ 16.6  $ (1.0) $ 15.6 
Derivative Commodity Contracts 11.4  —  11.4 
Other Noncurrent Assets:
Derivative Currency Contracts 1.6  —  1.6 
Derivative Commodity Contracts 0.1  —  0.1 
Other Accrued Expenses:
Derivative Currency Contracts 1.0  (1.0) — 
Other Noncurrent Liabilities:
Derivative Currency Contracts 0.1  —  0.1 

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15. FAIR VALUE
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities, or
Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or
Inputs other than quoted prices that are observable for the asset or liability
Level 3 Unobservable inputs for the asset or liability
The Company uses the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The fair values of cash equivalents and short-term deposits approximate their carrying values as of October 2, 2021 and January 2, 2021, due to the short period of time to maturity and are classified using Level 1 inputs. The fair values of trade receivables and accounts payable approximate the carrying values due to the short period of time to maturity. See Note 7 for disclosure of the approximate fair value of the Company's debt at October 2, 2021 and January 2, 2021.
The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of October 2, 2021 and January 2, 2021 (in millions):
October 2, 2021 January 2, 2021 Classification
Assets:
Prepaid Expenses and Other Current Assets:
Derivative Currency Contracts $ 8.9  $ 16.6  Level 2
Derivative Commodity Contracts 9.4  11.4  Level 2
Other Noncurrent Assets:
Assets Held in Rabbi Trust 6.7  6.5  Level 1
Derivative Currency Contracts 0.2  1.6  Level 2
Derivative Commodity Contracts —  0.1  Level 2
Interest Rate Swap 1.8  —  Level 2
Liabilities:
Other Accrued Expenses:
Interest Rate Swap —  0.7  Level 2
Derivative Currency Contracts 2.0  1.0  Level 2
Derivative Commodity Contracts 2.6  —  Level 2
Other Noncurrent Liabilities:
Interest Rate Swap —  1.4  Level 2
Derivative Currency Contracts 0.2  0.1  Level 2
Derivative Commodity Contracts 0.7  —  Level 2
Level 1 fair value measurements for assets held in a Rabbi Trust are unadjusted quoted prices.
Level 2 fair value measurements for derivative assets and liabilities are measured using quoted prices in active markets for similar assets and liabilities. Interest rate swaps are valued based on the discounted cash flows for the LIBOR forward yield curve for a swap with similar contractual terms. Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments. Commodity forwards are valued based on observable market transactions of forward commodity prices.

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16. RESTRUCTURING ACTIVITIES
The Company incurred restructuring and restructuring-related costs on projects during fiscal 2021 and 2020. Restructuring costs include employee termination and plant relocation costs. Restructuring-related costs include costs directly associated with actions resulting from the Company's simplification initiatives, such as asset write-downs or accelerated depreciation due to shortened useful lives in connection with site closures, discretionary employment benefit costs and other facility rationalization costs. Restructuring costs for employee termination expenses are generally required to be accrued over the employees' remaining service period while restructuring costs for plant relocation costs and restructuring-related costs are generally required to be expensed as incurred.

The following table presents a reconciliation of provisions and payments for the restructuring projects for the three and nine months ended October 2, 2021 and September 26, 2020 (in millions):
Three Months Ended Nine Months Ended
October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020
Beginning Balance $ 2.5  $ 2.9  $ 2.0  $ 0.9 
Provision 2.2  5.8  5.4  18.7 
Less: Payments/ Other 3.1  7.7  5.8  18.6 
Ending Balance $ 1.6  $ 1.0  $ 1.6  $ 1.0 

The following table presents a reconciliation of restructuring and restructuring-related costs for restructuring projects for the three and nine months ended October 2, 2021 and September 26, 2020, respectively (in millions):
Three Months Ended
October 2, 2021 September 26, 2020
Restructuring Costs: Cost of Sales Operating Expenses Total Cost of Sales Operating Expenses Total
Employee Termination Expenses $ 0.2  $ 0.2  $ 0.4  $ 1.5  $ 0.5  $ 2.0 
Facility Related Costs 1.5  —  1.5  2.5  1.6  4.1 
Other Expenses 0.2  0.1  0.3  —  (0.3) (0.3)
  Total Restructuring Costs $ 1.9  $ 0.3  $ 2.2  $ 4.0  $ 1.8  $ 5.8 
Nine Months Ended
October 2, 2021 September 26, 2020
Restructuring Costs: Cost of Sales Operating Expenses Total Cost of Sales Operating Expenses Total
Employee Termination Expenses $ 0.6  $ 0.8  $ 1.4  $ 4.4  $ 3.5  $ 7.9 
Facility Related Costs 3.1  0.3  3.4  8.4  2.4  10.8 
Other Expenses 0.5  0.1  0.6  0.3  (0.3) — 
  Total Restructuring Costs $ 4.2  $ 1.2  $ 5.4  $ 13.1  $ 5.6  $ 18.7 
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The following table presents the allocation of restructuring and restructuring-related costs by segment for the three and nine months ended October 2, 2021 and September 26, 2020 (in millions):
Restructuring Costs - Three Months Ended Total Commercial Systems Industrial Systems Climate Solutions Power Transmission Solutions
October 2, 2021 $ 2.2  $ 0.1  $ 0.8  $ 0.1  $ 1.2 
September 26, 2020 $ 5.8  $ 0.7  $ 2.3  $ 0.8  $ 2.0 
Restructuring Costs - Nine Months Ended Total Commercial Systems Industrial Systems Climate Solutions Power Transmission Solutions
October 2, 2021 $ 5.4  $ 0.4  $ 1.6  $ 0.7  $ 2.7 
September 26, 2020 $ 18.7  $ 4.8  $ 5.2  $ 3.2  $ 5.5 

The Company's current restructuring activities are expected to continue. The Company expects to record aggregate future charges of approximately $4.2 million which includes $2.3 million of employee termination expenses and $1.9 million of facility related costs on approved projects. The Company anticipates total restructuring costs of approximately $16.0 million for fiscal 2021 excluding costs related to the Rexnord Transaction.


17. SUBSEQUENT EVENT
The Company has evaluated subsequent events since October 2, 2021, the date of these financial statements, and is aware of the following events to disclose.

On October 4, 2021, in accordance with the terms and conditions of the Merger Agreement, dated February 15, 2021, the Company completed the Rexnord Transaction and subject to the terms and conditions of the Merger Agreement and the other definitive agreements entered into in connection with the Rexnord Transaction, (1) Zurn transferred to its then-subsidiary, Land, substantially all of the assets, and Land assumed substantially all of the liabilities, of the PMC Business (the “Reorganization”), (2) after which, all of the issued and outstanding shares of common stock, $0.01 par value per share, of Land (“Land common stock”) held by a subsidiary of Zurn were distributed in a series of distributions to Zurn’s stockholders (the distributions, and the final distribution of Land common stock from Zurn to Zurn’s stockholders, which was made pro rata for no consideration, the “Spin-Off”) and (3) immediately after the Spin-Off, a subsidiary of the Company ("Merger Sub") merged with and into Land (the “Merger”) and all shares of Land common stock (other than those held by Zurn, Land, the Company, Merger Sub or their respective subsidiaries) were converted into the right to receive 0.22296103 shares of our common stock, $0.01 par value per share (“Company common stock”), as calculated in the Merger Agreement. When the Merger was completed, Land became a wholly owned subsidiary of the Company.

Pursuant to the Merger, the Company issued 27,055,945 shares of common stock to holders of Land common stock which represented approximately 39.9% of the 67,756,732 outstanding shares of Company common stock immediately following the completion of the Merger.

In addition, shareholders of record as of October 1, 2021 received a $6.99 per share Special Dividend. In connection with the closing of the Rexnord Transaction, the Company drew upon the Credit Agreement to finance the approximate $284.4 million payment of the Special Dividend.

The Company has estimated the total consideration transferred for the acquisition of Land to be approximately $3.9 billion subject to finalization of purchase accounting and working capital adjustments.

In connection with the Rexnord Transaction, the Company entered into certain financing arrangements as indicated in Note 7. The proceeds of the DDTL Facility were drawn by Land in a single drawing to fund a payment from Land to a subsidiary of Zurn in connection with the Rexnord Transaction. Upon consummation of the Rexnord Transaction, Land became an indirect wholly owned subsidiary of the Company and, in connection therewith, the Land Credit Agreement was amended and restated (the "A&R Land Credit Agreement") to add the Company as a party to the A&R Land Credit Agreement and as a guarantor of the obligations of Land thereunder. The subsidiaries of the Company that provided a guaranty of the obligations under the
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Credit Agreement also entered into a subsidiary guaranty agreement with respect to the obligations under the A&R Land Credit Agreement. Additionally, Land and any subsidiary of Land that provided a guaranty under the DDTL Facility have also entered into the subsidiary guaranty agreement with respect to the Credit Agreement. The loans under the DDTL Facility will bear interest at floating rates based upon a reserve adjusted LIBOR rate or, at the Company's election, an alternate base rate plus, in each case an applicable margin determined by reference to the Company's consolidated funded debt (net of certain cash and cash equivalents) to EBITDA ratio. Immediately following the completion of the Rexnord Transaction, the Company had approximately $1.5 billion outstanding under the Credit Agreement, comprised of approximately $380.0 million outstanding under the revolving commitments, approximately $620.0 million outstanding under the term loan commitments under the Credit Agreement, and $486.0 million under the A&R Land Credit Agreement. The A&R Land Credit Agreement contains customary events of default and financial and other covenants, including (i) a maximum leverage ratio (defined as, with certain adjustments, the ratio of the Company’s consolidated funded debt to EBITDA) as of the last day of any fiscal quarter of 4.00 to 1.00; and (ii) a minimum interest coverage ratio (defined as, with certain adjustments, the ratio of EBITDA to the Company’s consolidated cash interest expense) of 3.00 to 1.00 as of the last day of any fiscal quarter.

Pro forma revenues and earnings have not been presented as the initial accounting for the transaction is incomplete as of the date the consolidated financial statements are issued. The Company is in the process of assessing the fair value of the acquired tangible assets, liabilities assumed and any applicable intangible assets and liabilities for this business combination

Subsequent to the closing, the Company changed its name to Regal Rexnord Corporation and its shares of common stock will trade on the NYSE under the ticker symbol RRX.

In connection with the Rexnord Transaction, Zurn received a tax opinion from its tax counsel (the “Rexnord Tax Opinion”) that includes an opinion to the effect that the Reorganization, together with the distributions of Land common stock from Zurn to Zurn’s stockholders (the “Distributions”), will qualify as tax-free to Zurn, Land and the Zurn stockholders, as applicable, for U.S. federal income tax purposes except, in the case of Zurn, to the extent Land’s payment to a subsidiary of Zurn under the terms of the Separation Agreement (the “Land Cash Payment”) exceeds RBS Global Inc.’s adjusted tax basis in Land common stock. The Rexnord Tax Opinion is based on, among other things, certain representations and assumptions as to factual matters and certain covenants made by the Company, Land and Zurn. Although the Company believes the representations, assumptions and covenants in the Rexnord Tax Opinion to be true, the failure of any such factual representation, assumption or covenant to be true, correct and complete in all material respects could adversely affect the validity of the opinion. The Rexnord Tax Opinion is not binding on the U.S. Internal Revenue Service (the “IRS”) or the courts, and it is possible that the IRS or the courts may not agree with the opinion. In addition, the Rexnord Tax Opinion is based on current law, and the conclusions in the opinion cannot be relied upon if current law changes with retroactive effect.

The Spin-Off will be taxable to Zurn pursuant to Section 355(e) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) if there is a 50% or greater change in ownership of either Zurn or Land, directly or indirectly, as part of a plan or series of related transactions that include the Spin-Off. For this purpose, any acquisitions of Land or Zurn stock or Company stock within the period beginning two years before the Spin-Off and ending two years after the Spin-Off are presumed to be a part of such plan, although the Company and Zurn may be able to rebut that presumption. Zurn received a private letter ruling from the IRS (the “IRS Ruling”) with respect to certain tax aspects of the Rexnord Transaction, including matters relating to the nature and extent of shareholders who may be counted for tax purposes as “Overlap Shareholders” (as such term is defined in the Merger Agreement) for purposes of determining the exchange ratio for the transaction in the Merger Agreement and the overall percentage change in the ownership of Land resulting from the Merger. The continuing validity of the IRS Ruling is subject to the accuracy of factual representations and assumptions made in the ruling request. Moreover, the IRS Ruling only describes the time, manner and methodology for measuring Overlap Shareholders and may be subject to varying interpretations.

The actual determination and calculation of Overlap Shareholders was made by the Company, Zurn and our respective advisors based on the IRS Ruling, but no assurance can be given that the IRS will agree with these determinations or calculations. If the IRS were to determine that the Merger, as a result of an error in the determination of Overlap Shareholders, or other acquisitions of Land, Zurn or Company stock, either before or after the Spin-Off, resulted in a 50% or greater change in ownership and were part of a plan or series of related transactions that included the Spin-Off, such determination could result in significant tax liability to Zurn. In certain circumstances and subject to certain limitations, under the Tax Matters Agreement, Land is required to indemnify Zurn for 100% of the taxes that result if the Distributions become taxable as a result of certain actions by us or Land and for 90% of the taxes that result as a result of a miscalculation of the Overlap Shareholders. If this occurs and Land is required to indemnify Zurn, this indemnification obligation could be substantial and could have a material adverse effect on the Company and Land, including with respect to its financial condition and results of operations given that the Company has guaranteed the indemnification obligations of Land.

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The Tax Matters Agreement the Company entered into in connection with the Rexnord Transaction imposes certain restrictions on the Company, Land and Zurn during the two-year period following the Spin-Off, subject to certain exceptions, with respect to actions that could cause the Reorganization and the Distributions to fail to qualify for their intended tax treatment. As a result of these restrictions, the Company’s and Land’s ability to engage in certain transactions, such as the issuance or purchase of stock or certain business combinations, may be limited.

If the Company, Land or Zurn take any enumerated actions or omissions, or if certain events relating to the Company, Land or Zurn occur that would cause the Reorganization or the Distributions to become taxable, the party whose actions or omissions (or who the event relates to) generally will be required to bear the cost of any resulting tax liability of Zurn (but not its stockholders). If the Reorganization or the Distributions became taxable, Zurn would be expected to recognize a substantial amount of gain, which would result in a material amount of taxes. Any such taxes would be expected to be material to the Company and could cause the Company’s business, financial condition and operating results to suffer. These restrictions may reduce the Company’s ability to engage in certain business transactions that otherwise might be advantageous, which could adversely affect the Company’s business, results of operations, or financial condition.

On October 19, 2021, the Company entered into a definitive agreement to acquire Arrowhead, a global leader in providing industrial process automation solutions, including conveyors and (de)palletizers to the food & beverage, aluminum can, and consumer staples end markets, among others. The approximate $300.0 million all-cash transaction, which is subject to customary working capital and other adjustments, has been approved by the Company's Board of Directors and is expected to close in the fourth quarter of 2021, subject to customary closing conditions and regulatory approvals.

At a meeting of the Board of Directors on October 26, 2021, the Company's Board of Directors approved the authorization to purchase up to $500.0 million of shares under the Company's share repurchase program. The new authorization has no expiration date. In addition, the Board of Directors approved a change in the fiscal year end from a 52-53 week year ending on the Saturday closest to December 31 to a calendar year ending on December 31, effective beginning with fiscal year 2022. The Company expects to make the fiscal year change on a prospective basis and will not adjust operating results for prior periods. The change to the Company’s fiscal year will not impact the Company’s results for the year ended January 1, 2022. However, the change will impact the prior year comparability of each of the fiscal quarters and the annual period in 2022 and in future filings. The Company believes this change will provide numerous benefits, including aligning its reporting periods to be more consistent with peer companies.

On November 4, 2021 Regal Rexnord exercised an option to expand the size of the Multicurrency Revolving Facility commitments under the Credit Agreement by $250.0 million. After the exercise the Multicurrency Revolving Facility commitment totals $1.0 billion.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context requires otherwise, references in this Item 2 to “we,” “us,” “our” or the “Company” refer collectively to Regal Rexnord Corporation, formerly known as Regal Beloit Corporation, and its subsidiaries.
Overview
Regal Rexnord Corporation (NYSE: RRX), based in Beloit, Wisconsin (USA), is a leading manufacturer of electric motors, electrical motion controls, power generation and power transmission products serving markets throughout the world.

Operating Segments

Our company is comprised of four operating segments: Commercial Systems, Industrial Systems, Climate Solutions and Power Transmission Solutions. Effective as of October 4, 2021, the Company's Power Transmissions Solutions operating segment was renamed Motion Control Solutions.

A description of the four operating segments is as follows:

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

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

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

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

Components of Profit and Loss

Net Sales. We sell our products to a variety of manufacturers, distributors and end users. Our customers consist of a large cross-section of businesses, ranging from Fortune 100 companies to small businesses. A number of our products are sold to Original Equipment Manufacturers ("OEMs"), who incorporate our products, such as electric motors, into products they manufacture, and many of our products are built to the requirements of our customers. The majority of our sales derive from direct sales to customers by sales personnel employed by the Company, however, a significant portion of our sales are derived from sales made by manufacturer’s representatives, who are paid exclusively on commission. Our product sales are made via purchase order, long-term contract, and, in some instances, one-time purchases. Many of our products have broad customer bases, with the levels of concentration of revenues varying from business unit to business unit.

Our level of net sales for any given period is dependent upon a number of factors, including (i) the demand for our products; (ii) the strength of the economy generally and the end markets in which we compete; (iii) our customers’ perceptions of our product quality at any given time; (iv) our ability to timely meet customer demands; (v) the selling price of our products; and (vi) the weather. As a result, our total revenue has tended to experience quarterly variations and our total revenue for any particular quarter may not be indicative of future results.

We use the term “organic sales" to refer to sales from existing operations excluding (i) sales from acquired businesses recorded prior to the first anniversary of the acquisition (“Acquisition Sales”), (ii) less the amount of sales attributable to any businesses divested/to be exited, and (iii) the impact of foreign currency translation. The impact of foreign currency translation is determined by translating the respective period’s organic sales using the same currency exchange rates that were in effect during the prior year periods. We use the term “organic sales growth” to refer to the increase in our sales between periods that is attributable to organic sales. We use the term “acquisition growth” to refer to the increase in our sales between periods that is attributable to Acquisition Sales.

Gross Profit. Our gross profit is impacted by our levels of net sales and cost of sales. Our cost of sales consists of costs for, among other things (i) raw materials, including copper, steel and aluminum; (ii) components such as castings, bars, tools, bearings and electronics; (iii) wages and related personnel expenses for fabrication, assembly and logistics personnel; (iv) manufacturing facilities, including depreciation on our manufacturing facilities and equipment, insurance and utilities; and (v) shipping. The majority of our cost of sales consists of raw materials and components. The price we pay for commodities and components can be subject to commodity price fluctuations. We attempt to mitigate this through fixed-price agreements with suppliers and our hedging strategies. When we experience commodity price increases, we have tended to announce price increase to our customers who purchase via purchase order, with such increases generally taking effect a period of time after the public announcements. For those sales we make under long-term contracts, we tend to include material price formulas that specify quarterly or semi-annual price adjustments based on a variety of factors, including commodity prices.

Outside of general economic cyclicality, our business units experience different levels of variation in gross profit from quarter to quarter based on factors specific to each business. For example, a portion of our Climate Solutions segment manufactures products that are used in air conditioning applications. As a result, our sales for that business tend to be lower in the first and fourth quarters and higher in the second and third quarters. In contrast, our Commercial Systems segment, Industrial Systems segment and Power Transmission Solutions segment have a broad customer base and a variety of applications, thereby helping to mitigate large quarter-to-quarter fluctuations outside of general economic conditions.

Operating Expenses. Our operating expenses consist primarily of (i) general and administrative expenses; (ii) sales and marketing expenses; (iii) general engineering and research and development expenses; and (iv) handling costs incurred in conjunction with distribution activities. Personnel related costs are our largest operating expense.
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Our general and administrative expenses consist primarily of costs for (i) salaries, benefits and other personnel expenses related to our executive, finance, human resource, information technology, legal and operations functions; (ii) occupancy expenses; (iii) technology related costs; (iv) depreciation and amortization; and (v) corporate-related travel. The majority of our general and administrative costs are for salaries and related personnel expenses. These costs can vary by business given the location of our different manufacturing operations.

Our sales and marketing expenses consist primarily of costs for (i) salaries, benefits and other personnel expenses related to our sales and marketing function; (ii) internal and external sales commissions and bonuses; (iii) travel, lodging and other out-of-pocket expenses associated with our selling efforts; and (iv) other related overhead.

Our general engineering and research and development expenses consist primarily of costs for (i) salaries, benefits and other personnel expenses; (ii) the design and development of new energy efficiency products and enhancements; (iii) quality assurance and testing; and (iv) other related overhead. Our research and development efforts tend to be targeted toward developing new products that would allow us to maintain or gain additional market share, whether in new or existing applications. While these costs make up an insignificant portion of our operating expenses in the Power Transmission Solutions segment, they are more substantial in our Commercial Systems, Industrial Systems and Climate Solutions segments. In particular, a large driver of our research and development efforts in those three segments is energy efficiency, which generally means using less electrical power to produce more mechanical power.

Operating Profit. Our operating profit consists of the segment gross profit less the segment operating expenses. In addition, there are shared operating costs that cover corporate and information technology expenses that are consistently allocated to the operating segments and are included in the segment operating expenses. Operating profit is a key metric used to measure year over year improvement of the segments.

Restructuring and Restructuring Related Costs. We incurred restructuring-related costs on employee termination and plant relocation costs. Restructuring related costs includes costs directly associated with actions resulting from our simplification initiatives, such as asset write-downs or accelerated depreciation due to shortened useful lives in connection with site closures, discretionary employment benefit costs and other facility rationalization costs. Restructuring costs for employee termination expenses are generally required to be accrued over the employees remaining service period while restructuring costs for plant relocation costs and restructuring-related costs are generally required to be expensed as incurred.
COVID-19 Pandemic
COVID-19 evolved during the first quarter of 2020 into a global pandemic, resulting in a severe global health crisis that drove a dramatic slowdown in global economic and social activity.

In the face of this global crisis, our first priority has been the health and safety of our associates. In response, we implemented a host of measures to help our associates stay safe, measures that have been enhanced and refined as impacts from COVID-19 grew, and as our knowledge about how to enhance their effectiveness improved.

Factors deriving from the COVID-19 response that have or may negatively impact sales and operating profit in the future include, but are not limited to: limitations on the ability of our suppliers to manufacture, or procure from manufacturers, components and raw materials used in our products, or to meet delivery requirements and commitments; limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring employees to remain at home; limitations on the ability of carriers to deliver our products to customers; limitations on the ability of our customers to conduct their business and purchase our products and services; reductions in demands of our customers; and limitations on the ability of our customers to pay us on a timely basis.

We continue to monitor the pandemic and make adjustments to the business as necessary to address any limitations or negative impacts.

Rexnord and Arrowhead Transactions

On October 4, 2021, in accordance with the terms and conditions of the Agreement and Plan of Merger, dated February 15, 2021 (the “Merger Agreement”), the Company completed its combination with the Process & Motion Control business (“PMC Business”) of Zurn Water Solutions Corporation (formerly known as Rexnord Corporation) (“Zurn”) in a Reverse Morris Trust transaction (the “Rexnord Transaction”). Pursuant to the Rexnord Transaction and subject to the terms and conditions of the Merger agreements and the other definitive agreements entered into in connection with the Rexnord Transaction, (1) Zurn
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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”), (2) after which, all of the issued and outstanding shares of common stock, $0.01 par value per share, of Land (“Land common stock”) held by a subsidiary of Zurn were distributed in a series of distributions to Zurn’s stockholders (the distributions, and the final distribution of Land common stock from Zurn to Zurn’s stockholders, which was made pro rata for no consideration, the “Spin-Off”) and (3) immediately after the Spin-Off, a subsidiary of the Company (“Merger Sub”) merged with and into Land (the “Merger”) and all shares of Land common stock (other than those held by Zurn, Land, the Company, Merger Sub or their respective subsidiaries) were converted into the right to receive 0.22296103 shares of our common stock, $0.01 par value per share (“Company common stock”), as calculated in the Merger Agreement. When the Merger was completed, Land which held the PMC Business, became a wholly owned subsidiary of the Company and was combined with the Company’s Power Transmission Solutions operating segment to form its new Motion Control Solutions operating segment.

Pursuant to the Merger, we issued 27,055,945 shares of common stock to holders of Land common stock, which represented approximately 39.9% of the 67,756,732 outstanding shares of Company common stock immediately following the completion of the Merger.

In addition, shareholders of record as of October 1, 2021 received a Special Dividend of $6.99 per share (or approximately $284.4 million in aggregate) pursuant to a special dividend in connection with the Rexnord Transaction.

In connection with the Rexnord Transaction, we have entered into certain financing arrangements, which are described below under “Liquidity and Capital Resources”.

