RRX Regal Rexnord 10-Q 2026-09-30 section summaries

Regal Rexnord (RRX) — Q3 and nine months ended September 30, 2026

Consolidated results

All figures in $ millions except per-share data.

Q3 sales increased 6.1%, but operating income fell sharply and the company recorded a $12.5 million attributable net loss. The principal driver was a $119.3 million goodwill impairment related to the planned sale of its autonomous mobile solutions (AMS) business; without the charge, Q3 operating income would have been $200.7 million. The impairment comprised an initial $95.5 million charge and a further $23.8 million after AMS qualified as held for sale and goodwill was allocated between AMS and the retained business. The sale is expected within 12 months and was not treated as a discontinued operation. Q3 pretax income of $10.6 million was below the $22.9 million tax provision; the 216.0% effective tax rate, versus 12.9%, principally reflected the nondeductible impairment. The 9M effective tax rate was 26.9%, up from 18.4%.

Tariff refunds supported gross profit: after a February 2026 Supreme Court ruling, the company reduced cost of sales by $17.8 million in Q3 and $49.8 million in 9M. By September 30, it had received $36.4 million of the $49.8 million claimed, with $13.4 million recorded as a receivable.

Segment results

AMC revenue grew 24.5% in Q3 and 18.7% in 9M, while its operating results included the impairment. IPS revenue declined 1.9% in Q3 but rose 2.2% in 9M; PES revenue rose 1.2% in Q3 but fell 4.2% in 9M. Segment operating income totals $