On October 19, 2021, we entered into a definitive agreement to acquire Arrowhead Systems, LLC (“Arrowhead”), a global leader in providing industrial process automation solutions, including conveyors and (de)palletizers to the food & beverage, aluminum can, and consumer staples end markets, among others. The $300 million all-cash transaction, which is subject to customary working capital and other adjustments, has been approved by our Board of Directors and is expected to close in the fourth quarter of 2021, subject to customary closing conditions and regulatory approvals. (the “Arrowhead Transaction” and, together with the Rexnord Transaction, the “Transactions”).

Change in Fiscal Year End

At a meeting of the Board of Directors of Regal Rexnord Corporation on October 26, 2021, the Board approved a change in the fiscal year end from a 52-53 week year ending on the Saturday closest to December 31 to a calendar year ending on December 31, effective beginning with fiscal year 2022. We expect to make the fiscal year change on a prospective basis and will not adjust operating results for prior periods. The change to our fiscal year will not impact our results for the year ended January 1, 2022. However, the change will impact the prior year comparability of each of the fiscal quarters and the annual period in 2022 and in future filings. We believe this change will provide numerous benefits, including aligning its reporting periods to be more consistent with peer companies.

Outlook
We are projecting increased sales growth for the remainder of the year which assumes no material decline in production capacity or the ability to conduct commercial operations, either from COVID-related disruptions, or other factors, including supply chain disruptions, versus levels as of the date of this report.

Results of Operations
Three Months Ended October 2, 2021 Compared to September 26, 2020
Net sales increased $134.5 million or 17.7% for the third quarter 2021 compared to the third quarter 2020. The increase consisted of positive organic sales of 16.3% and positive foreign currency translation of 1.4%. The increase was primarily driven by sales increases in North American markets and a resurgence in China. Gross profit increased $33.0 million or 14.9% for the third quarter 2021 as compared to the third quarter 2020. The increase in gross profit was driven by increase in volume and partially offset by increased freight and material costs. Total operating expenses for the third quarter 2021 increased $15.6 million or 11.9% as compared to the third quarter 2020. The increase was primarily driven by higher employee related wage and benefit costs and transaction costs which were partially offset by foreign exchange gains.
Commercial Systems segment net sales for the third quarter 2021 were $268.7 million, an increase of $50.2 million or 23.0% as compared to the third quarter 2020. The increase consisted of positive organic sales of 20.9% and positive foreign currency translation of 2.1%. The increase was primarily driven by strong growth in general industry and the Asia Pacific market as well
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as solid gains in the pool pump business. Gross profit increased $10.1 million or 16.6% as compared to the third quarter 2020. The increase in gross profit was primarily driven by the increase in volume and favorable product mix, partially offset by increased freight and tariff costs. Total operating expenses for the third quarter 2021 were $40.4 million compared to $36.1 million in the third quarter 2020. The $4.3 million or 11.9% increase was primarily driven by higher employee related wage and benefit costs as well as inflation.
Industrial Systems segment net sales for the third quarter 2021 were $148.0 million, an increase of $9.2 million or 6.6% as compared to the third quarter 2020. The increase consisted of positive organic sales of 3.6% and positive foreign currency translation of 3.0%. The increase was primarily driven by strength in the data center market for generators and demand for industrial motors in North America and China. Gross profit decreased $6.0 million or 18.8% as compared to the third quarter 2020. The decrease in gross profit was primarily driven by material inflation and, increased inventory provisions, offset by price realization and commodity hedges. Total operating expenses for the third quarter 2021 and 2020 were $19.5 million and $24.6 million, respectively. The decrease in operating expenses was due to general cost savings initiatives and foreign exchange gains partially offset by employee related wage and benefit costs, higher variable selling costs on stronger sales volume, and increased administrative costs.
Climate Solutions segment net sales were $268.4 million, an increase of $34.4 million or 14.7% as compared to the third quarter 2020. The increase consisted of positive organic sales of 14.2% and positive foreign currency translation of 0.5%. The increase was primarily due to continued strong demand in North American residential HVAC and combustion markets, recovering demand in EMEA and Asia Pacific. Gross profit increased $12.1 million or 17.5% compared to the third quarter 2020. The increase in gross profit was primarily driven by increased volume, favorable mix and 80/20 actions. Total operating expenses for the third quarter 2021 were $29.1 million compared to $29.9 million in the third quarter 2020. The slight decrease was primarily due to higher expenses related to commissions (higher volume), travel and professional services, which were offset by favorable foreign currency.
Power Transmission Solutions segment net sales for the third quarter 2021 were $207.6 million, an increase of $40.7 million or 24.4% compared to third quarter 2020 net sales of $166.9 million. The increase consisted of positive organic sales of 23.7% and positive foreign currency of 0.7%. The increase was primarily driven by strength in alternative energy, the North America general industrial market, the conveying business, and improving demand in Europe in addition to meaningful share gains tied to our industrial powertrain offering. Gross profit for the third quarter 2021 increased $16.8 million or 28.0%. The increase was driven by higher sales volume with favorable mix and lower overhead cost driven by cost reduction initiatives. Total operating expenses for the third quarter 2021 increased $17.2 million as compared to the third quarter 2020, primarily due to transaction costs related to the Rexnord Transaction and asset impairment related to a restructuring project.
Nine Months Ended October 2, 2021 Compared to September 26, 2020
Net sales increased $467.2 million or 22.0% for the nine months ended October 2, 2021 compared to the nine months ended September 26, 2020. The increase consisted of positive organic sales of 19.7% and positive foreign currency translation of 2.3%. The increase was primarily driven by sales increases in North America, China and recovering demand in EMEA and Asia Pacific. Gross profit increased $156.3 million or 26.3% for the nine months ended October 2, 2021 as compared to the nine months ended September 26, 2020. The increase in gross profit was driven by increase in volume, partially offset by increased freight and material costs. Total operating expenses for the nine months ended October 2, 2021 increased $48.7 million or 12.5% as compared to the nine months ended September 26, 2020. The increase was primarily driven by transaction costs, higher employee related wage and benefit costs, partially offset by foreign exchange gains.
Commercial Systems segment net sales for the nine months ended October 2, 2021 were $775.0 million, an increase of $181.2 million or 30.5% as compared to the nine months ended September 26, 2020. The increase consisted of positive organic sales of 27.3% and positive foreign currency translation of 3.2%. The increase was primarily driven by strong growth in the Asia Pacific market as well as the general industry and pool pump business. Gross profit increased $50.4 million or 32.9% as compared to the nine months ended September 26, 2020. The increase in gross profit was primarily driven by the increase in volume, partially offset by increased freight and tariff costs. Total operating expenses for the nine months ended October 2, 2021 were $120.5 million compared to $110.5 million in the nine months ended September 26, 2020. The $10.0 million or 9.0% increase was primarily driven by higher employee related wage and benefit costs, inflation and increased engineering expenses.
Industrial Systems segment net sales for the nine months ended October 2, 2021 were $429.6 million, an increase of $40.6 million or 10.4% as compared to the nine months ended September 26, 2020. The increase consisted of positive organic sales of 5.7% and positive foreign currency translation of 4.7%. The increase was primarily driven by strength in the generator business, strong growth in China and in India markets, and improving demand in the North America industrial motors business. Gross profit decreased $0.9 million or 1.1% for the nine months ended October 2, 2021 as compared to the nine months ended September 26, 2020. The decrease in gross profit was primarily driven by material inflation partially offset by strong volumes, favorable mix and positive price realization. Total operating expenses for the nine months ended October 2, 2021 and
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September 26, 2020 were $65.7 million and $69.4 million, respectively. The decrease of (5.3)% in operating expenses stems from general cost savings initiatives and foreign exchange gains partially offset by variable selling costs on higher sales volumes and increased administrative costs.
Climate Solutions segment net sales were $764.8 million, an increase of $142.5 million or 22.9% as compared to the nine months ended September 26, 2020. The increase consisted of positive organic sales of 22.4% and positive foreign currency translation of 0.5%. The increase was primarily due to continued strong demand in North American residential HVAC market and recovering demand in EMEA and Asia Pacific. Gross profit increased $53.3 million or 30.3% compared to the nine months ended September 26, 2020. The increase in gross profit was primarily driven by volume, favorable product mix and 80/20 actions, partially offset by material inflation. Total operating expenses for the nine months ended October 2, 2021 were $87.3 million compared to $87.2 million in the nine months ended September 26, 2020. The increase was primarily due to 2020 cost savings as a result of non-recurring furloughs and operating expenses, offset by gains in foreign currency.
Power Transmission Solutions segment net sales for the nine months ended October 2, 2021 were $624.3 million, an increase of $102.9 million or 19.7% compared to nine months ended September 26, 2020 net sales of $166.9 million. The increase consisted of positive organic sales of 18.1% and positive foreign currency of 1.6%. The increase was primarily driven by strength in the North American general industrial and alternative-energy end markets, prior year project wins in the aerospace end market and strength in the conveying business. Gross profit for the nine months ended October 2, 2021 increased $53.5 million or 28.7%. The increase was driven by higher sales volume, favorable product mix and lower overhead cost driven by cost reduction initiatives. Total operating expenses for the nine months ended October 2, 2021 increased $42.3 million as compared to the nine months ended September 26, 2020, primarily due to transaction costs related to the Rexnord Transaction, asset write down related to a restructuring project, and the normalizing of the business as it recovers from the pandemic.
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Three Months Ended Nine Months Ended
October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020
(Dollars in Millions)
Net Sales:
  Commercial Systems $ 268.7  $ 218.5  $ 775.0  $ 593.8 
  Industrial Systems 148.0  138.8  429.6  389.0 
  Climate Solutions 268.4  234.0  764.8  622.3 
  Power Transmission Solutions 207.6  166.9  624.3  521.4 
Consolidated $ 892.7  $ 758.2  $ 2,593.7  $ 2,126.5 
Gross Profit as a Percent of Net Sales:
  Commercial Systems 26.3  % 27.8  % 26.3  % 25.8  %
  Industrial Systems 17.5  % 23.0  % 18.4  % 20.5  %
  Climate Solutions 30.3  % 29.5  % 30.0  % 28.3  %
  Power Transmission Solutions 36.9  % 35.9  % 38.4  % 35.7  %
Consolidated 28.5  % 29.2  % 29.0  % 28.0  %
Operating Expenses as a Percent of Net Sales:
  Commercial Systems 15.0  % 16.5  % 15.3  % 18.2  %
  Industrial Systems 13.2  % 17.7  % 15.3  % 17.8  %
  Climate Solutions 10.8  % 12.8  % 11.3  % 13.8  %
  Power Transmission Solutions 26.7  % 24.6  % 25.9  % 23.4  %
Consolidated 16.2  % 17.4  % 16.7  % 18.1  %
Income from Operations as a Percent of Net Sales:
  Commercial Systems 11.3  % 11.3  % 10.7  % 7.2  %
  Industrial Systems 4.3  % 5.3  % 3.1  % 2.7  %
  Climate Solutions 19.4  % 16.8  % 18.6  % 14.3  %
  Power Transmission Solutions 8.9  % 11.3  % 12.0  % 12.3  %
Consolidated 12.0  % 11.9  % 12.1  % 9.7  %
Income from Operations $ 107.4  $ 90.0  $ 313.5  $ 205.9 
Other Income, Net (1.2) (1.1) (3.6) (3.3)
Interest Expense 22.0  9.0  46.1  31.2 
Interest Income (2.3) (1.3) (5.5) (3.8)
  Income before Taxes 88.9  83.4  276.5  181.8 
Provision for Income Taxes 17.8  17.1  57.2  39.5 
  Net Income 71.1  66.3  219.3  142.3 
Less: Net Income Attributable to Noncontrolling Interests 1.6  1.3  4.6  3.4 
  Net Income Attributable to Regal Rexnord Corporation $ 69.5  $ 65.0  $ 214.7  $ 138.9 
    
The effective tax rate for the three months ended October 2, 2021 was 20.0% versus 20.5% for the three months ended September 26, 2020. The effective tax rate for the nine months ended October 2, 2021 and September 26, 2020 was 20.7% and 21.7%, respectively. The change in the effective tax rate for the three and nine months ended October 2, 2021 was primarily driven by the mix of earnings. The make-whole payment of $12.7 million for early debt cancellation was included in interest expense for the three and nine months ended October 2, 2021.

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Liquidity and Capital Resources
General
Our principal source of liquidity is cash flow provided by operating activities. In addition to operating income, other significant factors affecting our cash flow include working capital levels, capital expenditures, dividends, share repurchases, acquisitions and divestitures, availability of debt financing and the ability to attract long-term capital at acceptable terms.

Cash flow provided by operating activities was $258.1 million for the nine months ended October 2, 2021, a $51.8 million decrease from the nine months ended September 26, 2020. The change is a result of an increase in inventory, early debt extinguishment charge and accounts receivable which is partially offset by an increase in accounts payable for the nine months ended October 2, 2021 compared to the nine months ended September 26, 2020.

Cash flow used in investing activities was $37.5 million for the nine months ended October 2, 2021 as compared to cash flow used in investing activities of $21.8 million for the nine months ended September 26, 2020. The change was driven primarily by lower proceeds received from sales of property, plant and equipment and cash used for capital purchases and business acquisitions in the current year compared to the prior year.

Cash flow used in financing activities was $500.8 million for the nine months ended October 2, 2021, compared to $135.2 million used in financing activities for the nine months ended September 26, 2020. We had net debt repayments of $422.4 million during the nine months ended October 2, 2021, compared to net debt repayments of $67.8 million during the nine months ended September 26, 2020. There were no share repurchases for the nine months ended October 2, 2021, compared to $25.0 million for the nine months ended September 26, 2020. There were $17.0 million in financing fees paid for the nine months ended October 2, 2021, compared to no fees in the prior year.

Our working capital was $1,067.6 million at October 2, 2021, compared to $1,029.3 million at January 2, 2021. At October 2, 2021 and January 2, 2021, our current ratio (which is the ratio of our current assets to current liabilities) was 2.4:1 and 2.3:1, respectively. Our working capital increased primarily due to the increase in accounts receivables and inventory offset by an increase in accounts payable and decrease in cash.

The following table presents selected financial information and statistics as of October 2, 2021 and January 2, 2021 (in millions):
October 2, 2021 January 2, 2021
Cash and Cash Equivalents $ 328.6  $ 611.3 
Trade Receivables, Net 560.9  432.0 
Inventories 808.2  690.3 
Working Capital 1,067.6  1,029.3 
Current Ratio 2.4:1 2.3:1

As of October 2, 2021, $325.9 million of our cash was held by foreign subsidiaries and could be used in our domestic operations if necessary. We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations. We regularly assess our cash needs and the available sources to fund these needs which includes repatriation of foreign earnings which may be subject to withholding taxes. Under current law, we do not expect restrictions or taxes on repatriation of cash held outside of the United States to have a material effect on our overall liquidity, financial condition or the results of operations for the foreseeable future.

We will, from time to time, maintain excess cash balances which may be used to (i) fund operations, (ii) repay outstanding debt, (iii) fund acquisitions, (iv) pay dividends, (v) make investments in new product development programs, (vi) repurchase our common stock, or (vii) fund other corporate objectives.
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Credit Agreement
On March 17, 2021, we entered into an amendment (the "First Amendment") with our lenders to the Amended and Restated Credit Agreement, dated August 27, 2018 (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 Rexnord Transaction, (ii) permit the incurrence of indebtedness to finance the special dividend that was paid in connection with the Rexnord Transaction (the "Special Dividend"), and, (iii) provide an increase of $250.0 million in the aggregate principal amount of the revolving commitments under the Credit Agreement. The amendment is subject to customary and market provisions. In connection with the closing of the Rexnord Transaction subsequent to the quarter end, we drew upon the Credit Agreement to finance the $284.4 million payment of the Special Dividend.
Prior to the First Amendment, the Credit Agreement provided for a (i) 5-year unsecured term loan facility in an original aggregate principal amount of $900.0 million (the “Term Facility”) and (ii) a 5-year unsecured multicurrency revolving facility in an aggregate principal amount of $500.0 million (increased as of the effectiveness of the First Amendment to $750.0 million) (the “Multicurrency Revolving Facility”), including a $50.0 million letter of credit sub facility, available for general corporate purposes. Borrowings under the Credit Agreement bear interest at floating rates based upon indices determined by the currency of the borrowing, plus an applicable margin determined by reference to our consolidated funded debt to consolidated EBITDA ratio or at an alternative base rate. On November 4, 2021 we exercised an option to expand the size of the Multicurrency Revolving Facility commitments under the Credit Agreement by $250.0 million. After the exercise the Multicurrency Revolving Facility commitment totals $1.0 billion.
The Term Facility under the Credit Agreement was drawn in full on August 27, 2018 with the proceeds settling the amounts owed under prior borrowings. The Term Facility requires quarterly amortization at a rate starting at 5.0% per annum, increasing to 7.5% per annum after three years and further increasing to 10.0% per annum for the last year of the Term Facility, unless previously prepaid. Per the terms of the agreement, prepayments can be made without penalty and be applied to the next payment due. After the prepayment is considered, the next payment in the amortization schedule is not due within one year and therefore no current maturities of debt will be recognized for this agreement. The weighted average interest rate on the Term Facility for the three months ended October 2, 2021 and September 26, 2020 was 1.3% and 1.5%, respectively. The weighted average interest rate on the Term Facility for the nine months ended October 2, 2021 and September 26, 2020 was 1.4% and 2.1%, respectively. The Credit Agreement requires that we prepay the loans under the Term Facility with 100% of the net cash proceeds received from specified asset sales and borrowed money indebtedness, subject to certain exceptions.
At October 2, 2021, we had $27.8 million borrowings under the Multicurrency Revolving Facility, $0.2 million of standby letters of credit issued under the facility and $722.0 million of available borrowing capacity. For the three months ended October 2, 2021 and September 26, 2020 under the Multicurrency Revolving Facility, the average daily balance in borrowings was $106.5 million and $51.4 million, respectively and the weighted average interest rate was 1.3% and 1.5%, respectively. For the nine months ended October 2, 2021 and September 26, 2020 under the Multicurrency Revolving Facility, the average daily balance in borrowings was $38.8 million and $189.7 million, respectively, and the weighted average interest rate was 1.4% and 2.1%, respectively. We pay a non-use fee on the aggregate unused amount of the Multicurrency Revolving Facility at a rate determined by reference to its consolidated funded debt to consolidated EBITDA ratio.
Immediately following the completion of the Rexnord Transaction subsequent to quarter end, we had approximately $1.5 billion outstanding under the Credit Agreement comprised of approximately $380.0 million outstanding under the revolving commitments, approximately $620.0 million outstanding under the term loan commitments under the Credit Agreement, and $486.0 million under the A&R Land Credit Agreement.
Senior Notes
In connection with the closing of the Rexnord Transaction, on September 30, 2021, we redeemed in full our senior notes due 2023 under the note purchase agreement, dated July 14, 2011 (as amended), by and between us and the purchasers thereto (the "Note Purchase Agreement"). Inclusive of principal, interest and the applicable make-whole payment, the total amount paid by us to redeem such senior notes was approximately $184.0 million. The make-whole payment of $12.7 million was included in interest expense. We funded this amount with a combination of cash on hand and drawings under the Credit Agreement. We also redeemed in the quarter our senior notes due July 2021 under the Note Purchase Agreement with a combination of cash on hand and drawings under the Multicurrency Revolving Facility.

We have an interest rate swap agreement to manage fluctuations in cash flows resulting from interest rate risk (see also Note 14 of Notes to the Condensed Consolidated Financial Statements).

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Compliance with Financial Covenants

The Credit Agreement require us to meet specified financial ratios and to satisfy certain financial condition tests. We were in compliance with all financial covenants contained in the Credit Agreement as of October 2, 2021.

Other Notes Payable

At October 2, 2021, other notes payable of approximately $4.3 million were outstanding with a weighted average interest rate of 4.9%. At January 2, 2021, other notes payable of approximately $4.6 million were outstanding with a weighted average rate of 4.9%.

Financing Arrangements Related to Rexnord Transaction

In connection with the Rexnord Transaction, on February 15, 2021, we entered into a debt commitment letter (the “Bridge Commitment Letter”) and related fee letters with Barclays Bank PLC (“Barclays”), pursuant to which, and subject to the terms and conditions set forth therein, Barclays committed to provide approximately $2.1 billion in an aggregate principal amount of senior bridge loans under a 364-day senior bridge loan credit facility (the “Bridge Facility”). As the Rexnord Transaction was consummated and the payments of amounts in connection therewith occurred without the use of the Bridge Facility, the commitments under the Bridge Commitment Letter were terminated in connection with the closing of the Rexnord Transaction.

In connection with the Rexnord Transaction, on May 14, 2021, Land entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as Administrative Agent and the lenders named therein (the "Land Credit Agreement"), providing for a delayed draw term loan facility with commitments thereunder in an aggregate principal amount of $487.0 million, maturing on August 25, 2023 (the "DDTL Facility"). The proceeds of the DDTL Facility were drawn by Land in a single drawing to fund a payment from Land to a subsidiary of Zurn in connection with the Rexnord Transaction. Upon consummation of the Rexnord Transaction, Land became our indirect wholly owned subsidiary and, in connection therewith, the Land Credit Agreement was amended and restated (the "A&R Land Credit Agreement") to add us as a party to the A&R Land Credit Agreement and as a guarantor of the obligations of Land thereunder. Our subsidiaries that provided a guaranty of the obligations under the Credit Agreement also entered into a subsidiary guaranty agreement with respect to the obligations under the A&R Land Credit Agreement. Additionally, Land and any subsidiary of Land that provided a guaranty under the DDTL Facility have also entered into the subsidiary guaranty agreement with respect to the Credit Agreement. The loans under the DDTL Facility will bear interest at floating rates based upon a reserve adjusted LIBOR rate or, at our election, an alternate base rate plus, in each case an applicable margin determined by reference to our consolidated funded debt (net of certain cash and cash equivalents) to EBITDA ratio.

Other Disclosures

Based on rates for instruments with comparable maturities and credit quality, which are classified as Level 2 inputs (see also Note 15 of Notes to the Condensed Consolidated Financial Statements), the approximate fair value of our total debt was $648.3 million and $1,085.8 million as of October 2, 2021 and January 2, 2021, respectively.

Critical Accounting Policies
Our disclosures of critical accounting policies, which are contained in our Annual Report on Form 10-K for the year ended January 2, 2021, have not materially changed since that report was filed.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk relating to our operations due to changes in interest rates, foreign currency exchange rates and commodity prices of purchased raw materials. We manage the exposure to these risks through a combination of normal operating and financing activities and derivative financial instruments such as interest rate swaps, commodity cash flow hedges and foreign currency forward exchange contracts. All hedging transactions are authorized and executed pursuant to clearly defined policies and procedures, which prohibit the use of financial instruments for speculative purposes.
Generally hedges are recorded on the balance sheet at fair value and are accounted for as cash flow hedges, with changes in fair value recorded in Accumulated Other comprehensive Income (Loss) (“AOCI”) in each accounting period. An ineffective portion of the hedges change in fair value, if any, is recorded in earnings in the period of change.
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Interest Rate Risk
We are exposed to interest rate risk on certain of our outstanding debt obligations used to finance our operations and acquisitions. Loans under the Credit Agreement bear interest at variable rates plus a margin, based on our consolidated net leverage ratio. At October 2, 2021, excluding the impact of interest rate swaps, we had $3.7 million of fixed rate debt and $648.4 million of variable rate debt. We utilize interest rate swaps to manage fluctuations in cash flows resulting from exposure to interest rate risk on forecasted variable rate interest payments.
We have floating rate borrowings, which expose us to variability in interest payments due to changes in interest rates. A hypothetical 10% change in our weighted average borrowing rate on outstanding variable rate debt at October 2, 2021 would result in a $0.7 million change in after-tax annualized earnings. We entered into two forward starting pay fixed/receive floating non-amortizing interest rate swaps in June 2020, with a total notional amount of $250.0 million to manage fluctuations in cash flows from interest rate risk related to floating rate interest. These swaps became effective July 2021 and will expire in July 2025. Upon inception, the swaps were designated as a cash flow hedges against forecasted interest payments with gains and losses, net of tax, measured on an ongoing basis, recorded in AOCI.
Details regarding the instruments as of October 2, 2021 are as follows (in millions):
Instrument Notional Amount Maturity Rate Paid Rate Received Fair Value
Swap $250.0 July 2025 0.6% LIBOR (1 month) $ 1.8 
As of October 2, 2021, the interest rate swap asset was included in Other Noncurrent Assets. The unrealized gain on the effective portion of the contract net of tax of $1.4 million was recorded in AOCI. At January 2, 2021, a $(0.7) million interest rate swap liability was included in Other Accrued Expenses and $(1.4) million in Other Noncurrent Liabilities. There was an unrealized loss of $(1.6) million, net of tax, at January 2, 2021 that was recorded in AOCI for the effective portion of the hedge.
In July 2017, the United Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR after 2021. We have material exposure to LIBOR through our revolving credit facility, certain lines of credit and interest rate swaps that are indexed to USD-LIBOR. It is expected that LIBOR will be discontinued and, while we believe an acceptable replacement to LIBOR will be available, if LIBOR is discontinued, we cannot reasonably estimate the impact, if any, on such discontinuation.
Foreign Currency Risk
We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of foreign subsidiaries, intercompany loans with foreign subsidiaries and transactions denominated in foreign currencies. Our objective is to minimize our exposure to these risks through a combination of normal operating activities and the utilization of foreign currency exchange contracts to manage our exposure on the forecasted transactions denominated in currencies other than the applicable functional currency. Contracts are executed with credit worthy banks and are denominated in currencies of major industrial countries. We do not hedge our exposure to the translation of reported results of foreign subsidiaries from local currency to United States dollars.
As of October 2, 2021, derivative currency assets (liabilities) of $8.9 million, $0.2 million, $(2.0) million and $(0.2) million, are recorded in Prepaid Expenses and Other Current Assets, Other Noncurrent Assets, Other Accrued Expenses, and Other Noncurrent Liabilities, respectively. As of January 2, 2021, derivative currency assets (liabilities) of $16.6 million, $1.6 million, $(1.0) million and $(0.1) million, are recorded in Prepaid Expenses and Other Current Assets, Other Noncurrent Assets, Other Accrued Expenses and Other Noncurrent Liabilities, respectively. The unrealized gains on the effective portions of the hedges of $5.3 million net of tax, and $12.7 million net of tax, as of October 2, 2021 and January 2, 2021 respectively, were recorded in AOCI. At October 2, 2021, we had $3.7 million, net of tax, of derivative currency gains on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings. At January 2, 2021, we had $1.1 million, net of tax, currency gains on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings.
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The following table quantifies the outstanding foreign exchange contracts intended to hedge non-US dollar denominated receivables and payables and the corresponding impact on the value of these instruments assuming a hypothetical 10% appreciation/depreciation of their counter currency on October 2, 2021 (in millions):
      Gain (Loss) From
Currency Notional Amount Fair Value 10% Appreciation of Counter Currency 10% Depreciation of Counter Currency
Chinese Renminbi $ 242.2  $ 3.5  $ 24.2  $ (24.2)
Mexican Peso 183.1  2.9  18.3  (18.3)
Indian Rupee 58.0  0.7  5.8  (5.8)
Canadian Dollar 0.6  —  0.1  (0.1)
Australian Dollar 28.8  0.2  2.9  (2.9)
British Pound 4.0  —  0.4  (0.4)
Thai Baht 4.0  (0.4) 0.4  (0.4)
Gains and losses indicated in the sensitivity analysis would be offset by gains and losses on the underlying forecasted non-US dollar denominated cash flows.
Commodity Price Risk
We periodically enter into commodity hedging transactions to reduce the impact of changing prices for certain commodities such as copper and aluminum based upon forecasted purchases of such commodities. The contract terms of commodity hedge instruments generally mirror those of the hedged item, providing a high degree of risk reduction and correlation.
Derivative commodity assets (liabilities) of $9.4 million, $(2.6) million, $(0.7) million were recorded in Prepaid Expenses and Other Current Assets, Other Accrued Expenses and Other Noncurrent Liabilities at October 2, 2021. Derivative commodity assets of $11.4 million and $0.1 million were recorded in Prepaid Expenses and Other Current Assets and Other Noncurrent Assets, respectively, at January 2, 2021. The unrealized gain on the effective portion of the hedges of $4.2 million net of tax and $8.7 million net of tax, as of October 2, 2021 and January 2, 2021, respectively, was recorded in AOCI. At October 2, 2021, we had $5.0 million, net of tax, of derivative commodity gains on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings. At January 2, 2021, there was an additional $2.6 million, net of tax, of derivative commodity gain on closed hedge instruments in AOCI that were realized into earnings when the hedged items impacted earnings.
The following table quantifies the outstanding commodity contracts intended to hedge raw material commodity prices and the corresponding impact on the value of these instruments assuming a hypothetical 10% appreciation/depreciation of their prices on October 2, 2021 (in millions):
      Gain (Loss) From
Commodity Notional Amount Fair Value 10% Appreciation of Commodity Prices 10% Depreciation of Commodity Prices
Copper $ 122.0  $ 4.4  $ 12.2  $ (12.2)
Aluminum 8.6  1.7  0.9  (0.9)
Gains and losses indicated in the sensitivity analysis would be offset by the actual prices of the commodities.
The net AOCI hedging component balance of a $19.6 million gains at October 2, 2021 includes $9.9 million of net current deferred gains expected to be realized in the next twelve months. The gain/loss reclassified from AOCI into earnings on such derivatives will be recognized in the same period in which the related item affects earnings.
Counterparty Risk
We are exposed to credit losses in the event of non-performance by the counterparties to various financial agreements, including our interest rate swap agreements, foreign currency exchange contracts and commodity hedging transactions. We manage exposure to counterparty credit risk by limiting our counterparties to major international banks and financial institutions meeting established credit guidelines and continually monitoring their compliance with the credit guidelines. We do not obtain collateral or other security to support financial instruments subject to credit risk. We do not anticipate non-performance by our counterparties, but cannot provide assurances.

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ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective to ensure that (a) information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and (b) information required to be disclosed by us in the reports the Company files or submits under the Exchange Act is accumulated and communicated to our management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
There have been no material changes in the legal matters described in Part I, Item 3 in our Annual Report on Form 10-K for the year ended January 2, 2021, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

Our business and financial results are subject to numerous risks and uncertainties. The factors in this Quarterly Report on Form 10-Q below should be carefully considered. For additional information regarding risks and uncertainties facing the Company, please also see the information provided under the header “Cautionary Statement” contained in this Quarterly Report on Form 10-Q.

Risks Related to Operations and Strategy

We depend on certain key suppliers, and any loss of those suppliers or their failure to meet commitments may adversely affect our business and results of operations.

We depend on a single or limited number of suppliers for some materials or components required in the manufacture of our products. If any of those suppliers fail to meet their commitments to us in terms of delivery or quality, we may experience supply shortages that could result in our inability to meet our customers’ requirements, or could otherwise experience an interruption in our operations that could negatively impact our business and results of operations.

Our dependence on, and the price of, raw materials may adversely affect our gross margins.

Many of the products we produce contain key materials such as steel, copper, aluminum and electronics. Market prices for those materials can be volatile due to changes in supply and demand, manufacturing and other costs, regulations and tariffs, economic conditions and other circumstances. We may not be able to offset any increase in commodity costs through pricing actions, productivity enhancements or other means, and increasing commodity costs may have an adverse impact on our gross margins, which could adversely affect our results of operations and financial condition.

The COVID-19 pandemic has adversely impacted our business and the PMC Business and could continue to have an adverse impact on our business, results of operation, financial condition, liquidity, customers, suppliers, and the geographies in which we operate.

The COVID-19 pandemic has significantly increased economic, demand and operational uncertainty. We haves global operations, customers and suppliers, including in countries impacted by COVID-19. Authorities around the world have taken a
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variety of measures to attempt to slow the spread of COVID-19, including travel bans or restrictions, increased border controls or closures, quarantines, shelter-in-place orders and business shutdowns and such authorities may impose additional restrictions. We have also taken actions to protect our employees and to mitigate the spread of COVID-19, including embracing guidelines set by the World Health Organization and the U.S. Centers for Disease Control and Prevention on social distancing, good hygiene, restrictions on employee travel and in-person meetings, and changes to employee work arrangements including remote work arrangements where feasible. The actions taken around the world to attempt slow the spread of COVID-19 have also impacted our customers and suppliers, and future developments could cause further disruptions to us due to the interconnected nature of our business relationships.

The impact of COVID-19 on the global economy and our customers, as well as recent volatility in commodity markets, has negatively impacted demand for our products and could continue to do so in the future. Its effects could also result in disruptions to our manufacturing operations, including higher rates of employee absenteeism, and supply chain, which could negatively impact our ability to meet customer demand. Additionally, the potential deterioration and volatility of credit and financial markets could limit our ability to obtain external financing. The extent to which COVID-19 will impact our business, results of operations, financial condition or liquidity is highly uncertain and will depend on future developments, including the spread and duration of the virus, potential actions taken by governmental authorities, and how quickly economic conditions stabilize and recover.

We may incur costs and charges as a result of restructuring activities such as facilities and operations consolidations and workforce reductions that are intended to reduce on-going costs, and those restructuring activities also may be disruptive to our business and may not result in anticipated cost savings.

We expect to review our overall manufacturing footprint, including potentially consolidating facilities and operations, in an effort to make our business more efficient. We expect to incur additional costs and restructuring charges in connection with such consolidations, divestitures, workforce reductions and other cost reduction measures that could adversely affect our future earnings and cash flows. Furthermore, such actions may be disruptive to our business. This may result in production inefficiencies, product quality issues, late product deliveries or lost orders as we begin production at consolidated facilities, which would adversely impact our sales levels, operating results and operating margins. In addition, we may not realize the cost savings that we expect to realize as a result of such actions.

These activities require substantial management time and attention and may divert management from other important work or result in a failure to meet operational targets. Divestitures may also give rise to obligations to buyers or other parties that could have a financial effect after the transaction is completed. Moreover, we could encounter changes to, or delays in executing, any restructuring or divestiture plans, any of which could cause disruption and additional unanticipated expense.

Our ability to establish, grow and maintain customer relationships depends in part on our ability to develop new products and product enhancements based on technological innovation, such as IoT, and marketplace acceptance of new and existing products, including products related to technology not yet adopted or utilized in certain geographic locations in which we do business.

The electric motor and power transmission industries in recent years have seen significant evolution and innovation, particularly with respect to increasing energy efficiency and control enhancements. Our ability to effectively compete in these industries depends in part on our ability to continue to develop new technologies and innovative products and product enhancements, including enhancements based on technological innovation such as IoT. Further, many large customers in these industries generally desire to purchase from companies that can offer a broad product range, which means we must continue to develop our expertise in order to design, manufacture and sell these products successfully. This requires that we make significant investments in engineering, manufacturing, customer service and support, research and development and intellectual property protection, and there can be no assurance that in the future we will have sufficient resources to continue to make such investments. If we are unable to meet the needs of our customers for innovative products or product variety, or if our products become technologically obsolete over time due to the development by our competitors of technological breakthroughs or otherwise, our revenues and results of operations may be adversely affected. In addition, we may incur significant costs and devote significant resources to the development of products that ultimately are not accepted in the marketplace, do not provide anticipated enhancements, or do not lead to significant revenue, all of which may adversely impact our results of operations.

Further, such new products and technologies may create additional exposure or risk. We cannot assure that we can adequately protect any of our own technological developments to produce a sustainable competitive advantage. Furthermore, we could be subject to business continuity risk in the event of an unexpected loss of a material facility or operation. We cannot ensure that we can adequately protect against such a loss.

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In each of our Climate Solutions and Commercial Systems segments, we depend on revenues from several significant customers, and any loss, cancellation or reduction of, or delay in, purchases by these customers may have a material adverse effect on our business.

In each of our Climate Solutions and Commercial Systems segments, we depend on, and expect to continue to depend on, revenues from several significant customers, and any loss, cancellation or reduction of, or delay in, purchases by these customers may have a material adverse effect on our business.
We derive a significant portion of the revenues of our motor businesses from several key OEM customers. Our success depends on our continued ability to develop and manage relationships with these customers. We have long standing relationships with these customers and we expect these customer relationships will continue for the foreseeable future. Our reliance on sales from customers makes the relationship with each of these customers important to our business. We cannot assure you that we will be able to retain these key customers. Some of our customers may in the future shift some or all of their purchases of products from us to our competitors or to other sources. The loss of one or more of our large customers, any reduction or delay in sales to these customers, our inability to develop relationships successfully with additional customers, or future price concessions that we may make could have a material adverse effect on our results of operations and financial condition.

Goodwill and an indefinite-lived trade name intangible comprise a significant portion of our total assets, and if we determine that goodwill and the indefinite-lived trade name intangible have become impaired in the future, our results of operations and financial condition in such years may be materially and adversely affected.

We have substantial intangible assets in respect of goodwill and indefinite-lived trade names. Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. The indefinite-lived trade name intangible represents a long-standing brand acquired in a business combination and is assumed to have indefinite life. We review goodwill and the indefinite-lived trade name intangible at least annually for impairment and any excess in carrying value over the estimated fair value is charged to the results of operations. Our estimates of fair value are based on assumptions about the future operating cash flows, growth rates, discount rates applied to these cash flows and current market estimates of value. A reduction in net income resulting from the write down or impairment of goodwill or the indefinite-lived trade name intangible would affect financial results. If we are required to record a significant charge to earnings in our consolidated financial statements because an impairment of goodwill or the indefinite-lived trade name intangible is determined, our results of operations and financial condition could be materially and adversely affected.

Portions of our total sales come directly from customers in key markets and industries. A significant or prolonged decline or disruption in one of those markets or industries could result in lower capital expenditures by such customers, which could have a material adverse effect on our results of operations and financial condition.

Portions of our total sales are dependent directly upon the level of capital expenditures by customers in key markets and industries, such as HVAC, refrigeration, aerospace power generation, oil and gas, mining, cement and aggregates and unit material handling or water heating. A significant or prolonged decline or disruption in one of those markets or industries may result in some of such customers delaying, canceling or modifying projects, or may result in nonpayment of amounts that are owed to us. These effects could have a material adverse effect on our results of operations and financial condition.

We sell certain products for high volume applications, and any failure of those products to perform as anticipated could result in significant liability and expenses that may adversely affect our business and results of operations.
We manufacture and sell a number of products for high volume applications, including electric motors used in pools and spas, residential and commercial heating, ventilation and air conditioning, refrigeration equipment and enclosed gear drives for solar power generation. Any failure of those products to perform as anticipated could result in significant product liability, product recall or rework, or other costs. The costs of product recalls and reworks are not generally covered by insurance.

If we were to experience a product recall or rework in connection with products of high volume applications, our financial condition or results of operations could be materially adversely affected.

One of our subsidiaries that we acquired in 2007 is subject to numerous claims filed in various jurisdictions relating to certain sub-fractional motors that were primarily manufactured through 2004 and that were included as components of residential and commercial ventilation units manufactured and sold in high volumes by a third party. These ventilation units are subject to regulation by government agencies such as the U.S. Consumer Product Safety Commission (“CPSC”). The claims generally
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allege that the ventilation units were the cause of fires. Based on the current facts, we cannot assure you that these claims, individually or in the aggregate, will not have a material adverse effect on our or our subsidiary’s results of operations, financial condition or cash flows. We cannot reasonably predict the outcome of these claims, the nature or extent of any CPSC or other remedial actions, if any, that we or our subsidiary may need to undertake with respect to motors that remain in the field, or the costs that may be incurred, some of which could be significant.

If our business does not generate cash flow from operations in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs, we could become increasingly vulnerable to general adverse economic and industry conditions and interest rate trends, and our ability to obtain future financing may be limited.

As of October 4, 2021, after giving effect to the Rexnord Transaction, we had approximately $1.0 billion in aggregate debt outstanding under our various financing arrangements, approximately $350.0 million in cash and cash equivalents and approximately $360.0 million in available borrowings under our current revolving credit facility. Our ability to make required payments of principal and interest on our debt levels depends on our future performance, which, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations or that future borrowings will be available under our current credit facilities in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs. In addition, our credit facilities contain financial and restrictive covenants that could limit our ability to, among other things, borrow additional funds or take advantage of business opportunities. Our failure to comply with such covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all of our indebtedness or otherwise have a material adverse effect on our business, financial condition, results of operations and debt service capability. Our indebtedness may have important consequences. For example, it could:

• make it more challenging for us to obtain additional financing to fund our business strategy and acquisitions, debt service requirements, capital expenditures and working capital;

• increase our vulnerability to interest rate changes and general adverse economic and industry conditions;

• require us to dedicate a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the availability of our cash flow to finance acquisitions and to fund working capital, capital expenditures, manufacturing capacity expansion, business integration, research and development efforts and other general corporate activities;

• limit our flexibility in planning for, or reacting to, changes in our business and our markets; and/or

• place us at a competitive disadvantage relative to our competitors that have less debt.

In addition, our credit facilities require us to maintain specified financial ratios and satisfy certain financial condition tests, which may require that us take action to reduce our debt or to act in a manner contrary to our business strategies. If an event of default under our credit facility or senior notes were to occur, the lenders could elect to declare all amounts outstanding under the applicable agreement, together with accrued interest, to be immediately due and payable.
Sales of products incorporated into HVAC systems and other residential applications are seasonal and affected by the weather; mild or cooler weather could have an adverse effect on our operating performance.

Many of our motors are incorporated into HVAC systems and other residential applications that OEMs sell to end users. The number of installations of new and replacement HVAC systems or components and other residential applications is higher during the spring and summer seasons due to the increased use of air conditioning during warmer months. Mild or cooler weather conditions during the spring and summer season often result in end users deferring the purchase of new or replacement HVAC systems or components. As a result, prolonged periods of mild or cooler weather conditions in the spring or summer season in broad geographical areas could have a negative impact on the demand for our HVAC motors and, therefore, could have an adverse effect on our operating performance. In addition, due to variations in weather conditions from year to year, our operating performance in any single year may not be indicative of our performance in any future year.

Our success is highly dependent on qualified and sufficient staffing. Our failure to attract or retain qualified personnel, including our senior management team, could lead to a loss of revenue or profitability.

Our success depends on, in part, on the efforts and abilities of our senior management team and key associates and the contributions of talented associates in various operations and functions, such as engineering, finance, sales, marketing, manufacturing, etc. The skills, experience and industry contacts of our senior management team significantly benefit our
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operations and administration. The failure to attract or retain members of our senior management team and key talent could have a negative effect on our operating results.

Moreover, on September 9, 2021, President Biden issued an executive order requiring all employers with U.S. Government contracts to ensure that their U.S.-based employees, contractors, and subcontractors, that work on or in support of U.S. Government contracts, are fully vaccinated by December 8, 2021. The executive order includes on-site and remote U.S.-based employees, contractors and subcontractors and it only permits limited exceptions for medical and religious reasons. In addition, on September 9, 2021, President Biden announced that he has directed OSHA to develop an ETS mandating either the full vaccination or weekly testing of employees for employers with 100 or more employees. OSHA has not issued the ETS nor provided any additional information on its contents or requirements.

It is currently not possible to predict with certainty the impact the executive order or OSHA ETS will have on our workforce. Our implementation of these requirements may result in attrition, including attrition of critically skilled labor, and difficulty securing future labor needs, which could have a material adverse effect on our business, financial condition, and results of operations.

Risks Related to Mergers, Acquisitions and Divestitures

We and Arrowhead may be unable to satisfy the conditions or obtain the approvals required to complete the Arrowhead Transaction.

The consummation of the Arrowhead Transaction is subject to customary closing conditions, including the receipt of U.S. regulatory approval. We cannot make any assurances that the Arrowhead Transaction will be consummated on the terms or timeline currently contemplated, or at all.

Our failure to successfully integrate the PMC Business and Arrowhead and realize forecasted synergies from the Transactions and any future acquisitions into our business within our expected timetable could adversely affect our future results and the market price of our common stock following the completion of the Transactions or any future acquisitions.

The success of the Rexnord Transaction and the Arrowhead Transaction will depend, in large part, our ability following the completion of the Transactions to realize the anticipated benefits of the Transactions and on our sales and profitability. To realize these anticipated benefits, we must successfully integrate the PMC Business and Arrowhead. These integrations will be complex and time-consuming. The failure to successfully integrate and manage the challenges presented by the integration process may result in our failure to achieve some or all of the anticipated benefits of the Transactions.

Potential difficulties that may be encountered in the integration process include, among others:

• the failure to implement our business plan and for us to recognize synergies between our business and the PMC Business and Arrowhead;

• lost sales and customers as a result of our customers or customers of the PMC Business and Arrowhead deciding not to do business with us;

• risks associated with managing the larger and more complex Company after the Transactions;

• integrating our personnel and the personnel of the PMC Business and Arrowhead while maintaining focus on providing consistent, high-quality products and service to customers;

• the loss of key employees;

• unanticipated issues in integrating manufacturing, logistics, information, communications and other systems;

• unexpected liabilities of the PMC Business and Arrowhead;

• possible inconsistencies in standards, controls, procedures, policies and compensation structures;

• the impact on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002; and

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• potential unknown liabilities and unforeseen expenses or delays associated with the Transactions.

If any of these events were to occur, our ability to maintain relationships with customers, suppliers and employees or our ability to achieve the anticipated benefits of the Transactions could be adversely affected, or could reduce our sales or earnings or otherwise adversely affect our business and financial results after the Transactions and, as a result, adversely affect the market price of our common stock.

Apart from the Transactions, as part of our growth strategy, we have made and expect to continue to make, acquisitions. Our continued growth may depend on our ability to identify and acquire companies that complement or enhance our business on acceptable terms, but we may not be able to identify or complete future acquisitions. We may not be able to integrate successfully our recent acquisitions, or any future acquisitions, operate these acquired companies profitably, or realize the potential benefits from these acquisitions, including the expected restructuring of certain aspects of the PMC Business and Arrowhead.

We will continue to incur significant costs related to the Transactions, which may be greater than anticipated and which could have an adverse effect on our liquidity, cash flows and operating results.

We have incurred and will continue to incur significant one-time costs in connection with the Transactions, including transaction costs, integration costs, and other costs that our management believes are necessary to realize the anticipated synergies from the Transactions. Although we believe our projections of these costs are based on reasonable assumptions, if such costs are greater than anticipated, the realization of these costs may have a material adverse effect on our liquidity, cash flows and operating results in the periods in which they are incurred.

Businesses that we have acquired or that we may acquire in the future, including the PMC Business and Arrowhead, may have liabilities which are not known to us.

We have assumed liabilities of acquired businesses, including the PMC Business and Arrowhead, and may assume liabilities of businesses that we acquire in the future. There may be liabilities or risks that we fail, or are unable, to discover, or that we underestimate, in the course of performing our due diligence investigations of acquired businesses. Additionally, businesses that we have acquired or may acquire in the future may have made previous acquisitions, and we will be subject to certain liabilities and risks relating to these prior acquisitions as well. We cannot assure you that our rights to indemnification contained in definitive acquisition agreements that we have entered or may enter into will be sufficient in amount, scope or duration to fully offset the possible liabilities associated with the business or property acquired. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition or results of operations. As we begin to operate acquired businesses, we may learn additional information about them that adversely affects us, such as unknown or contingent liabilities, issues relating to compliance with applicable laws or issues related to ongoing customer relationships or order demand.

The Reorganization and the Distributions could result in significant tax liability, including as a result of an error in the determination of Overlap Shareholders or subsequent acquisitions of stock of Zurn or us. Under certain circumstances, Land (our wholly owned subsidiary) may be obligated to indemnify Zurn for such taxes imposed on Zurn.

In connection with the Rexnord Transaction, Zurn received a tax opinion from its tax counsel (the “Rexnord Tax Opinion”) that includes an opinion to the effect that the Reorganization, together with the distributions of Land common stock from Zurn to Zurn’s stockholders (the “Distributions”), will qualify as tax-free to Zurn, Land and the Zurn stockholders, as applicable, for U.S. federal income tax purposes except, in the case of Zurn, to the extent Land’s payment to a subsidiary of Zurn under the terms of the Separation Agreement (the “Land Cash Payment”) exceeds RBS Global Inc.’s adjusted tax basis in Land common stock. The Rexnord Tax Opinion is based on, among other things, certain representations and assumptions as to factual matters and certain covenants made by us, Land and Zurn. Although we believe the representations, assumptions and covenants in the Rexnord Tax Opinion to be true, the failure of any such factual representation, assumption or covenant to be true, correct and complete in all material respects could adversely affect the validity of the opinion. The Rexnord Tax Opinion is not binding on the IRS or the courts, and it is possible that the IRS or the courts may not agree with the opinion. In addition, the Rexnord Tax Opinion is based on current law, and the conclusions in the opinion cannot be relied upon if current law changes with retroactive effect.

The Spin-Off will be taxable to Zurn pursuant to Section 355(e) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) if there is a 50% or greater change in ownership of either Zurn or Land, directly or indirectly, as part of a plan or series of related transactions that include the Spin-Off. For this purpose, any acquisitions of Land or Zurn stock or our stock within the period beginning two years before the Spin-Off and ending two years after the Spin-Off are presumed to be a part of such
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plan, although we and Zurn may be able to rebut that presumption. Zurn received a private letter ruling from the U.S. Internal Revenue Service (the “IRS”) (the “IRS Ruling”) with respect to certain tax aspects of the Rexnord Transaction, including matters relating to the nature and extent of shareholders who may be counted for tax purposes as “Overlap Shareholders” (as such term is defined in the Merger Agreement) for purposes of determining the exchange ratio for the transaction in the Merger Agreement and the overall percentage change in the ownership of Land resulting from the Merger. The continuing validity of the IRS Ruling is subject to the accuracy of factual representations and assumptions made in the ruling request. Moreover, the IRS Ruling only describes the time, manner and methodology for measuring Overlap Shareholders and may be subject to varying interpretations.

The actual determination and calculation of Overlap Shareholders was made by us, Zurn and our respective advisors based on the IRS Ruling, but no assurance can be given that the IRS will agree with these determinations or calculations. If the IRS were to determine that the Merger, as a result of an error in the determination of Overlap Shareholders, or other acquisitions of Land, Zurn or our stock, either before or after the Spin-Off, resulted in a 50% or greater change in ownership and were part of a plan or series of related transactions that included the Spin-Off, such determination could result in significant tax liability to Zurn. In certain circumstances and subject to certain limitations, under the Tax Matters Agreement, Land is required to indemnify Zurn for 100% of the taxes that result if the Distributions become taxable as a result of certain actions by us or Land and for 90% of the taxes that result as a result of a miscalculation of the Overlap Shareholders. If this occurs and Land is required to indemnify Zurn, this indemnification obligation could be substantial and could have a material adverse effect on us and Land, including with respect to our financial condition and results of operations given that we have guaranteed the indemnification obligations of Land.

Following consummation of the Rexnord Transaction, we and Land are each required to abide by potentially significant restrictions which could limit our ability to undertake certain corporate actions (such as the issuance of common stock or the undertaking of certain business combinations) that otherwise could be advantageous.

The Tax Matters Agreement we entered into in connection with the Rexnord Transaction imposes certain restrictions on us, Land and Zurn during the two-year period following the Spin-Off, subject to certain exceptions, with respect to actions that could cause the Reorganization and the Distributions to fail to qualify for their intended tax treatment. As a result of these restrictions, our and Land’s ability to engage in certain transactions, such as the issuance or purchase of stock or certain business combinations, may be limited.

If we, Land or Zurn take any enumerated actions or omissions, or if certain events relating to us, Land or Zurn occur that would cause the Reorganization or the Distributions to become taxable, the party whose actions or omissions (or who the event relates to) generally will be required to bear the cost of any resulting tax liability of Zurn (but not its stockholders). If the Reorganization or the Distributions became taxable, Zurn would be expected to recognize a substantial amount of gain, which would result in a material amount of taxes. Any such taxes would be expected to be material to us and could cause our business, financial condition and operating results to suffer. These restrictions may reduce our ability to engage in certain business transactions that otherwise might be advantageous, which could adversely affect our business, results of operations, or financial condition.

Zurn may not be able to perform the services it is required to perform under the Transition Services Agreement.

Prior to the Rexnord Transaction, Zurn performed certain corporate and other functions for the PMC Business. Following the Merger, Zurn is obligated to perform some of these services to the PMC Business pursuant to a transition services agreement (the “Transition Services Agreement”) between us, Zurn and Land for a transitional period. In the event that Zurn does not or is unable to perform its obligations with respect to the PMC Business under the Transition Services Agreement, or if there are disputes in connection with the Transition Services Agreement, we may be required to incur significant costs in order to provide such services or resolve such disputes, which could adversely affect our business, results of operations or financial condition.

Risks Related to Our Global Footprint

We operate in the highly competitive global electric motors and controls, power generation and power transmission industries.

The global electric motors and controls, power generation and power transmission industries are highly competitive. We have a wide variety of domestic and international competitors due in part to the nature of the products we manufacture and the wide variety of applications and customers we serve. In order to compete effectively, we must retain relationships with major customers and establish relationships with new customers, including those in developing countries. Moreover, in certain applications, customers exercise significant power over business terms. It may be difficult in the short-term for us to obtain new
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sales to replace any decline in the sale of existing products that may be lost to competitors. Our failure to compete effectively may reduce our revenues, profitability and cash flow, and pricing pressures resulting from competition may adversely impact our profitability.

We have continued to see a trend with certain customers who are attempting to reduce the number of vendors from which they purchase product in order to reduce their costs and diversify their risk. As a result, we may lose market share to our competitors in some of the markets in which we compete.

In addition, some of our competitors may be larger and have greater financial and other resources than us. There can be no assurance that our products will be able to compete successfully with the products of these other companies.

We may also choose to exit certain businesses, markets, or channels based on a variety of factors including our 80/20 initiatives.

We manufacture a significant portion of our products outside the U.S., and political, societal or economic instability or public health crises may present additional risks to our business.

As of October 29, 2021, after giving effect to the Rexnord Transaction, approximately 24,000 of our approximate 30,000 total associates and 63 of our principal manufacturing and warehouse facilities are located outside the U.S. International operations generally are subject to various risks, including political, societal and economic instability, local labor market conditions, public health crises, breakdowns in trade relations, the imposition of tariffs and other trade restrictions, lack of reliable legal systems, ownership restrictions, the impact of government regulations, the effects of income and withholding taxes, governmental expropriation or nationalization, and differences in business practices. We may incur increased costs and experience delays or disruptions in product deliveries and payments in connection with international manufacturing and sales that could cause loss of revenue.

Unfavorable changes in the political, regulatory and business climates in countries where we have operations could have a material adverse effect on our financial condition, results of operations and cash flows, including, for example, the uncertainty surrounding the effect of the United Kingdom’s exit from the European Union, commonly referred to as “Brexit,” trade relations between the U.S. and China, the implementation of the United States-Mexico-Canada Agreement (the “USMCA”), or the change in labor rates in Mexico.

In addition, as described in more detail above, the continued global spread of COVID-19 could continue to have an adverse effect on our financial condition, results of operations and cash flows.

Disruptions caused by labor disputes or organized labor activities could adversely affect our business or financial results.

We have a significant number of employees in Europe and other jurisdictions where trade union membership is common. Although we believe that our relations with our employees are strong, if our unionized workers were to engage in a strike, work stoppage or other slowdown in the future, we could experience a significant disruption of our operations, which could interfere with our ability to deliver products on a timely basis and could have other negative effects, such as decreased productivity and increased labor costs. In addition, if a greater percentage of our workforce becomes unionized as a result of legal or regulatory changes which may make union organizing easier, or otherwise, our costs could increase and our efficiency be affected in a material adverse manner, negatively impacting our business and financial results. Further, many of our direct and indirect customers and their suppliers, and organizations responsible for shipping our products, have unionized workforces and their businesses may be impacted by strikes, work stoppages or slowdowns, any of which, in turn, could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Economic and Financial Risks

Commodity, currency and interest rate hedging activities may adversely impact our financial performance as a result of changes in global commodity prices, interest rates and currency rates.

We use derivative financial instruments in order to reduce the substantial effects of currency and commodity fluctuations and interest rate exposure on our cash flow and financial condition. These instruments may include foreign currency and commodity forward contracts, currency swap agreements and currency option contracts, as well as interest rate swap agreements. We have entered into, and may continue to enter into, such hedging arrangements. By utilizing hedging instruments, we may forgo benefits that might result from fluctuations in currency exchange, commodity and interest rates. We are also exposed to the risk
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that counterparties to hedging contracts will default on their obligations. Any default by such counterparties might have an adverse effect on us.

We may suffer losses as a result of foreign currency fluctuations.

The net assets, net earnings and cash flows from our foreign subsidiaries based on the U.S. dollar equivalent of such amounts measured in the applicable functional currency.

These foreign operations have the potential to impact our financial position due to fluctuations in the local currency arising from the process of re-measuring the local functional currency in the U.S. dollar. Any increase in the value of the U.S. dollar in relation to the value of the local currency, whether by means of market conditions or governmental actions such as currency devaluations, will adversely affect our revenues from our foreign operations when translated into U.S. dollars. Similarly, any decrease in the value of the U.S. dollar in relation to the value of the local currency will increase our operating costs in foreign operations, to the extent such costs are payable in foreign currency, when translated into U.S. dollars.

Worldwide economic conditions may adversely affect our industry, business and results of operations.

General economic conditions and conditions in the global financial markets can affect our results of operations. Deterioration in the global economy could lead to higher unemployment, lower consumer spending and reduced investment by businesses, and could lead our customers to slow spending on our products or make it difficult for our customers, our vendors and us to accurately forecast and plan future business activities. Worsening economic conditions could also affect the financial viability of our suppliers, some of which could be considered key suppliers. If the commercial, industrial, residential HVAC, power generation and power transmission markets significantly deteriorate, our business, financial condition and results of operations will likely be materially and adversely affected. Some of the industries that we serve are highly cyclical, such as the aerospace, energy and industrial equipment industries. Additionally, our stock price could decrease if investors have concerns that our business, financial condition and results of operations will be negatively impacted by a worldwide economic downturn.

We are subject to tax laws and regulations in many jurisdictions and the inability to successfully defend claims from taxing authorities related to our current and/or acquired businesses could adversely affect our operating results and financial position.

A significant amount of our revenue is generated from customers located outside of the U.S., and a substantial portion of our assets and associates are located outside of the U.S. which requires us to interpret the income tax laws and rulings in each of those taxing jurisdictions. Due to the subjectivity of tax laws between those jurisdictions as well as the subjectivity of factual interpretations, our estimates of income tax liabilities may differ from actual payments or assessments. Claims from taxing authorities related to these differences could have an adverse impact on our operating results and financial position.

Our required cash contributions to our pension plans may increase further and we could experience a change in the funded status of our pension plans and the amount recorded in our consolidated balance sheets related to such plans. Additionally, our pension costs could increase in future years.

The funded status of our defined benefit pension plans depends on such factors as asset returns, market interest rates, legislative changes and funding regulations. If the returns on the assets of any of our plans were to decline in future periods, if market interest rates were to decline, if the Pension Benefit Guaranty Corporation were to require additional contributions to any such plans as a result of acquisitions or if other actuarial assumptions were to be modified, our future required cash contributions and pension costs to such plans could increase. Any such increases could impact our business, financial condition, results of operations or cash flows. The need to make contributions to such plans may reduce the cash available to meet our other obligations, including our obligations under our borrowing arrangements or to meet the needs of our business.

Risks Relating to the Legal and Regulatory Environment

We are subject to changes in legislative, regulatory and legal developments involving income and other taxes.

We are subject to U.S. federal, state, and international income, payroll, property, sales and use, fuel, and other types of taxes. Changes in tax rates, enactment of new tax laws, revisions of tax regulations, and claims or litigation with taxing authorities, including claims or litigation related to our interpretation and application of tax laws and regulations, could result in substantially higher taxes, could have a negative impact on our ability to compete in the global marketplace, and could have a significant adverse effect on our results or operations, financial conditions and liquidity.

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It is difficult to predict the timing and effect that future tax law changes could have on our earnings both in the U.S. and in foreign jurisdictions. The Biden administration has provided informal guidance on certain tax law changes that it would support, which includes, among other things, raising tax rates on both domestic and foreign income and imposing a new alternative minimum tax on book income. Such changes could cause us to experience an effective tax rate significantly different from previous periods or our current estimates. If our effective tax rate were to increase, our financial condition and results of operations could be adversely affected.

We are subject to litigation, including product liability and warranty claims that may adversely affect our financial condition and results of operations.

We are, from time to time, a party to litigation that arises in the normal course of our business operations, including product warranty and liability claims, contract disputes and environmental, asbestos, employment and other litigation matters. We face an inherent business risk of exposure to product liability and warranty claims in the event that the use of our products is alleged to have resulted in injury or other damage. Certain subsidiaries of ours are co-defendants in various lawsuits in a number of U.S. jurisdictions alleging personal injury as a result of exposure to asbestos that was used in certain components of PMC Business products. The uncertainties of litigation and the uncertainties related to insurance and indemnification coverage make it difficult to accurately predict the ultimate financial effect of these claims.

While we maintain general liability and product liability insurance coverage in amounts that we believe are reasonable, we cannot assure you that we will be able to maintain this insurance on acceptable terms or that this insurance will provide sufficient coverage against potential liabilities that may arise. Any product liability claim may also include the imposition of punitive damages, the award of which, pursuant to certain state laws, may not be covered by insurance. Any claims brought against us, with or without merit, may have an adverse effect on our business and results of operations as a result of potential adverse outcomes, the expenses associated with defending such claims, the diversion of our management’s resources and time and the potential adverse effect to our business reputation.

Infringement of our intellectual property by third parties may harm our competitive position, and we may incur significant costs associated with the protection and preservation of our intellectual property.

We own or otherwise have rights in a number of patents and trademarks relating to the products we manufacture, which have been obtained over a period of years, and we expect to actively pursue patents in connection with new product development and to acquire additional patents and trademarks through the acquisitions of other businesses. These patents and trademarks have been of value in the growth of our business and may continue to be of value in the future. Our inability to protect this intellectual property generally, or the illegal breach of some or a large group of our intellectual property rights, would have an adverse effect on our business. In addition, there can be no assurance that our intellectual property will not be challenged, invalidated, circumvented or designed-around, particularly in countries where intellectual property rights are not highly developed or protected. We have incurred in the past, and expect to incur in the future, significant costs associated with defending challenges to our intellectual property or enforcing our intellectual property rights, which could adversely impact our cash flow and results of operations.

Third parties may claim that we are infringing their intellectual property rights and we could incur significant costs and expenses or be prevented from selling certain products.

We may be subject to claims from third parties that our products or technologies infringe on their intellectual property rights or that we have misappropriated intellectual property rights. If we are involved in a dispute or litigation relating to infringement of third party intellectual property rights, we could incur significant costs in defending against those claims. Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of infringement or misappropriation. In addition, as a result of such claims of infringement or misappropriation, we could lose our rights to technology that are important to our business, or be required to pay damages or license fees with respect to the infringed rights or be required to redesign our products at substantial cost, any of which could adversely impact our cash flows and results of operations.

We may incur costs or suffer reputational damage due to improper conduct of our associates, agents or business partners.

We are subject to a variety of domestic and foreign laws, rules and regulations relating to improper payments to government officials, bribery, anti-kickback and false claims rules, competition, export and import compliance, money laundering and data privacy. If our associates, agents or business partners engage in activities in violation of these laws, rules or regulations, we may be subject to civil or criminal fines or penalties or other sanctions, may incur costs associated with government investigations, or may suffer damage to our reputation.
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Our operations are highly dependent on information technology infrastructure, and failures, attacks or breaches could significantly affect our business.

We depend heavily on our information technology infrastructure in order to achieve our business objectives. If we experience a problem that impairs this infrastructure, such as a computer virus, a problem with the functioning of an important IT application, or an intentional disruption of our IT systems by a third party, the resulting disruptions could impede our ability to record or process orders, manufacture and ship in a timely manner, or otherwise carry on our business in the ordinary course. Any such events could cause us to lose customers or revenue and could require us to incur significant expense to eliminate these problems and address related security concerns, including costs relating to investigation and remediation actions.

IT security threats via computer malware and other “cyber-attacks,” which are increasing in both frequency and sophistication, could also result in unauthorized disclosures of information, such as customer data, personally identifiable information or other confidential or proprietary material, and create financial liability, subject us to legal or regulatory sanctions, or damage our reputation. Moreover, because the techniques used to gain access to or sabotage systems often are not recognized until launched against a target, we may be unable to anticipate the methods necessary to defend against these types of attacks, and we cannot predict the extent, frequency or impact these attacks may have. While we maintain robust information security mechanisms and controls, the impact of a material IT event could have a material adverse effect on our competitive position, results of operations, financial condition and cash flow.

We have substantially completed the implementation of two Enterprise Resource Planning (“ERP”) systems that each redesigned and deployed common information systems. We will continue to implement the ERP systems throughout the business. The process of implementation can be costly and can divert the attention of management from the day-to-day operations of the business. As we implement the ERP systems, some elements may not perform as expected. This could have an adverse effect on our business.

We may be adversely affected by environmental, health and safety laws and regulations.

We are subject to various laws and regulations relating to the protection of the environment and human health and safety and expect incur capital and other expenditures to comply with these regulations. Failure to comply with any environmental regulations, including more stringent environmental laws that may be imposed in the future, could subject us to future liabilities, fines or penalties or the suspension of production. In addition, if environmental and human health and safety laws and regulations are repealed, made less burdensome or implemented at a later date, demand for our products designed to comply with such regulations may be unfavorably impacted.

General Risks

Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to our outstanding debt.

Amounts drawn under our credit facilities may bear interest rates in relation to LIBOR, depending on our selection of repayment options. On July 27, 2017, the Financial Conduct Authority in the United Kingdom announced that it would phase out LIBOR as a benchmark by the end of 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. The overall financing market may be disrupted as a result of the phase-out or replacement of LIBOR. Disruption in the financing market could have a material adverse effect on our business, financial position, operating results, and interest expense related to our outstanding debt.

Our operations can be negatively impacted by natural disasters, terrorism, acts of war, international conflict, political and governmental actions which could harm our business.

Natural disasters, acts or threats of war or terrorism, international conflicts, and the actions taken by the U.S. and other governments in response to such events could cause damage or disrupt our business operations, our suppliers, or our customers, and could create political or economic instability, any of which could have an adverse effect on our business. Although it is not possible to predict such events or their consequences, these events could decrease demand for our products, could make it difficult or impossible for us to deliver products, or could disrupt our supply chain. We may also be negatively impacted by actions by the U.S. or foreign governments which could disrupt manufacturing and commercial operations, including policy changes affecting taxation, trade, immigration, currency devaluation, tariffs, customs, border actions and the like, including, for example, the effect of the United Kingdom’s exit from the European Union, commonly referred to as “Brexit,” trade relations between the U.S. and China, the implementation of the USMCA, or the change in labor rates in Mexico.
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Our stock may be subject to significant fluctuations and volatility.

The market price of shares of our common stock may be volatile. Among the factors that could affect our common stock price are those discussed above under “Risk Factors” as well as:

• domestic and international economic and political factors unrelated to our performance;

• quarterly fluctuation in our operating income and earnings per share results;

• decline in demand for our products;

• significant strategic actions by our competitors, including new product introductions or technological advances;

• fluctuations in interest rates;

• cost increases in energy, raw materials, intermediate components or materials, or labor; and

• changes in revenue or earnings estimates or publication of research reports by analysts.

In addition, stock markets may experience extreme volatility that may be unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no repurchases of our common stock during the current quarter. 

Under our equity incentive plans, participants may pay the exercise price or satisfy all or a portion of the federal, state and local withholding tax obligations arising in connection with plan awards by electing to (a) have the Company withhold shares of common stock otherwise issuable under the award, (b) tender back shares received in connection with such award or (c) deliver other previously owned shares of common stock, in each case having a value equal to the exercise price or the amount to be withheld. During the quarter ended October 2, 2021, we did not acquire any shares in connection with transactions pursuant to equity incentive plans.
At a meeting of the Board of Directors on October 25, 2019, the Company's Board of Directors approved the authorization to purchase up to $250.0 million of shares.
At a meeting of the Board of Directors on October 26, 2021, the Company's Board of Directors approved the authorization to purchase up to $500.0 million of shares under the Company's share repurchase program. The new authorization has no expiration date.
61

ITEM 6. EXHIBITS
 
Exhibit Number    Exhibit Description
3.1
3.2
10.1
31.1   
31.2   
32.1   
101.INS    XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).



62

SIGNATURE
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 thereunto duly authorized.
REGAL REXNORD CORPORATION
(Registrant)
/s/ Robert J. Rehard
Robert J. Rehard
Vice President
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: November 10, 2021



63
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF REGAL REXNORD CORPORATION (Effective October 4, 2021) Pursuant to Section 180.1007 of the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes (the “WBCL”), these amended and restated articles of incorporation of the corporation (the “Corporation”), which Corporation is organized under Chapter 180 of the Wisconsin Statutes, supersede and take the place of the existing articles of incorporation of the Corporation and any and all amendments thereto: ARTICLE I NAME The name of the Corporation is Regal Rexnord Corporation. ARTICLE II PURPOSE The purposes for which the Corporation is organized are to engage in any lawful activity within the purposes for which a corporation may be organized under the WBCL. ARTICLE III STOCK The aggregate number of shares which the Corporation shall have authority to issue is one hundred and fifty million (150,000,000) consisting of one class only, designated as “Common Stock” of the par value of one cent ($0.01) per share. ARTICLE IV PREEMPTIVE RIGHTS No holder of any stock of the Corporation shall have any preemptive right to purchase, subscribe for, or otherwise acquire any shares of stock of the Corporation of any class now or hereafter authorized, or any securities exchangeable for or convertible into such shares. ARTICLE V BOARD OF DIRECTORS (a) The authorized number of directors of the Corporation which shall constitute the entire Board of Directors shall be such as from time to time shall be determined by majority of the then authorized number of directors, but in no case shall the authorized number of directors be less than three (3) or more than fifteen (15). Until the annual meeting of shareholders of the

 
2 Corporation held in 2016, the directors shall be divided with respect to the time for which they severally hold office into three (3) classes, as nearly equal in number as possible, as determined by the Board of Directors, with the members of each class to hold office until their successors have been elected and qualified, or until their earlier resignation or removal. At each annual meeting of shareholders prior to the annual meeting of shareholders of the Corporation held in 2016, the successors of the members of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of directors held in the third year following the year of their election. Commencing with the annual meeting of shareholders of the Corporation held in 2016, directors shall be elected and shall hold office for terms as follows: (i) at the 2016 annual meeting of shareholders, directors for whom such annual meeting is the annual meeting of shareholders held in the third year following the year of their election (or such directors’ successors) shall be elected to hold office for a term expiring at the next annual meeting of shareholders and until their successors have been elected and qualified, and the remaining directors shall hold office for the term for which they were elected and until their successors have been elected and qualified, (ii) at the 2017 annual meeting of shareholders, directors for whom such annual meeting is the annual meeting of shareholders held in the third year following the year of their election and directors elected at the 2016 annual meeting of shareholders (or such directors’ successors) shall be elected to hold office for a term expiring at the next annual meeting of shareholders and until their successors have been elected and qualified, and the remaining directors shall hold office for the term for which they were elected and until their successors have been elected and qualified, and (iii) at the 2018 annual meeting of shareholders and each annual meeting of shareholders thereafter, all directors shall be elected to hold office for a term expiring at the next annual meeting of shareholders and until their successors have been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of an incumbent director. Any director elected to fill a vacancy who is replacing a director who was in the course of serving a three-year term shall serve for the remainder of the predecessor’s term. (b) Any director may be removed from office by the shareholders, but only for cause and only by the affirmative vote of a majority of the votes then entitled to be cast in an election of directors. (c) Any vacancy occurring on the Board of Directors, including, but not limited to, a vacancy created by an increase in the number of directors or the removal of a director, shall be filled only by the affirmative vote of a majority of the directors then in office, even if such majority is less than a quorum of the board of Directors, or by a sole remaining director. If no director remains in office, any vacancy may be filled by the shareholders. Any director elected to fill a vacancy shall serve until the next election of the class for which such director shall have been chosen. ARTICLE VI SHAREHOLDER CONSENT ACTION Action required or permitted by the WBCL to be taken at a shareholder’s meeting may be taken without a meeting by shareholders who would be entitled to vote shares at a meeting with voting power sufficient to cast not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote were present and voted. The action must be evidenced by one or more written consents describing the action taken, signed by the shareholders consenting thereto and delivered to the Corporation for

 
3 inclusion in its corporate records. Such a consent has the effect of a meeting vote and may be described as such in any document. Such action shall be effective when consents representing the required number of shares are delivered to the Corporation, unless the consents specify a different effective date. ARTICLE VII SHAREHOLDER VOTE REQUIRED Unless a greater number of affirmative votes is required by the WBCL or these Articles of Incorporation, action on a matter, including the election of directors, by shareholders is approved only if a majority of the votes represented in person or by proxy at a meeting at which a quorum is present are cast in favor of the action. ARTICLE VIII REGISTERED OFFICE AND AGENT The address of the initial registered office of the Corporation is 200 State Street, Beloit, Rock County, Wisconsin 53511 and the name of its initial registered agent at such address is Gerald J. Berres. * * * * *

 
AMENDED AND RESTATED BYLAWS   OF   REGAL REXNORD CORPORATION   (a Wisconsin corporation)   (as amended through October 4, 2021)   Article I. OFFICES   1.01 Principal and Business Offices.   The corporation may have such principal and other business offices, either within or without the State of Wisconsin, as the Board of Directors may designate or as the business of the corporation may require from time to time.   1.02 Registered Office.   The registered office of the corporation required by the Wisconsin Business Corporation Law to be maintained in the State of Wisconsin may be, but need not be, identical to the principal office in the State of Wisconsin, and the address of the registered office may be changed from time to time by the Board of Directors. The business office of the registered agent of the corporation shall be identical to such registered office.   Article II. SHAREHOLDERS   2.01 Annual Meeting.   The annual meeting of the shareholders of the corporation (the “Annual Meeting”) shall be held at such time and date as may be fixed by or under the authority of the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may properly come before the Annual Meeting in accordance with Section 2.13 of these bylaws. If the election of directors shall not be held on the day fixed as herein provided for any Annual Meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders (a “Special Meeting”) as soon thereafter as the Board deems appropriate. In fixing a meeting date for any Annual Meeting, the Board of Directors may consider such factors as it deems relevant within the good faith exercise of its business judgment.   2.02 Special Meetings.   (a)           A Special Meeting may be called only by (i) the Chairman of the Board, (ii) the Chief Executive Officer or (iii) the Board of Directors and shall be called by the Chairman of the Board or the Chief Executive Officer upon the demand, in accordance with this Section 2.02, of the holders of record of shares representing at least 10% of all the votes entitled to be cast on any issues proposed to be considered at the Special Meeting.         (b)           In order that the corporation may determine the shareholders entitled to demand a Special Meeting, the Board of Directors may fix a record date to determine the shareholders entitled to make such a demand (the “Demand Record Date”). The Demand Record Date shall not precede the date upon which the resolution fixing

 
the Demand Record Date is adopted by the Board of Directors and shall not be more than 10 days after the date upon which the resolution fixing the Demand Record Date is adopted by the Board of Directors. Any shareholder of record seeking to have shareholders demand a Special Meeting shall, by sending written notice to the Secretary of the corporation by hand or by certified or registered mail, return receipt requested, request the Board of Directors to fix a Demand Record Date. The Board of Directors shall promptly, but in all events within 10 days after the date on which a valid request to fix a Demand Record Date is received, adopt a resolution fixing the Demand Record Date and shall make a public announcement of such Demand Record Date. If no Demand Record Date has been fixed by the Board of Directors within 10 days after the date on which such request is received by the Secretary, the Demand Record Date shall be the 10th day after the first day on which a valid written request to set a Demand Record Date is received by the Secretary. To be valid, such written request shall set forth the purpose or purposes for which the Special Meeting is to be held, shall be signed by one or more shareholders of record (or their duly authorized proxies or other representatives), shall bear the date of signature of each such shareholder (or proxy or other representative) and shall set forth all information about each such shareholder and about the beneficial owner or owners, if any, on whose behalf the request is made that would be required to be set forth in a shareholder’s notice described in paragraph (a)(ii) of Section 2.13 of these bylaws.   (c)           In order for a shareholder or shareholders to demand a Special Meeting, a written demand or demands for a Special Meeting by the holders of record as of the Demand Record Date of shares representing at least 10% of all the votes entitled to be cast on any issue proposed to be considered at the Special Meeting must be delivered to the corporation. To be valid, each written demand by a shareholder for a Special Meeting shall set forth the specific purpose or purposes for which the Special Meeting is to be held (which purpose or purposes shall be limited to the purpose or purposes set forth in the written request to set a Demand Record Date received by the corporation pursuant to paragraph (b) of this Section 2.02), shall be signed by one or more persons who as of the Demand Record Date are shareholders of record (or their duly authorized proxies or other representatives), shall bear the date of signature of each such shareholder (or proxy or other representative), shall set forth the name and address, as they appear in the corporation’s books, of each shareholder signing such demand and the class or series and number of shares of the corporation which are owned of record and beneficially by each such shareholder, shall be sent to the Secretary by hand or by certified or registered mail, return receipt requested, and shall be received by the Secretary within 70 days after the Demand Record Date.   2   (d)          The corporation shall not be required to call a Special Meeting upon shareholder demand unless, in addition to the documents required by paragraph (c) of this Section 2.02, the Secretary receives a written agreement signed by each Soliciting Shareholder (as defined herein), pursuant to which each Soliciting Shareholder, jointly and severally, agrees to pay the corporation’s costs of holding the Special Meeting, including the costs of preparing and mailing proxy materials for the corporation’s own solicitation, provided that if each of the resolutions introduced by any Soliciting Shareholder at such meeting is adopted, and each of the individuals nominated by or on behalf of any Soliciting Shareholder for election as director at such meeting is elected, then the Soliciting Shareholders shall not be required to pay such costs. For purposes of this paragraph (d), the following terms shall have the meanings set forth below:   (i)             “Affiliate” of any Person shall mean any Person controlling, controlled by or under common control with such first Person.   (ii)            “Participant” shall have the meaning assigned to such term in Rule 14a-12 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).   (iii)         “Person” shall mean any individual, firm, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity.   (iv)          “Proxy” shall have the meaning assigned to such term in Rule 14a-1(f) promulgated under the Exchange Act.  

 
(v)           “Solicitation” shall have the meaning assigned to such term in Rule 14a-1(l) promulgated under the Exchange Act.   (vi)          “Soliciting Shareholder” shall mean, with respect to any Special Meeting demanded by a shareholder or shareholders, any of the following Persons:   (A)          if the number of shareholders signing the demand or demands for a meeting delivered to the corporation pursuant to paragraph (c) of this Section 2.02 is 10 or fewer, each shareholder signing any such demand;   (B)           if the number of shareholders signing the demand or demands for a meeting delivered to the corporation pursuant to paragraph (c) of this Section 2.02 is more than 10, each Person who either (I) was a Participant in any Solicitation of such demand or demands or (II) at the time of the delivery to the corporation of the documents described in paragraph (c) of this Section 2.02, had engaged or intended to engage in any Solicitation of Proxies for use at such Special Meeting (other than a Solicitation of Proxies on behalf of the corporation); or   (C)          any Affiliate of a Soliciting Shareholder, if a majority of the directors then in office determine, reasonably and in good faith, that such Affiliate should be required to sign the written notice described in paragraph (c) of this Section 2.02 and/or the written agreement described in this paragraph (d) in order to prevent the purposes of this Section 2.02 from being evaded.   3   (e)           Except as provided in the following sentence, any Special Meeting shall be held at such hour and day as may be designated by whichever of the Chairman of the Board, the Chief Executive Officer or the Board of Directors shall have called such meeting. In the case of any Special Meeting called by the Chairman of the Board or the Chief Executive Officer upon the demand of shareholders (a “Demand Special Meeting”), such meeting shall be held at such hour and day as may be designated by the Board of Directors; provided, however, that the date of any Demand Special Meeting shall be not more than 70 days after the Meeting Record Date (as defined in Section 2.05 of these bylaws); and provided further that in the event that the directors then in office fail to designate an hour and date for a Demand Special Meeting within 10 days after the date that valid written demands for such meeting by the holders of record as of the Demand Record Date of shares representing at least 10% of all the votes entitled to be cast on any issue proposed to be considered at the Special Meeting are delivered to the corporation (the “Delivery Date”), then such meeting shall be held at 2:00 p.m. (local time) on the 100th day after the Delivery Date or, if such 100th day is not a Business Day (as defined below), on the first preceding Business Day. In fixing a meeting date for any Special Meeting, the Chairman of the Board, the Chief Executive Officer or the Board of Directors may consider such factors as he, she or it deems relevant within the good faith exercise of his, her or its business judgment, including, without limitation, the nature of the action proposed to be taken, the facts and circumstances surrounding any demand for such meeting, and any plan of the Board of Directors to call an Annual Meeting or a Special Meeting for the conduct of related business.   (f)           The corporation may engage nationally or regionally recognized independent inspectors of elections to act as an agent of the corporation for the purpose of promptly performing a ministerial review of the validity of any purported written demand or demands for a Special Meeting received by the Secretary. For the purpose of permitting the inspectors to perform such review, no purported demand shall be deemed to have been delivered to the corporation until the earlier of (i) five Business Days following receipt by the Secretary of such purported demand and (ii) such date as the independent inspectors certify to the corporation that the valid demands received by the Secretary represent at least 10% of all the votes entitled to be cast on each issue proposed to be considered at the Special Meeting. Nothing contained in this paragraph shall in any way be construed to suggest or imply that the Board of Directors or any shareholder shall not be entitled to contest the validity of any demand, whether during or after such

 
five Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto).   (g)           For purposes of these bylaws, “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of Wisconsin are authorized or obligated by law or executive order to close.   2.03 Place of Meeting.   The Board of Directors, the Chairman of the Board or the Chief Executive Officer may designate any place, either within or without the State of Wisconsin, as the place of meeting for any Annual Meeting or for any Special Meeting, or for any postponement thereof. If no designation is made, the place of meeting shall be the principal business office of the corporation in the State of Wisconsin. Any meeting may be adjourned to reconvene at any place designated by vote of the Board of Directors or by the Chairman of the Board or the Chief Executive Officer.   4   2.04 Notice of Meeting.   Written notice stating the place, day and hour of any Annual Meeting or Special Meeting shall be delivered not less than 10 (unless a longer period is required by the Wisconsin Business Corporation Law) nor more than 70 days before the date of such meeting, either personally or by mail, by or at the direction of the Secretary, to each shareholder of record entitled to vote at such meeting and to other shareholders as may be required by the Wisconsin Business Corporation Law. In the event of any Demand Special Meeting, such notice of meeting shall be sent not more than 30 days after the Delivery Date. If mailed, notice pursuant to this Section 2.04 shall be deemed to be effective when deposited in the United States mail, addressed to each shareholder at his or her address as it appears on the stock record books of the corporation, with postage thereon prepaid. Unless otherwise required by the Wisconsin Business Corporation Law, a notice of an Annual Meeting need not include a description of the purpose for which the meeting is called. In the case of any Special Meeting, (a) the notice of meeting shall describe any business that the Board of Directors shall have theretofore determined to bring before the meeting and (b) in the case of a Demand Special Meeting, the notice of meeting (i) shall describe any business set forth in the statement of purpose of the demands received by the corporation in accordance with Section 2.02 of these bylaws and (ii) shall contain all of the information required in the notice received by the corporation in accordance with Section 2.13(b) of these bylaws. If an Annual Meeting or Special Meeting is adjourned to a different date, time or place, the corporation shall not be required to give notice of the new date, time or place if the new date, time or place is announced at the meeting before adjournment; provided, however, that if a new Meeting Record Date for an adjourned meeting is or must be fixed, the corporation shall give notice of the adjourned meeting to persons who are shareholders as of the new Meeting Record Date.   2.05 Fixing of Record Date.   (a)           The Board of Directors may fix in advance a date not less than 10 days and not more than 70 days prior to the date of any Annual Meeting or Special Meeting as the record date for the determination of shareholders entitled to notice of, or to vote at, such meeting (the “Meeting Record Date”). In the case of any Demand Special Meeting, (i) the Meeting Record Date shall be not later than the 30th day after the Delivery Date and (ii) if the Board of Directors fails to fix the Meeting Record Date within 30 days after the Delivery Date, then the close of business on such 30th day shall be the Meeting Record Date. The shareholders of record on the Meeting Record Date shall be the shareholders entitled to notice of and to vote at the meeting. Except as provided by the Wisconsin Business Corporation Law for a court-ordered adjournment, a determination of shareholders entitled to notice of and to vote at any Annual Meeting or Special Meeting is effective for any adjournment of such meeting unless the Board of Directors fixes a new Meeting Record Date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.  

 
(b)           The Board of Directors may also fix in advance a date as the record date for the purpose of determining shareholders entitled to take any other action or determining shareholders for any other purpose. Such record date shall be not more than 70 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. The record date for determining shareholders entitled to a distribution (other than a distribution involving a purchase, redemption or other acquisition of the corporation’s shares) or a share dividend is the date on which the Board of Directors authorizes the distribution or share dividend, as the case may be, unless the Board of Directors fixes a different record date.   5   (c)           In order that the corporation may determine the shareholders entitled to express consent to corporate action in writing without a meeting, the Board of Directors may fix a record date to determine the shareholders entitled to express consent to corporate action in writing without a meeting (the “Consent Record Date”). The Consent Record Date shall not precede the date upon which the resolution fixing the Consent Record Date is adopted by the Board of Directors, and such date shall not be more than ten days after the date upon which the resolution fixing the Consent Record Date is adopted by the Board of Directors. Any shareholder of record seeking to have the shareholders express consent to corporate action in writing without a meeting shall, by sending written notice to the Secretary of the corporation by hand or by certified registered mail, return receipt requested, request the Board of Directors to fix a Consent Record Date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the Consent Record Date and shall make a public announcement of such Consent Record Date. If no Consent Record Date has been fixed by the Board of Directors within ten days after the date on which such a request is received by the Secretary, then the Consent Record Date shall be the 10th day after the first date on which a valid written request to set a Consent Record Date is received by the Secretary. To be valid, such written request shall comply with each of the following:   (i)             Such written request shall be signed by one or more shareholders of record and by the beneficial owners or owners, if any, on whose behalf the shareholder or shareholders are acting, shall bear the date of signature of each such shareholder and any such beneficial owner and shall set forth: (A) the name and address, as they appear on this corporation’s books, of each such shareholder and any such beneficial owner who seeks to have the shareholders express consent to corporate action in writing without a meeting; (B) the class and number of shares of the corporation which are owned of record and/or beneficially by each such shareholder and any such beneficial owner; (C) a representation that each such shareholder is a holder of record of shares of the corporation entitled to vote at a meeting of shareholders; (D) the manner in which each such shareholder and any such beneficial owner intend to comply with Regulation 14A under the Exchange Act in seeking to have the shareholders express consent to corporate action in writing without a meeting; (E) in the case of any such shareholder and any such beneficial owner seeking to elect or re-elect a director by the shareholders expressing consent to corporate action in writing without a meeting, (1) the name and residence address of the person or persons each such shareholder and any such beneficial owner are seeking to elect or re-elect as a director, (2) a description of all arrangements or understandings between each such shareholder and any such beneficial owner and each person such shareholder and any such beneficial owner are seeking to elect or re-elect as a director and any other person or persons (naming such person or persons) pursuant to which such shareholder and any such beneficial owner are seeking to elect or re-elect such person as a director, (3) such other information regarding each person such shareholder and any such beneficial owner are seeking to elect or re-elect as a director as would be required to be disclosed in solicitations of proxies for elections of directors, or would be otherwise required to be disclosed, in each case pursuant to Regulation 14A under the Exchange Act, including any information that would be required to be included in a proxy statement filed pursuant to Regulation 14A had such person been nominated by the Board of Directors and (4) the written consent of each such person to serve as a director of the corporation if so elected; (F) in the case of any such shareholder and any such beneficial owner seeking to remove a director by the shareholders expressing consent to corporate action in writing without a meeting, (1) the names of the director(s) each such shareholder and any such beneficial owner are seeking to remove and (2) the reasons of

 
each such shareholder and any such beneficial owner for asserting that such director(s) may be removed for cause; and (G) in the case of any such shareholder and any such beneficial owner seeking to authorize or take any other corporate action by the shareholders expressing consent to corporate action in writing without a meeting, (1) a brief description of the corporate action desired to be authorized or taken and, if such corporate action includes an amendment to these bylaws, the language of the proposed amendment, (2) the reasons of each such shareholder and any such beneficial owner for authorizing or taking such corporate action and (3) any material interest in such corporate action of each such shareholder and any such beneficial owner.   6   (ii)           Such written request shall be accompanied by a written agreement signed by each Consent Soliciting Shareholder (as defined below) pursuant to which each Consent Soliciting Shareholder, jointly and severally, agrees to pay the corporation’s costs relating to such Consent Soliciting Shareholder seeking to have the shareholders express consent to corporate action in writing without a meeting, including the costs of preparing and mailing proxy materials for the corporation’s own solicitation, provided that if the Consent Soliciting Shareholder obtains the requisite number of shares subject to valid and unrevoked Consents (as defined in Section 7.02(a)) to express the corporate action referred to therein in accordance with these Bylaws, then the Consent Soliciting Shareholders shall not be required to pay such costs. For purposes of these Bylaws, “Consent Soliciting Shareholder” shall mean each of the following Persons:   (A)          if the number of shareholders signing the Consent or Consents is ten or fewer, each Person signing any such Consents; or   (B)           if the number of shareholders signing the Consent or Consents is more than ten, each Person who either (1) was a Participant in any Solicitation of such consent or consents or (2) at the time of the delivery to the corporation of the documents described in this Section 2.05(c) had engaged or intends to engage in any Solicitation of Consents and/or Proxies for expressing consent to corporate action in writing without a meeting (other than a Solicitation of Consents and/or Proxies on behalf of the corporation).   A “Consent Soliciting Shareholder” shall also mean each Affiliate of a Consent Soliciting Shareholder described in clause (A) or (B) above who is a member of such Consent Soliciting Shareholder’s “group” for purposes of Rule 13d-5(b) under the Exchange Act, and any other Affiliate of such a Consent Soliciting Shareholder, if a majority of the directors then in office determine, reasonably and in good faith, that such Affiliate should be required to sign the written notice described in Section 2.05(c)(i) and/or the written agreements described in this Section 2.05(c)(ii) and Section 2.05(c)(iii) to prevent the purposes of this Section 2.05(c) and Section 7.02 from being evaded.   (iii)           Such written request shall be accompanied by a written agreement signed by each Consent Soliciting Shareholder pursuant to which each Consent Soliciting Shareholder agrees to deliver to any inspectors of election engaged by the corporation pursuant to Section 7.02(c) within two (2) Business Days after receipt all Consents and revocations thereof received by such Consent Soliciting Shareholder or such Consent Soliciting Shareholder’s proxy solicitor or other designated agent in connection with such Consent Soliciting Shareholder seeking to have the shareholders express written consent to corporate action without a meeting.   2.06 Shareholder Lists.   After a Meeting Record Date has been fixed, the corporation shall prepare a list of the names of all of the shareholders entitled to notice of the meeting. The list shall be arranged by class or series of shares, if any, and show the address of and number of shares held by each shareholder. Such list shall be available for inspection by any

 
shareholder, beginning two Business days after notice of the meeting is given for which the list was prepared and continuing to the date of the meeting, at the corporation’s principal office or at a place identified in the meeting notice in the city where the meeting will be held. A shareholder or his or her agent may, on written demand, inspect and, subject to the limitations imposed by the Wisconsin Business Corporation Law, copy the list, during regular business hours and at his or her expense, during the period that it is available for inspection pursuant to this Section 2.06. The corporation shall make the shareholders’ list available at the meeting and any shareholder or his or her agent or attorney may inspect the list at any time during the meeting or any adjournment thereof. Refusal or failure to prepare or make available the shareholders’ list shall not affect the validity of any action taken at a meeting of shareholders.   2.07 Quorum and Voting Requirements; Postponements; Adjournments.   (a)           Shares entitled to vote as a separate voting group may take action on a matter at any Annual Meeting or Special Meeting only if a quorum of those shares exists with respect to that matter. If the corporation has only one class of stock outstanding, such class shall constitute a separate voting group for purposes of this Section 2.07. Except as otherwise provided in the Articles of Incorporation, any bylaw adopted under authority granted in the Articles of Incorporation, or the Wisconsin Business Corporation Law, a majority of the votes entitled to be cast on the matter shall constitute a quorum of the voting group for action on that matter. Once a share is represented for any purpose at any Annual Meeting or Special Meeting, other than for the purpose of objecting to holding the meeting or transacting business at the meeting, it is considered present for purposes of determining whether a quorum exists for the remainder of the meeting and for any adjournment of that meeting unless a new Meeting Record Date is or must be set for the adjourned meeting. If a quorum exists, action on a matter shall be approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Articles of Incorporation, any bylaw adopted under authority granted in the Articles of Incorporation, or the Wisconsin Business Corporation Law requires a greater number of affirmative votes.   7   (b)           The Board of Directors acting by resolution may postpone and reschedule any previously scheduled Annual Meeting or Special Meeting; provided, however, that a Demand Special Meeting shall not be postponed beyond the 100th day following the Delivery Date. Any Annual Meeting or Special Meeting may be adjourned from time to time, whether or not there is a quorum, (i) at any time, upon a resolution of shareholders if the votes cast in favor of such resolution by the holders of shares of each voting group entitled to vote on any matter theretofore properly brought before the meeting exceed the number of votes cast against such resolution by the holders of shares of each such voting group or (ii) at any time prior to the transaction of any business at such meeting, by the Chairman of the Board or pursuant to resolution of the Board of Directors. No notice of the time and place of adjourned meetings need be given except as required by the Wisconsin Business Corporation Law. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.   2.08 Conduct of Meetings.   The Chairman of the Board and, in his or her absence, the Chief Executive Officer shall call any Annual Meeting or Special Meeting to order and shall act as chairman of such meeting. In the absence of the Chairman of the Board and the Chief Executive Officer, such duties shall be performed by the President. In the absence of the Chairman of the Board, the Chief Executive Officer and the President, such duties shall be performed by a Vice President in the order provided under Section 4.08, or in their absence, by any person chosen by the shareholders present. The Secretary of the corporation shall act as secretary of all Annual Meetings and Special Meetings, but, in the absence of the Secretary, the presiding officer may appoint any other person to act as secretary of the meeting.   2.09 Proxies.   At any Annual Meeting or Special Meeting, a shareholder entitled to vote may vote in person or by proxy. A shareholder entitled to vote at any Annual Meeting or Special Meeting, or to express consent or dissent in writing to any corporate action without a meeting, may authorize another person to act for the shareholder by appointing the

 
person as a proxy. The means by which a shareholder or the shareholder’s authorized officer, director, employee, agent or attorney-in-fact may authorize another person to act for the shareholder by appointing the person as proxy include:   (a)           Appointment of a proxy in writing by signing or causing the shareholder’s signature to be affixed to an appointment form by any reasonable means, including, but not limited to, by facsimile signature.   (b)           Appointment of a proxy by transmitting or authorizing the transmission of an electronic transmission of the appointment to the person who will be appointed as proxy or to a proxy solicitation firm, proxy support service organization or like agent authorized to receive the transmission by the person who will be appointed as proxy. Every electronic transmission shall contain, or be accompanied by, information that can be used to reasonably determine that the shareholder transmitted or authorized the transmission of the electronic transmission. Any person charged with determining whether a shareholder transmitted or authorized the transmission of the electronic transmission shall specify the information upon which the determination is made.   8   An appointment of a proxy is effective when a signed appointment form or an electronic transmission of the appointment is received by the inspector of election or the officer or agent of the corporation authorized to tabulate votes. An appointment is valid for eleven months unless a different period is expressly provided in the appointment. An appointment of a proxy is revocable unless the appointment form or electronic transmission states that it is irrevocable and the appointment is coupled with an interest. The presence of a shareholder who has made an effective proxy appointment shall not of itself constitute a revocation. The Board of Directors shall have the power and authority to make rules that are not inconsistent with the Wisconsin Business Corporation Law as to the validity and sufficiency of proxy appointments.   2.10 Voting of Shares.   Each outstanding share shall be entitled to one vote upon each matter submitted to a vote at any Annual Meeting or Special Meeting except to the extent that the voting rights of the shares of any class or classes are enlarged, limited or denied by the Articles of Incorporation or the Wisconsin Business Corporation Law.   2.11 Acceptance of Instruments Showing Shareholder Action.   If the name signed on a vote, consent, waiver or proxy appointment corresponds to the name of a shareholder, the corporation, if acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of a shareholder. If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the name of a shareholder, the corporation, if acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder if any of the following apply:   (a)           The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity.   (b)          The name purports to be that of a personal representative, administrator, executor, guardian or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation is presented with respect to the vote, consent, waiver or proxy appointment.   (c)           The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation is presented with respect to the vote, consent, waiver or proxy appointment.   (d)           The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory’s authority to sign for the shareholder is presented with respect to the vote, consent, waiver or proxy appointment.

 
  9   (e)           Two or more persons are the shareholders as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners.   The corporation may reject a vote, consent, waiver or proxy appointment if the Secretary or other officer or agent of the corporation who is authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory’s authority to sign for the shareholder.   2.12 Waiver of Notice by Shareholders.   A shareholder may waive any notice required by the Wisconsin Business Corporation Law, the Articles of Incorporation or these bylaws before or after the date and time stated in the notice. The waiver shall be in writing and signed by the shareholder entitled to the notice, contain the same information that would have been required in the notice under applicable provisions of the Wisconsin Business Corporation Law (except that the time and place of meeting need not be stated) and be delivered to the corporation for inclusion in the corporate records. A shareholder’s attendance at any Annual Meeting or Special Meeting, in person or by proxy, waives objection to all of the following: (a) lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting or promptly upon arrival objects to holding the meeting or transacting business at the meeting; and (b) consideration of a particular matter at the meeting that is not within the purpose described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.   2.13 Notice of Shareholder Business and Nomination of Directors.   (a)           Annual Meetings.   (i)            Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the shareholders may be made at an Annual Meeting (A) pursuant to the corporation’s notice of meeting, (B) by or at the direction of the Board of Directors, (C) by any shareholder of the Corporation who (1) is a shareholder of record at the time of giving of notice provided for in this Section 2.13, (2) is entitled to vote with respect to such nomination or other business at the meeting under the Articles of Incorporation and (3) complies with the notice procedures set forth in this Section 2.13 or (D) with respect to nominations, by any shareholder of the corporation who is eligible under, and complies with the notice procedures set forth in, Section 2.14.   10   (ii)           For nominations or other business to be properly brought before an Annual Meeting by a shareholder pursuant to the foregoing Section 2.13(a)(i)(C), the shareholder must have given timely notice thereof in writing to the Secretary and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder’s notice shall be received by the Secretary at the principal offices of the corporation not less than 45 days nor more than 70 days prior to the first annual anniversary of the date set forth in the corporation’s proxy statement for the immediately preceding Annual Meeting as the date on which the corporation first made available to its shareholders definitive proxy materials for the immediately preceding Annual Meeting (the “Anniversary Date”); provided, however, that if the date for which the Annual Meeting is called more than 30 days before or more than 30 days after the first anniversary of the immediately preceding Annual Meeting, then notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 100th day prior to the date of such Annual Meeting and not

 
later than the later of (A) the 75th day prior to the date of such Annual Meeting or (B) the 10th day following the day on which public announcement of the date of such Annual Meeting is first made. In no event shall the announcement of an adjournment or postponement of an Annual Meeting commence a new time period for the giving of a shareholder notice as described above. Such shareholder’s notice shall be signed by the shareholder of record who intends to make the nomination or introduce the other business and by the beneficial owner or owners, if any, on whose behalf the shareholder is acting, shall bear the date of signature of such shareholder and any such beneficial owner and shall set forth: (I) the name and address of such shareholder (as they appear on the corporation’s books) and any such beneficial owner; (II) (1) the class or series and number of shares of the corporation that are owned of record and/or beneficially by such shareholder and any such beneficial owner; (2) any option, warrant, convertible security, stock appreciation right or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by such shareholder and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the corporation, (3) any proxy, contract, arrangement, understanding, or relationship pursuant to which such shareholder has a right to vote any shares of any security of the corporation, (4) any short interest in any security of the corporation (for purposes of this bylaw a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (5) any rights to dividends on the shares of the corporation owned beneficially by such shareholder that are separated or separable from the underlying shares of the corporation, (6) any proportionate interest in shares of the corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such shareholder is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (7) any performance-related fees (other than an asset-based fee) that such shareholder is entitled to based on any increase or decrease in the value of shares of the corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of such shareholder’s immediate family sharing the same household (which information shall be supplemented by such shareholder and beneficial owner, if any, not later than 10 days after the record date for the meeting to disclose such ownership as of the record date); (III) a representation that such shareholder is a holder of record of shares of the corporation entitled to vote under the Articles of Incorporation at such meeting with respect to such nomination or other business and intends to appear in person or by proxy at the meeting to make such nomination or introduce such other business; (IV) any other information relating to such shareholder and any such beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitation of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 15 of the Exchange Act and the rules and regulations promulgated thereunder; (V) in the case of any proposed nomination for election or re- election as a director, (1) the name and residence address of the person or persons to be nominated, (2) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such shareholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the shareholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant, (3) such other information regarding each nominee proposed by such shareholder and any such beneficial owner as would be required to be disclosed in solicitations of proxies for elections of directors, or would be otherwise required to be disclosed, in each case pursuant to Regulation 14A under the Exchange Act, including any

 
information that would be required to be included in a proxy statement filed pursuant to Regulation 14A had the nominee been nominated by the Board of Directors and (4) the written consent of each nominee to be named in a proxy statement and to serve as a director of the corporation if so elected; (VI) in the case of any proposed removal of a director, (1) the names of the directors to be removed and (2) the reasons of such shareholder and any such beneficial owner for asserting that such directors should be removed; and (VII) in the case of any other business that such shareholder and any such beneficial owner propose to bring before the meeting, (1) a brief description of the business desired to be brought before the meeting and, if such business includes a proposal to amend these bylaws, the language of the proposed amendment, (2) the reasons of such shareholder and any such beneficial owner for conducting such business at the meeting and (3) a description of all agreements, arrangements and understandings between such shareholder and any beneficial owner and any other person or persons (including their names) in connection with the proposal of such business by such shareholder. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such nominee.   11   (iii)          Notwithstanding anything in the second sentence of the foregoing Section 2.13(a)(ii) to the contrary, if the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least 45 days prior to the Anniversary Date, then a shareholder’s notice required by this Section 2.13 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be received by the Secretary at the principal offices of the corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the corporation.   (b)           Special Meetings. Only such business shall be conducted at a Special Meeting as shall have been described in the notice of meeting sent to shareholders pursuant to the foregoing Section 4. Nominations of persons for election to the Board of Directors may be made at a Special Meeting at which directors are to be elected pursuant to such notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the corporation who (A) is a shareholder of record at the time of giving of such notice of meeting, (B) is entitled to vote with respect to such nominations at the meeting under the Articles of Incorporation and (C) complies with the notice procedures set forth in this Section 2.13. Any shareholder permitted to nominate persons for election to the Board of Directors pursuant to clause (ii) of the preceding sentence who desires to nominate persons for election to the Board of Directors at such a Special Meeting shall cause a written notice complying with the requirements as to proper form set forth in paragraph (a)(ii) of this Section 2.13 to be received by the Secretary at the principal offices of the corporation not earlier than 90 days prior to such Special Meeting and not later than the close of business on the later of (I) the 60th day prior to such Special Meeting and (II) the 10th day following the day on which public announcement is first made of the date of such Special Meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the announcement of an adjournment or postponement of a Special Meeting commence a new time period for the giving of a shareholder notice as described above.   (c)           General.   (i)            Only persons who are nominated in accordance with the procedures set forth in this Section 2.13 or Section 2.14 shall be eligible to be elected as directors at an Annual Meeting or Special Meeting. Only such business shall be conducted at an Annual Meeting or Special Meeting as shall have been brought before such meeting in accordance with the procedures set forth in this Section 2.13. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 2.13 or Section 2.14 and, if any proposed nomination or

 
business is not in compliance with this Section 2.13 or Section 2.14, as the case may be, to declare that such defective proposal shall be disregarded.   12   (ii)           For purposes of this Section 2.13, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13, 14 or 15(d) of the Exchange Act.   (iii)         Notwithstanding the foregoing provisions of this Section 2.13, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.13; provided, however, that any references in these bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to limit the requirements applicable to nominations or shareholder action pursuant to paragraph (a)(ii) or (b) of this Section 2.13. Nothing in this Section 2.13 shall be deemed to limit the corporation’s obligation to include shareholder proposals in its proxy statement if such inclusion is required by Rule 14a-8 under the Exchange Act.   2.14 Shareholder Nominations Included in the Corporation’s Proxy Materials:   (a)           Inclusion of Nominee in Proxy Statement. Subject to the provisions of this Section 2.14, if expressly requested in the relevant Nomination Notice (as defined below), the corporation shall include in its proxy statement for any Annual Meeting:   (i)             the name of any person nominated for election (the “Nominee”) to the Board of Directors, which shall also be included on the corporation’s form of proxy and ballot for the relevant Annual Meeting, by any Eligible Holder (as defined below) or group of up to 20 Eligible Holders that has (individually and collectively, in the case of a group) satisfied, as determined by the Board of Directors or its designee, acting in good faith, all applicable conditions and complied with all applicable procedures set forth in this Section 2.14 (such Eligible Holder or group of Eligible Holders being a “Nominating Shareholder”);   (ii)           disclosure about the Nominee and the Nominating Shareholder required under SEC rules or any other applicable law, rule or regulation to be included in the proxy statement; and   (iii)          any statement included by the Nominating Shareholder in the Nomination Notice for inclusion in the proxy statement in support of the Nominee’s election to the Board of Directors (subject, without limitation, to Section 2.14(e)(ii)), if such statement does not exceed 500 words.   Promptly after the corporation has determined that it shall include a Nominee in its proxy statement and proxy card for an Annual Meeting, the corporation shall notify the Nominating Shareholder that nominated the Nominee of such determination.   Notwithstanding anything herein to the contrary, the corporation may solicit shareholders against any Nominee and include in its proxy statement for any Annual Meeting any other information that the corporation or the Board of Directors determines, in their discretion, to include in the proxy statement relating to the nomination of the Nominee, including without limitation any statement in opposition to the nomination and any of the information provided pursuant to this Section 2.14.   13  

 
  (b) Maximum Number of Nominees.   (i)            The corporation shall not be required to include in the proxy statement for an Annual Meeting more Nominees than that number of directors constituting 20% of the total number of directors of the corporation on the last day on which a Nomination Notice may be submitted pursuant to Section 2.14(d) (the “Final Nomination Date”), rounded down to the nearest whole number, but not less than two (the “Maximum Number”). The Maximum Number for a particular Annual Meeting shall be reduced by (A) Nominees nominated by a Nominating Shareholder for that Annual Meeting whose nomination is subsequently withdrawn after the Nominating Shareholder is notified by the corporation that the Nominees will be included in the corporation’s proxy statement and proxy card for the Annual Meeting, (B) Nominees nominated by a Nominating Shareholder for such Annual Meeting pursuant to this Section 2.14 that the Board of Directors itself decides to nominate for election at such Annual Meeting, (C) the number of directors in office as of the Final Nomination Date who had been Nominees nominated by a Nominating Shareholder with respect to any of the preceding two Annual Meetings (including any Nominee who had been counted at any such Annual Meeting pursuant to the immediately preceding clause (B)) and (1) if Article V of the corporation’s Articles of Incorporation provides for a classified Board of Directors, whose term as a director extends past such Annual Meeting or (2) if Article V of the corporation’s Articles of Incorporation provides for annual elections of the entire Board of Directors, whose reelection at the upcoming Annual Meeting is being recommended by the Board of Directors and (D) any director candidate for whom the Corporation shall have received one or more valid shareholder notices (whether or not subsequently withdrawn) nominating such person for election to the Board of Directors pursuant to Section 2.13(a)(i)(C), other than any such director referred to in this clause (D) who at the time of such Annual Meeting will have served as a director continuously, as a nominee of the Board of Directors, for at least two annual terms, but only to the extent the Maximum Number after such reduction with respect to this clause (D) equals one. If one or more vacancies for any reason occurs on the Board of Directors after the Final Nomination Date but before the date of the Annual Meeting and the Board of Directors resolves to reduce the size of the Board of Directors in connection with the occurrence of the vacancy or vacancies, then the Maximum Number shall be calculated based on the number of directors in office as so reduced.   (ii)            Any Nominating Holder submitting more than one Nominee pursuant to this Section 2.14 for an Annual Meeting shall rank such Nominees based on the order in which the Nominating Holder desires such Nominees to be selected for inclusion in the corporation’s proxy statement for such Annual Meeting if the number of Nominees pursuant to this Section 2.14 exceeds the Maximum Number. If the number of Nominees pursuant to this Section 2.14 for any Annual Meeting exceeds the Maximum Number, then the highest ranking Nominee who meets the requirements of this Section 2.14 from each Nominating Holder will be selected for inclusion in the corporation’s proxy statement until the Maximum Number is reached, going in order of the amount (largest to smallest) of the shares of common stock of the corporation disclosed as owned in each Nominating Shareholder’s Nomination Notice.   (iii)           If, after the Final Nomination Date, (A) the corporation is notified, or the Board of Directors or its designee, acting in good faith, determines, that (1) a Nominating Shareholder has failed to satisfy or to continue to satisfy the eligibility requirements described in Section 2.14(c), (2) any of the representations and warranties made in the Nomination Notice cease to be true and accurate in all material respects (or omit a material fact necessary to make the statements therein not misleading) or (3) any material violation or breach occurs of the obligations, agreements, representations or warranties of the Nominating Shareholder or the Nominee under this Section 2.14, (B) a Nominating Shareholder or any qualified representative thereof does not appear at the Annual Meeting to present any nomination submitted pursuant to this Section 2.14, or the Nominating Shareholder withdraws its nomination, or (C) a Nominee becomes ineligible for inclusion in the corporation’s proxy statement pursuant to this Section 2.14 or dies, becomes disabled or is otherwise disqualified from being nominated for election or serving as a director of the corporation or is unwilling or unable to serve as a director of the corporation, in each case as

 
determined by the Board of Directors or its designee, acting in good faith, whether before or after the corporation’s definitive proxy statement for such Annual Meeting is made available to shareholders, then the nomination of the Nominating Shareholder or such Nominee, as the case may be, shall be disregarded and no vote on such Nominee will occur (notwithstanding that proxies in respect of such vote may have been received by the corporation), the Nominating Shareholder may not cure in any way any defect preventing the nomination of the Nominee, and the corporation (1) may omit from its proxy statement and any ballot or form of proxy the disregarded Nominee and any information concerning such Nominee (including a Nominating Shareholder’s statement in support), any other Nominee that the corporation had determined not to include in its proxy statement and proxy card for such Annual Meeting and any successor or replacement nominee proposed by the Nominating Shareholder or by any other Nominating Shareholder and (2) may otherwise communicate to its shareholders, including without limitation by amending or supplementing its proxy statement or ballot or form of proxy, that the Nominee will not be included as a Nominee in the proxy statement or on any ballot or form of proxy and will not be voted on at the Annual Meeting.   14   (c) Eligibility of Nominating Shareholder.   (i)             An “Eligible Holder” is a person who has either (A) been a record holder of the shares of the corporation’s common stock used to satisfy the eligibility requirements in this Section 2.14(c) continuously for the three-year period specified in Section 2.14(c)(ii) or (B) provides to the Secretary of the corporation, within the time period referred to in Section 2.14(d), evidence of continuous ownership of such shares for such three-year period from one or more securities intermediaries in a form and in substance that the Board of Directors or its designee, acting in good faith, determines would be deemed acceptable for purposes of a shareholder proposal under Rule 14a-8(b)(2) under the Exchange Act (or any successor rule).   (ii)            An Eligible Holder or group of up to 20 Eligible Holders may submit a nomination in accordance with this Section 2.14 only if the person or group (in the aggregate) has continuously owned at least the Minimum Number (as defined below) of shares of the corporation’s common stock throughout the three-year period preceding and including the date of submission of the Nomination Notice and continues to own at least the Minimum Number through the date of the Annual Meeting. A group of funds under common management and investment control shall be treated as one Eligible Holder for purposes of such limitation if such Eligible Holder shall provide together with the Nomination Notice documentation reasonably satisfactory to the corporation that demonstrates that the funds are under common management and investment control. For the avoidance of doubt, in the event of a nomination by a group of Eligible Holders, any and all requirements and obligations applicable to an individual Eligible Holder that are set forth in this Section 2.14, including the minimum holding period, shall apply to each member of such group; provided, however, that the Minimum Number shall apply to the ownership of the group in the aggregate, and a breach of any obligation, agreement, representation or warranty under this Section 2.14 by any member of a group shall be deemed a breach by the Nominating Shareholder. If any shareholder withdraws from a group of Eligible Holders at any time prior to the Annual Meeting, then the group of Eligible Shareholders shall only be deemed to own the shares held by the remaining members of the group and if, as a result of such withdrawal, the Nominating Shareholder no longer owns the Minimum Number of shares of the corporation’s common stock, then the nomination shall be disregarded as provided in Section 2.14(b)(iii).   (iii)           The “Minimum Number” of shares of the corporation’s common stock means 3% of the number of outstanding shares of the corporation’s common stock as of the most recent date for which such amount is given in any filing by the corporation with the SEC prior to the submission of the Nomination Notice.

 
  (iv)          For purposes of this Section 2.14, an Eligible Holder “owns” only those outstanding shares of common stock of the corporation as to which the Eligible Holder possesses both:   (A) the full voting and investment rights pertaining to such shares; and   (B) the full economic interest in (including the opportunity for profit and risk of loss on) such shares;   provided that the number of shares calculated in accordance with clauses (A) and (B) shall not include any shares (1) sold by such Eligible Holder or any of its affiliates in any transaction that has not been settled or closed, (2) borrowed by such Eligible Holder or any of its affiliates for any purpose or purchased by such Eligible Holder or any of its affiliates pursuant to an agreement to resell or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar instrument or agreement entered into by such Eligible Holder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of outstanding shares of common stock of the corporation, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (x) reducing in any manner, to any extent or at any time in the future, such Eligible Holder’s or any of its affiliates’ full right to vote or direct the voting of any such shares and/or (y) hedging, offsetting, or altering to any degree gain or loss arising from maintaining the full economic ownership of such shares by such Eligible Holder or any of its affiliates. An Eligible Holder “owns” shares held in the name of a nominee or other intermediary so long as the Eligible Holder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. An Eligible Holder’s ownership of shares shall be deemed to continue during any period in which the Eligible Holder has delegated any voting power by means of a proxy, power of attorney or other similar instrument or arrangement that is revocable at any time by the Eligible Holder. An Eligible Holder’s ownership of shares shall be deemed to continue during any period in which the Eligible Holder has loaned such shares provided that the Eligible Holder has the power to recall such loaned shares on five Business Days’ notice, recalls such loaned shares upon being notified by the corporation that any of the Eligible Holder’s Nominees will be included in the corporation’s proxy statement and proxy card for the Annual Meeting (subject to the provisions of this Section 2.14) and holds such shares through the date of the Annual Meeting. The terms “owned,” “owning,” “ownership” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of the corporation are “owned” for these purposes shall be determined by the Board. For purposes of this Section 2.14, the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the General Rules and Regulations under the Exchange Act.   (v)           No person shall be permitted to be in more than one group constituting a Nominating Shareholder, and if any person appears as a member of more than one group, then it shall be deemed to be a member of the group that has the largest amount of shares of common stock of the corporation disclosed as owned in the Nomination Notice.   15   (d)           Nomination Notice. To nominate a Nominee for purposes of this Section 2.14, the Nominating Shareholder must have given timely notice thereof in writing to the Secretary. To be timely, a Nominating Shareholder’s notice shall be received by the Secretary at the principal offices of the corporation not less than 120 days nor more than 150 days prior to the first annual anniversary of the date set forth in the corporation’s proxy statement for the immediately preceding Annual Meeting as the date on which the corporation first made available to its shareholders definitive proxy materials for the immediately preceding Annual Meeting; provided, however, that if the date for which the Annual Meeting is called is more than 30 days before or more than 30 days after the first annual

 
anniversary of the immediately preceding Annual Meeting, then notice by the Nominating Shareholder to be timely must be received by the Secretary by the later of the close of business on the date that is 180 days prior to the date of such Annual Meeting or the tenth day following the day on which public announcement of such Annual Meeting is first made. In no event shall any adjournment or postponement of any Annual Meeting or the announcement thereof commence a new time period for the giving of a Nomination Notice. To be in proper form, a Nominating Shareholder’s notice to the Secretary for purposes of this Section 2.14 shall include all of the following information and documents (collectively, the “Nomination Notice”):   (i)            A Schedule 14N (or any successor form) relating to the Nominee, completed and filed with the SEC by the Nominating Shareholder as applicable, in accordance with SEC rules;   (ii)           A written notice of the nomination of such Nominee that includes the following additional information, agreements, representations and warranties by the Nominating Shareholder (including each group member):   (A)          the information and representations that would be required to be set forth in a shareholder’s notice of a nomination for the election of directors pursuant to Section 2.13(a);   (B)           the details of any relationship that existed within the past three years and that would have been described pursuant to Item 6(e) of Schedule 14N (or any successor item) if it existed on the date of submission of the Schedule 14N;   (C)           a representation and warranty that the shares of common stock of the corporation owned by the Nominating Shareholder were acquired in the ordinary course of business and not with the intent or objective to influence or change control of the corporation and are not being held with the purpose or effect of changing control of the corporation or to gain a number of seats on the Board of Directors that exceeds the maximum number of nominees that shareholders may nominate pursuant to this Section 2.14;   (D)           a representation and warranty that the Nominating Shareholder satisfies the eligibility requirements set forth in Section 2.14(c) and has provided evidence of ownership to the extent required by Section 2.14(c)(i);   (E)           a representation and warranty that the Nominating Shareholder will continue to satisfy the eligibility requirements described in Section 2.14(c) through the date of the Annual Meeting;   (F)           a representation and warranty that the Nominating Shareholder has not nominated and will not nominate for election to the Board of Directors at the Annual Meeting any person other than the Nominees it is nominating pursuant to this Section 2.14;   (G)           a representation and warranty as to the Nominating Shareholder’s intentions with respect to continuing to own the Minimum Number of shares of common stock of the corporation for at least one year following the Annual Meeting;   16   (H)           a representation and warranty that the Nominating Shareholder will not engage in, and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act (without reference to the exception in Rule 14a-(l)(2)(iv)) (or any successor rules), with respect to the Annual Meeting, other than with respect to its Nominees or any nominees of the Board of Directors;

 
  (I)           a representation and warranty that the Nominating Shareholder will not use any proxy card other than the corporation’s proxy card in soliciting shareholders in connection with the election of a Nominee at the Annual Meeting;   (J)           a representation and warranty that the Nominee’s nomination for election to the Board of Directors or, if elected, Board membership would not violate applicable state or federal law or the rules of any stock exchange on which the corporation’s securities are traded;   (K)          a representation and warranty that the Nominee (1) qualifies as independent under the rules of any stock exchange on which the corporation’s securities are traded, (2) meets the audit committee and compensation committee independence requirements under the rules of any stock exchange on which the corporation’s securities are traded, (3) is a “non-employee director” for the purposes of Rule 16b-3 under the Exchange Act (or any successor rule), (4) is an “outside director” for the purposes of Section 162(m) of the Internal Revenue Code (or any successor provision), (5) does not exceed the retirement age set forth in Section 3.04, and (6) is not and has not been subject to any event specified in Rule 506(d)(1) of Regulation D (or any successor rule) under the Securities Act of 1933, as amended, or Item 401(f) of Regulation S-K (or any successor rule) under the Exchange Act, without reference to whether the event is material to an evaluation of the ability or integrity of the Nominee;   (L)          details of any position of the Nominee as an employee, consultant, agent, officer or director of any Competitor within the three years preceding the submission of the Nomination Notice;   (1)           “Competitor” means an individual, business or any other entity or enterprise engaged or having publicly announced its intent to engage in the sale or marketing of any Competing Product or Service.   (2)           “Competing Product or Service” means any product or service that is sold in competition with, or is being developed and that will compete with, a product or service developed, manufactured, or sold by the corporation.   (M)         if desired, a statement for inclusion in the proxy statement in support of the Nominee’s election to the Board of Directors, provided that such statement shall not exceed 500 words and shall fully comply with Section 14 of the Exchange Act and the rules and regulations thereunder, including Rule 14a-9 thereunder; and   (N)          in the case of a nomination by a group, the designation by all group members of one group member for purposes of receiving communications, notices and inquiries from the corporation and that is authorized to act on behalf of all group members with respect to matters relating to the nomination, including withdrawal of the nomination;   (iii)          An executed agreement, in a form deemed satisfactory by the Board of Directors or its designee, acting in good faith, pursuant to which the Nominating Shareholder (including each group member) agrees:   (A)         to comply with all applicable laws, rules and regulations in connection with the nomination, solicitation and election;   (B)           to file any written solicitation or other written communication with the corporation’s shareholders relating to one or more of the corporation’s directors or director nominees or any Nominee with the SEC, regardless of whether any such filing is required

 
under rule or regulation or whether any exemption from filing is available for such materials under any rule or regulation;   (C)           to assume all liability (jointly and severally by all group members in the case of a nomination by a group) stemming from any action, suit or proceeding concerning any actual or alleged legal or regulatory violation arising out of any communication by the Nominating Shareholder, its affiliates and associates or their respective agents and representatives with the corporation, its shareholders or any other person in connection with the nomination or election of directors, including without limitation the Nomination Notice, or out of the facts, statements or other information that the Nominating Shareholder or its Nominees provided to the corporation in connection with the inclusion of such Nominees in the corporation’s proxy statement;   17   (D)         to indemnify and hold harmless (jointly with all other group members, in the case of a group member) the corporation and each of its directors, officers and employees individually against any liability, loss, damages, expenses or other costs (including attorneys’ fees) incurred in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the corporation or any of its directors, officers or employees arising out of or relating to any nomination submitted by the Nominating Shareholder pursuant to this Section 2.14 or a failure or alleged failure of the Nominating Shareholder to comply with, or any breach or alleged breach of, its obligations, agreements or representations under this Section 2.14;   (E)          in the event that any information included in the Nomination Notice, or any other communication by the Nominating Shareholder (including with respect to any group member) with the corporation, its shareholders or any other person in connection with the nomination or election ceases to be true and accurate in all material respects or omits a material fact necessary to make the statements made not misleading or that the Nominating Shareholder (including any group member) has failed to continue to satisfy the eligibility requirements described in Section 2.14(c), to promptly (and in any event within 48 hours of discovering such misstatement, omission or failure) notify the corporation and any other recipient of such communication of the misstatement or omission in such previously provided information and of the information that is required to correct the misstatement or omission and/or notify the corporation of the failure to continue to satisfy the eligibility requirements described in Section 2.14(c), as the case may be, it being understood that providing any such notification shall not be deemed to cure any defect or limit the corporation’s right to omit a Nominee from its proxy materials as provided in this Section 2.14; and   (F)           at the request of the corporation, promptly, but in any event within five (5) Business Days after such request, to provide to the corporation such additional information as reasonably requested by the corporation.   (iv)          An executed agreement, in a form deemed satisfactory by the Board of Directors or its designee, acting in good faith, by the Nominee:   (A)         that the Nominee will provide such other information as may reasonably be required by the corporation to determine the eligibility of such person to serve as a director of the corporation and will make such other acknowledgments, enter into such agreements and provide such other information as the Board of Directors requires of all directors, including promptly completing the corporation’s director questionnaire;  

 
(B)          that the Nominee has read and agrees, if elected as a director of the corporation, to adhere to the corporation’s corporate governance guidelines and codes of ethics and any other corporation policies and guidelines applicable to directors;   18   (C)         that the Nominee is not and will not become a party to (1) any compensatory, payment, reimbursement, indemnification or other financial agreement, arrangement or understanding with any person or entity in connection with service or action as a director of the corporation that has not been disclosed to the corporation, (2) any agreement, arrangement or understanding with any person or entity as to how the Nominee would vote or act on any issue or question as a director (a “Voting Commitment”) that has not been disclosed to the corporation or (3) any Voting Commitment that could limit or interfere with the Nominee’s ability to comply, if elected as a director of the corporation, with his or her fiduciary duties under applicable law; and   (D)          in the event that any information or communication provided by the Nominee to the corporation, its shareholders or any other person in connection with the nomination or election ceases to be true and accurate in all material respects or omits a material fact necessary to make the statements made not misleading (and in any event within 48 hours of discovering such misstatement, omission or failure), that the Nominee will notify the corporation and any other recipient of such communication of the misstatement or omission in such previously provided information and of the information that is required to correct the misstatement or omission, as the case may be, it being understood that providing any such notification shall not be deemed to cure any defect or limit the corporation’s right to omit a Nominee from its proxy materials as provided in this Section 2.14.   The information and documents required by this Section 2.14(d) shall be (i) provided with respect to and executed by each group member in the case of information applicable to group members and (ii) provided with respect to the persons specified in Instruction 1 to Items 6(c) and (d) of Schedule 14N (or any successor item) in the case of a Nominating Shareholder or group member that is an entity. The Nomination Notice shall be deemed submitted on the date on which all the information and documents referred to in this Section 2.14(d) (other than such information and documents contemplated to be provided after the date the Nomination Notice is provided) have been delivered to or, if sent by mail, received by the Secretary of the corporation.   (e)            Exceptions.   (i)             Notwithstanding anything to the contrary contained in this Section 2.14, the corporation may omit from its proxy statement and any ballot or form of proxy any Nominee and any information concerning such Nominee (including a Nominating Shareholder’s statement in support), and no vote on such Nominee will occur (notwithstanding that proxies in respect of such vote may have been received by the corporation), and the Nominating Shareholder may not, after the Final Nomination Date, cure in any way any defect preventing the nomination of the Nominee, if:   (A)          the corporation receives a notice pursuant to Section 2.13(a) that a shareholder intends to nominate a person for election to the Board of Directors at the Annual Meeting;   (B)           the Board of Directors or its designee, acting in good faith, determines that such Nominee’s nomination or election to the Board of Directors would result in the corporation violating or failing to be in compliance with these bylaws, the corporation’s articles of incorporation or any applicable law, rule or regulation to which the corporation

 
is subject, including any rules or regulations of any stock exchange on which the corporation’s securities are traded;   19   (C)          the Nominee was nominated for election to the Board of Directors pursuant to this Section 2.14 at one of the corporation’s two preceding Annual Meetings and either (i) withdrew or became ineligible or unavailable for election at any such Annual Meeting or (ii) received a vote of less than 25% of the shares of common stock of the corporation entitled to vote for such Nominee; or   (D)          the Nominee has been, within the past three years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914, as amended.   (ii)            Notwithstanding anything to the contrary contained in this Section 2.14, the corporation may omit from its proxy statement, or may supplement or correct, any information, including all or any portion of the statement in support of the Nominee included in the Nomination Notice, if the Board of Directors or its designee, acting in good faith, determines that:   (A)          such information is not true in all material respects or omits a material statement necessary to make the statements made not misleading;   (B)          such information directly or indirectly impugns character, integrity or personal reputation of, or directly or indirectly makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation, with respect to, any person; or   (C)           the inclusion of such information in the proxy statement would otherwise violate SEC rules or any other applicable law, rule or regulation.   20   Article III. BOARD OF DIRECTORS   3.01 General Powers and Number; Tenure.   All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, its Board of Directors. Each director shall hold office until the next Annual Meeting in the year in which such director’s term expires and until his or her successor shall have been duly elected and, if necessary, qualified, or until there is a decrease in the number of directors which takes effect after the expiration of his or her term, or until his or her prior retirement, death, resignation or removal. Notwithstanding the foregoing, a director who is also an employee of the corporation shall cease to be a director on the date such employee’s employment by the corporation is terminated for any reason without further action by the corporation.   3.02 Chairman of the Board.   The Board of Directors shall annually elect one of its members to be Chairman of the Board and shall fill any vacancy in the position of Chairman of the Board at such time and in such manner as the Board of Directors shall determine. The Chairman of the Board shall preside at all meetings of the Board of Directors and of shareholders. The Chairman shall perform such other duties and services as shall be assigned to or required of the Chairman by the Board of Directors.

 
  3.03 Resignation and Removal.   A director may resign at any time by delivering written notice that complies with the Wisconsin Business Corporation Law to the Chairman of the Board or to the corporation. Unless otherwise provided in these bylaws, a director’s resignation is effective when the notice is delivered unless the notice specifies a later effective date. Directors need not be residents of the State of Wisconsin. Pursuant to Article V(b) of the Articles of Incorporation, any director may be removed from office by the corporation’s shareholders, but only for cause and only by the affirmative vote of a majority of the votes then entitled to be cast in an election of directors. In determining whether a director may be removed by the Company’s shareholders, “cause” shall exist only if the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction or has been adjudged liable for actions or omissions in the performance of his or her duty to the corporation in a matter which has had a materially adverse effect on the business of the corporation.   3.04 Eligibility.   A person shall not be eligible for nomination to serve as a director of the corporation beginning with the Annual Meeting immediately following such director’s seventy-second (72nd) birthday.   3.05          Regular Meetings.   A regular meeting of the Board of Directors shall be held without other notice than this bylaw immediately after the Annual Meeting, and each adjourned session thereof. The place of such regular meeting shall be the same as the place of the Annual Meeting which precedes it, or such other suitable place as may be announced at such Annual Meeting. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Wisconsin, for the holding of additional regular meetings without other notice than such resolution.   21   3.06 Special Meetings.   Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the Chief Executive Officer or any three directors. The Chairman of the Board or the Chief Executive Officer may fix any place, either within or without the State of Wisconsin, as the place for holding any special meeting of the Board of Directors, and if no other place is fixed the place of meeting shall be the principal business office of the corporation in the State of Wisconsin.   3.07 Notice; Waiver.   Notice of each meeting of the Board of Directors (unless otherwise provided in or pursuant to Section 3.05) shall be given by written notice delivered or communicated in person, by telegram, facsimile or other form of wire or wireless communication, or by mail or private carrier, to each director at his or her business address or at such other address as such director shall have designated in writing filed with the Secretary, in each case not less than 48 hours prior to the time of the meeting. If mailed, such notice shall be deemed to be effective when deposited in the United States mail so addressed, with postage thereon prepaid. If notice is given by telegram, facsimile or other form of wire or wireless communication, such notice shall be deemed to be effective when transmitted for delivery. If notice is given by private carrier, such notice shall be deemed to be effective when the notice is delivered to the private carrier. Whenever any notice whatever is required to be given to any director of the corporation under the Articles of Incorporation or these bylaws or any provision of the Wisconsin Business Corporation Law, a waiver thereof in writing, signed at any time, whether before or after the time of meeting, by the director entitled to such notice, shall be deemed equivalent to the giving of such notice. The corporation shall retain any such waiver as part of the permanent corporate records. A director’s attendance at or participation in a meeting waives any required notice to him or her of the meeting unless the director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken

 
at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.   3.08 Quorum.   Except as otherwise provided by the Wisconsin Business Corporation Law or by the Articles of Incorporation or these bylaws, a majority of the number of directors set forth in Section 3.01 shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but a majority of the directors present (though less than such quorum) may adjourn the meeting from time to time without further notice.   3.09 Manner of Acting.   The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the act of a greater number is required by the Wisconsin Business Corporation Law or by the Articles of Incorporation or these bylaws.   22   3.10 Conduct of Meetings.   The Chairman of the Board and, in his or her absence, any director chosen by the directors present, shall call meetings of the Board of Directors to order and shall act as chairman of the meeting. The Secretary of the corporation shall act as secretary of all meetings of the Board of Directors, but in the absence of the Secretary, the presiding officer may appoint any Assistant Secretary or any director or other person present to act as secretary of the meeting. Minutes of any regular or special meeting of the Board of Directors shall be prepared and distributed to each director.   3.11 Vacancies.   Any vacancy occurring in the Board of shall be filled in accordance with Article V(c) of the Articles of Incorporation. A vacancy that will occur at a specific later date, because of a resignation effective at a later date or otherwise, may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs.   3.12 Compensation.   The Board of Directors by affirmative vote of a majority of the directors then in office, irrespective of any personal interest of any of its members, may establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise, or may delegate such authority to an appropriate committee. The Board of Directors shall also have authority to provide for, or to delegate authority to, an appropriate committee to provide for reasonable pensions, disability or death benefits, and other benefits or payments to directors, officers and employees of the corporation.   3.13 Presumption of Assent.   A director of the corporation who is present at a meeting of the Board of Directors or a committee thereof of which he or she is a member at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless any of the following occurs:   (a)           the director objects at the beginning of the meeting or promptly upon his arrival to holding the meeting or transacting business at the meeting; (b) the director dissents or abstains from an action taken and minutes of the meeting are prepared that show the director’s dissent or abstention from the action taken; (c) the director delivers written notice that complies with the Wisconsin Business Corporation Law of his dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting; or (d) the director dissents or abstains from an action taken, minutes of the meeting are prepared that fail to show the director’s dissent or abstention from the action taken, and the director delivers to the corporation a written

 
notice of that failure that complies with the Wisconsin Business Corporation Law promptly after receiving the minutes. Such right to dissent or abstain shall not apply to a director who voted in favor of such action.   23   3.14 Committees.   The Board of Directors may create one or more committees, appoint members of the Board of Directors to serve on the committees and designate other members of the Board of Directors to serve as alternates. Each committee shall have at least one member who shall, unless otherwise provided by the Board of Directors, serve at the pleasure of the Board of Directors. A committee may be authorized to exercise the authority of the Board of Directors, except as otherwise limited by the Wisconsin Business Corporation Law. Unless otherwise provided by the Board of Directors in creating the committee, a committee may employ counsel, accountants and other consultants to assist it in the exercise of its authority.   3.15 Telephonic Meetings.   Except as herein provided and notwithstanding any place set forth in the notice of the meeting or these bylaws, members of the Board of Directors (and any committee thereof) may participate in regular or special meetings by, or through the use of, any means of communication by which all participants may simultaneously communicate with each other, such as by conference telephone. If a meeting is conducted by such means, then at the commencement of such meeting the presiding officer shall inform the participating directors that a meeting is taking place at which official business may be transacted. Any participant in a meeting by such means shall be deemed present in person at such meeting. Notwithstanding the foregoing, no action may be taken at any meeting held by such means on any particular matter which the presiding officer determines, in his sole discretion, to be inappropriate under the circumstances for action at a meeting held by such means. Such determination shall be made and announced in advance of such meeting.   Article IV. OFFICERS   4.01 Number.   The principal officers of the corporation shall be established by the Board of Directors and may include a Chief Executive Officer, a President, a Chief Financial Officer, one or more Vice Presidents, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. The Board of Directors may also authorize any duly appointed officer to appoint one or more officers or assistant officers. Any two or more offices may be held by the same person.   4.02 Election and Term of Office.   The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after the Annual Meeting. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office until such officer’s successor shall have been duly elected or until his or her prior death, resignation or removal, or a different person is appointed to such office.   24   4.03 Removal and Resignation.  

 
The Board of Directors may remove any officer with or without cause and notwithstanding the contract rights, if any, of the officer removed. Election or appointment shall not of itself create contract rights. An officer may resign at any time by delivering notice to the corporation that complies with the Wisconsin Business Corporation Law. The resignation shall be effective when the notice is delivered, unless the notice specifies a later effective date and the corporation accepts the later effective date.   4.04 Vacancies.   A vacancy in any principal office because of death, resignation, removal, disqualification or otherwise, shall be filled by the Board of Directors for the unexpired portion of the term. If a resignation of an officer is effective at a later date as contemplated by Section 4.03 hereof, the Board of Directors may fill the pending vacancy before the effective date if the Board provides that the successor may not take office until the effective date.   4.05 Chief Executive Officer.   Subject to the control of the Board of Directors, the Chief Executive Officer shall in general supervise and control all of the business and affairs of the corporation. He or she shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint and remove such agents and employees of the corporation as he or she shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to them. He or she shall have authority to sign, execute and acknowledge, on behalf of the corporation, all deeds, mortgages, securities, contracts, leases, reports, and all other documents or other instruments necessary or proper to be executed in the course of the corporation’s regular business, or which shall be authorized by resolution of the Board of Directors; and, except as otherwise provided by law or the Board of Directors, he or she may authorize any elected President, Vice President or other officer or agent of the corporation to sign, execute and acknowledge such documents or instruments in his place and stead. In general, he or she shall perform all duties incident to the office of Chief Executive Officer of the corporation and such other duties as may be prescribed by the Board of Directors from time to time.   4.06 President.   In the absence of the Chief Executive Officer or in the event of his or her death, inability or refusal to act, or in the event for any reason it shall be impracticable for the Chief Executive Officer to act personally, the President shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. He or she shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such agents and employees of the corporation as he or she shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to them. Such agents and employees shall hold office at the discretion of the President. He or she shall have authority to sign, execute and acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the corporation’s regular business, or which shall be authorized by resolution of the Board of Directors; and, except as otherwise provided by law or the Board of Directors, he or she may authorize any Vice President or other officer or agent of the corporation to sign, execute and acknowledge such documents or instruments in his place and stead. In general the President shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer from time to time.   25    4.07 Chief Financial Officer.   Subject to the control of the Board of Directors and the Chief Executive Officer, the Chief Financial Officer shall in general perform all of the duties incident to the office of Chief Financial Officer and have such other duties and exercise such other authority as from time to time may be delegated or assigned to him by the Chief Executive Officer or by the Board of Directors. He or she shall have authority to sign, execute and acknowledge, on behalf of the corporation, all deeds, mortgages, contracts, leases, reports, and all other documents or other instruments necessary or proper to be executed in the course of the corporation’s regular business, or which shall be authorized by the Chief

 
Executive Officer or by resolution of the Board of Directors. The Chief Financial Officer shall have the same authority as a Vice President of the corporation under these bylaws to execute documents, contracts or the like on behalf of the corporation or to otherwise bind the corporation.   4.08 The Vice Presidents.   In the absence of the President or in the event of his or her death, inability or refusal to act, or in the event for any reason it shall be impracticable for the President to act personally, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may sign, with the Secretary or Assistant Secretary, certificates for shares of the corporation and shall perform such other duties and have such authority as from time to time may be delegated or assigned to him or her by the President, Chief Executive Officer or by the Board of Directors. The execution of any instrument of the corporation by any Vice President shall be conclusive evidence, as to third parties, of his authority to act in the stead of the President.   4.09 The Secretary.   The Secretary shall: (a) keep the minutes of all Annual Meetings and Special Meetings and of all meetings of the Board of Directors in one or more books provided for that purpose (including records of actions taken without a meeting); (b) see that all notices are duly given in accordance with the provisions of these bylaws or as required by the Wisconsin Business Corporation Law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (d) maintain a record of the shareholders of the corporation, in a form that permits preparation of a list of the names and addresses of all shareholders, by class or series of shares and showing the number and class or series of shares held by each shareholder; (e) sign with the Chief Executive Officer, the President, or a Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general perform all duties incident to the office of Secretary and have such other duties and exercise such authority as from time to time may be delegated or assigned to him or her by the President, the Chief Executive Officer or by the Board of Directors.   26   4.10 The Treasurer.   The Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) maintain appropriate accounting records; (c) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Section 5.04; and (d) in general perform all of the duties incident to the office of Treasurer and have such other duties and exercise such other authority as from time to time may be delegated or assigned to him or her by the President, the Chief Executive Officer or by the Board of Directors. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine.   4.11 Assistant Secretaries and Assistant Treasurers.   There shall be such number of Assistant Secretaries and Assistant Treasurers as the Board of Directors may from time to time authorize. The Assistant Secretaries may sign, with the Chief Executive Officer, the President or a Vice President, certificates for shares of the corporation the issuance of which shall have been authorized by a resolution of the Board of Directors. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties and have such

 
authority as shall from time to time be delegated or assigned to them by the Secretary or the Treasurer, respectively, or by the President, the Chief Executive Officer or the Board of Directors.   4.12 Other Assistants and Acting Officers.   The Board of Directors shall have the power to appoint, or to authorize any duly appointed officer of the corporation to appoint, any person to act as assistant to any officer, or as agent for the corporation in his stead, or to perform the duties of such officer whenever for any reason it is impracticable for such officer to act personally, and such assistant or acting officer or other agent so appointed by the Board of Directors or the appointing officer shall have the power to perform all the duties of the office to which he or she is so appointed to be assistant, or as to which he or she is so appointed to act, except as such power may be otherwise defined or restricted by the Board of Directors or the appointing officer.   4.13 Salaries.   The salaries of the principal officers shall be fixed from time to time by the Board of Directors or by a duly authorized committee thereof, and no officer shall be prevented from receiving such salary by reason of the fact that he or she is also a director of the corporation.   27   Article V. CONTRACTS, LOANS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS   5.01 Contracts.   The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute or deliver any instrument in the name of and on behalf of the corporation, and such authorization may be general or confined to specific instances. In the absence of other designation, all deeds, mortgages and instruments of assignment or pledge made by the corporation shall be executed in the name of the corporation by the Chief Executive Officer, the President or one of the Vice Presidents and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer; the Secretary or an Assistant Secretary, when necessary or required, shall affix the corporate seal thereto; and when so executed no other party to such instrument or any third party shall be required to make any inquiry into the authority of the signing officer or officers.   5.02 Loans.   No indebtedness for borrowed money shall be contracted on behalf of the corporation and no evidences of such indebtedness shall be issued in its name unless authorized by or under the authority of a resolution of the Board of Directors. Such authorization may be general or confined to specific instances.   5.03 Checks, Drafts, etc.   All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by or under the authority of a resolution of the Board of Directors.   5.04 Deposits.   All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as may be selected by or under the authority of a resolution of the Board of Directors.   5.05 Voting of Securities Owned by this Corporation.

 
  Subject always to the specific directions of the Board of Directors, (a) any shares or other securities issued by any other corporation and owned or controlled by this corporation may be voted at any meeting of security holders of such other corporation by the Chief Executive Officer if he or she be present, or in his or her absence by the President of this corporation if he or she be present, or in his or her absence by any Vice President of this corporation who may be present, and (b) whenever, in the judgment of the Chief Executive Officer, or in his absence of the President, or in his absence of any Vice President, it is desirable for this corporation to execute a proxy or written consent in respect to any shares or other securities issued by any other corporation and owned by this corporation, such proxy or consent shall be executed in the name of this corporation by the Chief Executive Officer, the President or one of the Vice Presidents of this corporation, without necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this corporation shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by this corporation the same as such shares or other securities might be voted by this corporation.   28   5.06 No Nominee Procedures.   The corporation has not established, and nothing in these bylaws shall be deemed to establish, any procedure by which a beneficial owner of the corporation’s shares that are registered in the name of a nominee is recognized by the corporation as the shareholder under Section 180.0723 of the Wisconsin Business Corporation Law.   Article VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER   6.01 Certificates for Shares.   Certificates representing shares of the corporation shall be in such form, consistent with the Wisconsin Business Corporation Law, as shall be determined by the Board of Directors. Such certificates shall be signed by the Chairman of the Board, the Chief Executive Officer, the President or a Vice President and by the Secretary or an Assistant Secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except as provided in Section 6.06.   6.02 Facsimile Signatures and Seal.   The seal of the corporation (if any) on any certificates for shares may be a facsimile. The signatures of the Chairman of the Board, the Chief Executive Officer, the President or any Vice President and the Secretary or Assistant Secretary upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation.   6.03 Signature by Former Officers.   In case any officer, who has signed or whose facsimile signature has been placed upon any certificate for shares, shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer at the date of its issue.   6.04 Transfer of Shares.   Prior to due presentment of a certificate for shares for registration of transfer the corporation may treat the registered owner of such shares as the person exclusively entitled to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner. Where a certificate for shares is presented to the corporation with a

 
request to register for transfer, the corporation shall not be liable to the owner or any other person suffering loss as a result of such registration of transfer if (a) there were on or with the certificate the necessary endorsements, and (b) the corporation had no duty to inquire into adverse claims or has discharged any such duty. The corporation may require reasonable assurance that said endorsements are genuine and effective and in compliance with such other regulations as may be prescribed under the authority of the Board of Directors.   29   6.05 Restrictions on Transfer.   The face or reverse side of each certificate representing shares shall bear a conspicuous notation of any restriction imposed by the corporation upon the transfer of such shares.   6.06 Lost, Destroyed or Stolen Certificates.   Where the owner claims that his or her certificate for shares has been lost, destroyed or wrongfully taken, a new certificate shall be issued in place thereof if the owner (a) so requests before the corporation has notice that such shares have been acquired by a bona fide purchaser, and (b) files with the corporation a sufficient indemnity bond, and (c) satisfies such other reasonable requirements as the Board of Directors may prescribe.   6.07 Consideration for Shares.   The Board of Directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed or other securities of the corporation. Before the corporation issues shares, the Board of Directors shall determine that the consideration received or to be received for the shares to be issued is adequate. In the absence of a resolution adopted by the Board of Directors expressly determining that the consideration received or to be received is adequate, Board approval of the issuance of the shares shall be deemed to constitute such a determination. The determination of the Board of Directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid and nonassessable. The corporation may place in escrow shares issued in whole or in part for a contract for future services or benefits, a promissory note, or other property to be issued in the future, or make other arrangements to restrict the transfer of the shares, and may credit distributions in respect of the shares against their purchase price, until the services are performed, the benefits or property are received or the promissory note is paid. If the services are not performed, the benefits or property are not received or the promissory note is not paid, the corporation may cancel, in whole or in part, the shares escrowed or restricted and the distributions credited.   6.08 Stock Regulation.   The Board of Directors shall have the power and authority to make all such further rules and regulations not inconsistent with the statutes of the State of Wisconsin as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the corporation.   30   Article VII. ACTION WITHOUT MEETINGS   7.01 Director Action without Meeting.   Any action required or permitted by the Articles of Incorporation or these bylaws or any provision of the Wisconsin Business Corporation Law to be taken by the Board of Directors (or a committee thereof) at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by such number of

 
members of the Board or of the committee, as the case may be, as is required by the Wisconsin Business Corporation Law or by the Articles of Incorporation or these bylaws to take such action. Such action shall be effective when the last director or committee member signs the consent, unless the consent specifies a different effective date.   7.02 Shareholder Action without Meeting.   (a)           To be valid, each expression of consent to corporate action in writing (a “Consent”) shall be in writing; shall set forth the specific corporate action to be taken (which corporate action or actions shall be limited to the action or actions set forth in the written request to set a Consent Record Date received by the corporation pursuant to Section 2.05(c)); shall be signed by one or more persons who as of the Consent Record Date are shareholders of record (or their duly authorized proxies); shall bear the date of signature of each such shareholder (or their duly authorized proxies); shall set forth the name and address, as they appear in the corporation’s books, of each shareholder signing such Consent and the class and number of shares of the corporation that are owned of record by each such shareholder; in the case of a Person who is not a shareholder of record, shall be accompanied by a proxy or proxies evidencing each such Person’s appointment as a proxy for the applicable shareholder of record; and shall be sent to the inspectors of elections engaged by the corporation pursuant to Section 7.02(c) in accordance with the provisions of Section 7.02(d). Without limiting the foregoing, no Consent shall be valid unless, within seventy (70) days after the applicable Consent Record Date fixed pursuant to Section 2.05(c), Consents representing the requisite number of shares subject to valid and unrevoked Consents to express such corporate action are delivered to the corporation pursuant to Section 7.02; provided, however, that if the corporation or a Consent Soliciting Shareholder (whichever is soliciting Consents) has requested a Preliminary Consent Report that is pending on such 70th day pursuant to Section 7.02(e), then such Consents shall be valid if Consents representing the requisite number of shares subject to valid and unrevoked Consents to express such corporate action are delivered to the corporation pursuant to this Section 7.02 at such time as such inspectors issue the Final Consent Report relating to the pending Preliminary Consent Report pursuant to Section 7.02(f) or Section 7.02(g). The Board of Directors shall have the power and authority to make rules that are not inconsistent with the Wisconsin Business Corporation Law as to the validity of Consents and revocations thereof.   (b)           Consents may be revoked at any time prior to the earlier of (i) such time as the inspectors of elections issue a Final Consent Report pursuant to Section 7.02(f) or Section 7.02(g) or (ii) seventy (70) days after the applicable Consent Record Date fixed pursuant to Section 2.05(c) by written notice delivered to (A) the Secretary, (B) any Consent Soliciting Shareholder, (C) to a proxy solicitor or other agent designated by the corporation or any Consent Soliciting Shareholder and/or (D) the inspectors of elections engaged by the corporation pursuant to Section 7.02(c).   31   (c)           Within three (3) Business Days after a Consent Record Date fixed pursuant to Section 2.05(c), the corporation shall (i) engage regionally or nationally recognized independent inspectors of elections to act as agent of the corporation for the purpose of promptly performing a ministerial review of the validity of Consents and revocations thereof and (ii) provide notice to each Consent Soliciting Shareholder of the identity of such inspectors and the manner in which such Consent Soliciting Shareholder may deliver Consents and revocations thereof to such inspectors pursuant to Section 7.02(d). Except as provided in Section 2.05(c)(ii), the cost of retaining inspectors of election shall be borne by the corporation.   (d)           The corporation, the Consent Soliciting Shareholders and their respective proxy solicitors or other designated agents shall deliver Consents and revocations thereof to the inspectors within two (2) Business Days after receipt. As soon as the inspectors receive Consents and/or revocations thereof, the inspectors shall review the Consents and revocations thereof and shall maintain a count of the number of shares subject to valid and unrevoked Consents. The inspectors shall keep such count confidential and shall not reveal the count to any Person; provided, however, that, as soon as practicable after a written request therefor by the corporation or a Consent Soliciting Shareholder, the inspectors shall issue a report (a “Consent Report”) to the corporation and the Consent Soliciting Shareholders stating: (i) number of shares subject to valid Consents; (ii) the number of shares subject to valid revocations of Consents; (iii) the number of shares subject to valid and unrevoked Consents; (iv) the number of shares

 
subject to invalid Consents; (v) the number of shares subject to invalid revocations of Consents; (vi) whether, based on their count, the requisite number of shares subject to valid and unrevoked Consents has been obtained to express the corporate action specified in the Consents; and (vii) the latest date the inspectors received Consents and revocations thereof that the inspectors reflected in such report (the “Report Date”).   (e)           As soon as practicable after a written request therefor by the corporation or a Consent Soliciting Shareholder (whichever is soliciting Consents), notice of which request shall be given to the corporation and any parties opposing the solicitation of Consents, if any, which request shall state that the corporation or the Consent Soliciting Shareholders, as the case may be, have a good faith belief that the requisite number of shares subject to valid and unrevoked Consents to express the corporate action specified in the Consents has been received in accordance with the Articles of Incorporation and these Bylaws, the inspectors shall issue and deliver to the corporation and the Consent Soliciting Shareholders a preliminary Consent Report (the “Preliminary Consent Report”); provided, however, that neither the corporation nor the Consent Soliciting Shareholders may request a Preliminary Consent Report after the 70th day after the applicable Consent Record Date fixed pursuant to Section 2.05(c). Unless the corporation and the Consent Soliciting Shareholders shall agree to a shorter or longer period, the corporation and the Consent Soliciting Shareholders shall have two (2) Business Days after receipt of the Preliminary Consent Report to review the Consents and revocations thereof and to advise the inspectors and the opposing parties in writing as to whether they intend to challenge the Preliminary Consent Report.   32   (f)            If no written notice of an intention to challenge a Preliminary Consent Report is received within two (2) Business Days after receipt of the Preliminary Consent Report by the corporation and the Consent Soliciting Shareholders and either (i) the date that is two (2) Business Days after such receipt of such Preliminary Consent Report (the “Cut-Off Date”) is more than seventy (70) days after the applicable Consent Record Date fixed pursuant to Section 2.05(c) or (ii) the Cut-Off Date is not more than seventy (70) days after the applicable Consent Record Date fixed pursuant to Section 2.05(c) and the requisite number of shares subject to valid and unrevoked Consents to express the corporate action specified in the Consents was obtained, then the inspectors shall as promptly as practicable issue to the corporation and the Consent Soliciting Shareholders their final Consent Report (a “Final Consent Report”), which shall contain the information included in the Preliminary Consent Report, plus all changes in the vote totals as a result of Consents and revocations thereof received after the Preliminary Consent Report Report Date to the time of issuance of the Final Consent Report, if such Consents and revocations thereof are received within seventy (70) days after the applicable Consent Record Date fixed pursuant to Section 2.05(c), and a certification as to whether the requisite number of shares subject to valid and unrevoked Consents to express the corporate action specified in the Consents was obtained. If the Cut-Off Date is not more than seventy (70) days after the applicable Consent Record Date fixed pursuant to Section 2.05(c) and the requisite number or shares subject to valid and unrevoked Consents to express the corporate action specified in the Consents was not obtained, then the inspectors shall as promptly as practicable issue a Consent Report to the corporation and the Consent Soliciting Shareholders and a certification that the requisite number of shares subject to valid and unrevoked Consents to express the corporate action specified in the Consents was not obtained, and the corporation or the Consent Soliciting Shareholders (whichever is soliciting Consents) shall have the right to request again a Preliminary Consent Report in accordance with the provisions of Section 7.02(e).   (g)           If the corporation or the Consent Soliciting Shareholders issue written notice to the inspectors and the corporation or the Consent Soliciting Shareholders, as the case may be, of an intention to challenge a Preliminary Consent Report within two (2) Business Days after receipt of the Preliminary Consent Report by the corporation and the Consent Soliciting Shareholders, then challenge session shall be scheduled by the inspectors as promptly as practicable, at which the corporation and the Consent Soliciting Shareholders shall have the right to object to the validity of Consents and revocations thereof. A transcript of the challenge session shall be recorded by a certified court reporter. Following completion of the challenge session, if either (i) the date on which the challenge session is completed (the “Completion Date”) is more than seventy (70) days after the applicable Consent Record Date fixed pursuant to Section 2.05(c) or (ii) the Completion Date is not more than seventy (70) days after the applicable Consent Record Date fixed pursuant to Section 2.05(c) and the requisite number of shares subject to valid and unrevoked Consents to express the corporate action specified in the Consents was obtained, then the inspectors shall as promptly

 
as practicable issue to the corporation and the Consent Soliciting Shareholders a Final Consent Report, which shall contain the information included in the Preliminary Consent Report, plus all changes in the vote totals as a result of the challenge and, if such Consents and revocations thereof are received within seventy (70) days after the applicable Consent Record Date fixed pursuant to Section 2.05(c), Consents and revocations thereof received after the Preliminary Consent Report Report Date to the time of issuance of the Final Report, and a certification as to whether the requisite number of shares subject to valid and unrevoked Consents to express the corporate action specified in the Consents was obtained. If the Completion Date is not more than seventy (70) days after the applicable Consent Record Date fixed pursuant to Section 2.05(c) and the requisite number of shares subject to valid and unrevoked Consents to express the corporate action specified in the Consents was not obtained, then the inspectors shall as promptly as practicable issue a Consent Report to the corporation and the Consent Soliciting Shareholders and a certification that the requisite number of shares subject to valid and unrevoked Consents to express the corporate action specified in the Consents was not obtained, and the corporation or the Consent Soliciting Shareholders whichever is soliciting Consents shall have the right to request again a Preliminary Consent Report in accordance with the provisions of Section 7.02(e).   33   (h)           Simultaneously with the delivery of any Final Consent Report to the corporation pursuant to Section 7.02(f) or Section 7.02(g), the inspectors shall deliver all valid and unrevoked Consents to the corporation, which shall constitute delivery of such Consents to the corporation for purposes of Section 180.0704 of the Wisconsin Business Corporation Law and the Articles of Incorporation. A copy of any Final Consent Report shall be included in the book in which the proceedings of meetings of shareholders are recorded.   (i)            As to any Consent, if, prior to the issuance of a Final Consent Report and delivery of Consents to the corporation, all Consent Soliciting Shareholders notify the corporation and the inspectors in writing that such Consent Soliciting Shareholders no longer desire to express consent to the corporate actions specified in the Consents, then the Consents shall be deemed abandoned, and the inspectors shall not issue a Final Consent Report or deliver such Consents to the corporation.   Article VIII. MISCELLANEOUS   8.01 Seal. The Board of Directors may (but shall not be required to) provide a corporate seal.   8.02 Forum for Certain Actions.   (a)           Forum. Unless a majority of the Board of Directors, acting on behalf of the corporation, consents in writing to the selection of an alternative forum (which consent may be given at any time, including during the pendency of litigation), any commercial court established pursuant to Wisconsin Supreme Court Order No. 16-05 and amendments thereto (or, if such commercial courts established pursuant to such order do not have jurisdiction or cease to exist, any circuit court located within the State of Wisconsin or, if no circuit court located within the State of Wisconsin has jurisdiction, any other state court located within the State of Wisconsin, or if no state court located within the State of Wisconsin has jurisdiction, a federal district court located in the State of Wisconsin), to the fullest extent permitted by law, shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee of the corporation to the corporation or the corporation’s shareholders, (iii) any action asserting a claim against the corporation or any of its directors, officers or other employees arising pursuant to any provision of the Wisconsin Business Corporation Law, these bylaws or the Articles of Incorporation (in each case, as may be amended from time to time), or (iv) any action asserting a claim against the corporation or any of its directors, officers or other employees governed by the internal affairs doctrine of the State of Wisconsin, in all cases subject to the court’s having personal jurisdiction over all indispensable parties named as defendants. Unless a majority of the Board, acting on behalf of the corporation, consents in writing to the selection of an alternative forum (which consent may be given at any time, including during the pendency of litigation), the federal district courts of the United States of America, to the fullest extent permitted by law, shall be the sole and exclusive forum for the resolution of any action asserting a cause of action arising under the Securities Act of 1933, as amended.

 
  34   (b)           Personal Jurisdiction. If any action the subject matter of which is within the scope of subparagraph (a) of this Section 8.02 is filed in a court other than a court located within the State of Wisconsin (a “Foreign Action”) in the name of any shareholder, such shareholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Wisconsin in connection with any action brought in any such court to enforce subparagraph (a) of this Section 8.02 (an “Enforcement Action”) and (ii) having service of process made upon such shareholder in any such Enforcement Action by service upon such shareholder’s counsel in the Foreign Action as agent for such shareholder.   (c)           Enforceability. If any provision of this Section 8.02 shall be held to be invalid, illegal or unenforceable as applied to any person, entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provision in any other circumstance and of the remaining provisions of this Section 8.02, and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.   (d)           Notice and Consent. For the avoidance of doubt, any person or entity purchasing or otherwise acquiring or holding any interest in any security of the corporation shall be deemed to have notice of and consented to the provisions of this Section 8.02.   Article IX. INDEMNIFICATION   9.01 Certain Definitions.   The following capitalized terms (including any plural forms thereof) used in this Article IX shall be defined for purposes of this Article IX as follows:   (a)           “Authority” shall mean the persons or entity selected by the Director or Officer to determine his or her right to indemnification pursuant to Section 9.04.   (b)           “Board” shall mean the entire then elected and serving Board of Directors of the Corporation, including without limitation all members thereof who are Parties to the subject Proceeding or any related Proceeding.   (c)           “Breach of Duty” shall mean the Director or Officer breached or failed to perform his or her duties to the Corporation and his or her breach or failure to perform those duties is determined, in accordance with Section 9.04, to constitute misconduct under Section 180.0851(2)(a) l, 2, 3 or 4 of the Statute.   (d)          “Corporation,” as used herein and as defined in the Statute and incorporated by reference into the definitions of certain other capitalized terms used herein, shall mean this corporation, including, without limitation, any successor corporation or entity to this corporation by way of merger, consolidation or acquisition of all or substantially all of the capital stock or assets of this corporation.   35   (e)           “Corporation Affiliate” shall include, without limitation, any corporation, partnership, limited liability company, joint venture, employee benefit plan, trust or other enterprise, whether domestic or foreign, that is an Affiliate (as defined in Section 1.04(d)(i) of these bylaws) of the Corporation.   (f)            “Director or Officer” shall have the meaning set forth in the Statute; provided, that, for purposes of this Article IX, (i) “Director or Officer” shall include a director or officer of a Subsidiary (whether or not

 
otherwise serving as a Director or Officer), (ii) the term “employee benefit plan” as used in Section 180.0850(2)(c) of the Statute shall include an employee benefit plan sponsored, maintained or contributed to by a Subsidiary and (iii) it shall be conclusively presumed that any Director or Officer serving as a director, officer, partner, member, trustee, member of any governing or decision-making committee, manager, employee or agent of a Corporation Affiliate shall be so serving at the request of the Corporation.   (g)           “Disinterested Quorum” shall mean a quorum of the Board who are not Parties to the subject Proceeding or any related Proceeding.   (h)           “Expenses” shall mean and include fees, costs, charges, disbursements, attorney fees and any other expenses incurred in connection with a Proceeding.   (i)            “Liability” shall mean and include the obligation to pay a judgment, settlement, penalty, assessment, forfeiture or fine, including an excise tax assessed with respect to an employee benefit plan, and reasonable Expenses.   (j)            “Party” shall have the meaning set forth in the Statute; provided, that, for purposes of this Article IX, the term “Party” shall also include any Director or Officer or employee of the Corporation who is or was a witness in a Proceeding at a time when he or she has not otherwise been formally named a Party thereto.   (k)           “Proceeding” shall have the meaning set forth in the Statute; provided, that, in accordance with Section 180.0859 of the Statute and for purposes of this Article IX, the term “Proceeding” shall include without limitation all Proceedings (i) brought under (in whole or in part) the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, their respective state counterparts, and/or any rule or regulation promulgated under any of the foregoing; (ii) brought before an Authority or otherwise to enforce rights hereunder; (iii) involving any appeal from a Proceeding; and (iv) in which the Director or Officer is a plaintiff or petitioner because he or she is a Director or Officer; provided, however, that any such Proceeding under this subsection (iv) must be authorized by a majority vote of a Disinterested Quorum.   (l)             “Statute” shall mean Sections 180.0850 through 180.0859, inclusive, of the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes, as the same shall then be in effect, including any amendments thereto, but, in the case of any such amendment, only to the extent such amendment permits or requires the Corporation to provide broader indemnification rights than the Statute permitted or required the Corporation to provide prior to such amendment.   (m)           “Subsidiary” shall mean any direct or indirect subsidiary of the Corporation as determined for financial reporting purposes, whether domestic or foreign.   36   9.02 Mandatory Indemnification of Directors and Officers.   To the fullest extent permitted or required by the Statute, the Corporation shall indemnify a Director or Officer against all Liabilities incurred by or on behalf of such Director or Officer in connection with a Proceeding in which the Director or Officer is a Party because he or she is a Director or Officer.   9.03 Procedural Requirements.   (a)           A Director or Officer who seeks indemnification under Section 9.02 shall make a written request therefor to the Corporation. Subject to Section 9.03(b), within 60 days of the Corporation’s receipt of such request, the Corporation shall pay or reimburse the Director or Officer for the entire amount of Liabilities incurred by the Director or Officer in connection with the subject Proceeding (net of any Expenses previously advanced pursuant to Section 9.05).  

 
(b)           No indemnification shall be required to be paid by the Corporation pursuant to Section 9.02 if, within such 60-day period, (i) a Disinterested Quorum, by a majority vote thereof, determines that the Director or Officer requesting indemnification engaged in misconduct constituting a Breach of Duty or (ii) a Disinterested Quorum cannot be obtained.   (c)           In case of nonpayment pursuant to Section 9.03(b), the Board shall immediately authorize by resolution that an Authority, as provided in Section 9.04, determine whether the Director’s or Officer’s conduct constituted a Breach of Duty and, therefore, whether indemnification should be denied hereunder.   (d)           (i) If the Board does not authorize an Authority to determine the Director’s or Officer’s right to indemnification hereunder within such 60-day period and/or (ii) if indemnification of the requested amount of Liabilities is paid by the Corporation, then it shall be conclusively presumed for all purposes that a Disinterested Quorum has affirmatively determined that the Director or Officer did not engage in misconduct constituting a Breach of Duty and, in the case of subsection (i) above (but not subsection (ii)), indemnification by the Corporation of the requested amount of Liabilities shall be paid to the Director or Officer immediately.   9.04 Determination of Indemnification.   (a)           If the Board authorizes an Authority to determine a Director’s or Officer’s right to indemnification pursuant to Section 9.03, then the Director or Officer requesting indemnification shall have the absolute discretionary authority to select one of the following as such Authority:   (i)             An independent legal counsel; provided, that such counsel shall be mutually selected by such Director or Officer and by a majority vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, then by a majority vote of the Board;   (ii)           A panel of three arbitrators selected from the panels of arbitrators of the American Arbitration Association in Wisconsin; provided, that (A) one arbitrator shall be selected by such Director or Officer, the second arbitrator shall be selected by a majority vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, then by a majority vote of the Board, and the third arbitrator shall be selected by the two previously selected arbitrators, and (B) in all other respects (other than this Article IX), such panel shall be governed by the American Arbitration Association’s then existing Commercial Arbitration Rules; or   (iii)           A court pursuant to and in accordance with Section 180.0854 of the Statute.   37   (b)          In any such determination by the selected Authority, there shall exist a rebuttable presumption that the Director’s or Officer’s conduct did not constitute a Breach of Duty and that indemnification against the requested amount of Liabilities is required. The burden of rebutting such a presumption by clear and convincing evidence shall be on the Corporation or such other party asserting that such indemnification should not be allowed.   (c)           The Authority shall make its determination within 60 days of being selected and shall submit a written opinion of its conclusion simultaneously to both the Corporation and the Director or Officer.   (d)           If the Authority determines that indemnification is required hereunder, then the Corporation shall pay the entire requested amount of Liabilities (net of any Expenses previously advanced pursuant to Section 9.05), including interest thereon at a reasonable rate, as determined by the Authority, within 10 days of receipt of the Authority’s opinion; provided, that, if it is determined by the Authority that a Director or Officer is entitled to indemnification against Liabilities incurred in connection with some claims, issues or matters, but not as to other claims, issues or matters involved in the subject Proceeding, then the Corporation shall be required to pay (as set forth

 
above) only the amount of such requested Liabilities as the Authority shall deem appropriate in light of all of the circumstances of such Proceeding.   (e)           The determination by the Authority that indemnification is required hereunder shall be binding upon the Corporation, regardless of any prior determination that the Director or Officer engaged in a Breach of Duty.   (f)           All Expenses incurred in the determination process under this Section 9.04 by either the Corporation or the Director or Officer, including, without limitation, all Expenses of the selected Authority, shall be paid by the Corporation.   38   9.05 Mandatory Allowance of Expenses.   (a)            The Corporation shall pay or reimburse from time to time or at any time, within 10 days after the receipt of the Director’s or Officer’s written request therefor, the reasonable Expenses of the Director or Officer as such Expenses are incurred; provided, the following conditions are satisfied:   (b)           The Director or Officer furnishes to the Corporation an executed written certificate affirming his or her good faith belief that he or she has not engaged in misconduct which constitutes a Breach of Duty; and   (c)           The Director or Officer furnishes to the Corporation an unsecured executed written agreement to repay any advances made under this Section 9.05 if it is ultimately determined by an Authority that he or she is not entitled to be indemnified by the Corporation for such Expenses pursuant to Section 9.04.   (d)           If the Director or Officer must repay any previously advanced Expenses pursuant to this Section 9.05, then such Director or Officer shall not be required to pay interest on such amounts.   9.06 Indemnification and Allowance of Expenses of Certain Others.   (a)            The Board may, in its sole and absolute discretion as it deems appropriate, pursuant to a majority vote thereof, indemnify a director or officer of a Corporation Affiliate (who is not otherwise serving as a Director or Officer) against all Liabilities, and shall advance the reasonable Expenses, incurred by such director or officer in a Proceeding to the same extent hereunder as if such director or officer incurred such Liabilities because he or she was a Director or Officer, if such director or officer is a Party thereto because he or she is or was a director or officer of the Corporation Affiliate.   (b)           The Corporation shall indemnify an employee who is not a Director or Officer, to the extent he or she has been successful on the merits or otherwise in defense of a Proceeding, for all reasonable Expenses incurred in the Proceeding if the employee was a Party because he or she was an employee of the Corporation.   (c)           The Board may, in its sole and absolute discretion as it deems appropriate, pursuant to a majority vote thereof, indemnify (to the extent not otherwise provided in Section 9.06(b)) against Liabilities incurred by, and/or provide for the allowance of reasonable Expenses of, an employee or authorized agent of the Corporation acting within the scope of his or her duties as such and who is not a Director or Officer.   9.07 Insurance.   The Corporation may purchase and maintain insurance on behalf of a Director or Officer or any individual who is or was an employee or authorized agent of the Corporation against any Liability asserted against or incurred by such individual in his or her capacity as such or arising from his or her status as such, regardless of whether the Corporation is required or permitted to indemnify against any such Liability under this Article IX.

 
  9.08 Notice to the Corporation.   A Director or Officer or an employee of the Corporation shall promptly notify the Corporation in writing when he or she has actual knowledge of a Proceeding that may result in a claim of indemnification against Liabilities or allowance of Expenses hereunder, but the failure to do so shall not relieve the Corporation of any liability to the Director or Officer or employee hereunder unless the Corporation shall have been irreparably prejudiced by such failure (as determined, in the case of Directors or Officers only, by an Authority selected pursuant to Section 9.04(a)).   39   9.09 Severability.   If any provision of this Article IX shall be deemed invalid or inoperative, or if a court of competent jurisdiction determines that any of the provisions of this Article IX contravene public policy, then this Article IX shall be construed so that the remaining provisions shall not be affected, but shall remain in full force and effect, and any such provisions which are invalid or inoperative or which contravene public policy shall be deemed, without further action or deed by or on behalf of the Corporation, to be modified, amended and/or limited, but only to the extent necessary to render the same valid and enforceable; it being understood that it is the Corporation’s intention to provide Directors and Officers with the broadest possible protection against personal liability allowable under the Statute.   9.10 Nonexclusivity of Article IX.   The rights of a Director or Officer or an employee of the corporation (or any other person) granted under this Article IX shall not be deemed exclusive of any other rights to indemnification against Liabilities or allowance of Expenses which the Director or Officer or employee of the corporation (or such other person) may be entitled to under any written agreement, board resolution, vote of shareholders of the corporation or otherwise, including, without limitation, under the Statute. Nothing contained in this Article IX shall be deemed to limit the corporation’s obligations to indemnify against Liabilities or allow Expenses to a Director or Officer or an employee of the corporation under the Statute.   9.11 Contractual Nature of Article IX; Repeal or Limitation of Rights.   This Article IX shall be deemed to be a contract between the Corporation and each Director or Officer and employee of the Corporation and any repeal or other limitation of this Article IX or any repeal or limitation of the Statute or any other applicable law shall not limit any rights of indemnification against Liabilities or allowance of Expenses then existing or arising out of events, acts or omissions occurring prior to such repeal or limitation, including, without limitation, the right to indemnification against Liabilities or allowance of Expenses for Proceedings commenced after such repeal or limitation to enforce this Article IX with regard to acts, omissions or events arising prior to such repeal or limitation. If the Statute is amended to permit or require the Corporation to provide broader indemnification rights than this Article IX permits or requires, then this Article IX shall be automatically amended and deemed to incorporate such broader indemnification rights.   Article X. AMENDMENTS   10.01 By Shareholders.   These bylaws may be altered, amended or repealed and new bylaws may be adopted by the shareholders at any Annual Meeting or Special Meeting at which a quorum is in attendance.   40  

 
10.02 By Directors.   These bylaws may also be altered, amended or repealed and new bylaws may be adopted by the Board of Directors by affirmative vote of a majority of the number of directors present at any meeting at which a quorum is in attendance; provided, however, that the shareholders in adopting, amending or repealing a particular bylaw may provide therein that the Board of Directors may not amend, repeal or readopt that bylaw.   10.03 Implied Amendments.   Any action taken or authorized by the shareholders or by the Board of Directors, which would be inconsistent with the bylaws then in effect but is taken or authorized by affirmative vote of not less than the number of shares or the number of directors required to amend the bylaws so that the bylaws would be consistent with such action, shall be given the same effect as though the bylaws had been temporarily amended or suspended so far, but only so far, as is necessary to permit the specific action so taken or authorized.   Article XI. INTERPRETATION   11.01 Interpretation.   Unless the context requires otherwise, all words used in these bylaws in the singular number extend to and include the plural, all words in the plural number extend to and include the singular, and all words in any gender extend to and include all genders.   41  

 

EXHIBIT 31.1
CERTIFICATIONS
I, Louis V. Pinkham, certify that:
1 I have reviewed this quarterly report on Form 10-Q of Regal Beloit Corporation;
2 Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3 Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4 The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5 The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Louis V. Pinkham
Louis V. Pinkham
Chief Executive Officer
Date: November 10, 2021


EXHIBIT 31.2
CERTIFICATIONS
I, Robert J. Rehard, certify that:
1 I have reviewed this quarterly report on Form 10-Q of Regal Beloit Corporation;
2 Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3 Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4 The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5 The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Robert J. Rehard
Robert J. Rehard
Vice President
Chief Financial Officer
Date: November 10, 2021


EXHIBIT 32.1
CERTIFICATIONS of the
Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350
Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Regal Beloit Corporation (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the three and nine months ended October 2, 2021 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ Louis V. Pinkham
Louis V. Pinkham
Chief Executive Officer
 
/s/ Robert J. Rehard
Robert J. Rehard
Vice President
Chief Financial Officer
Date: November 10, 2021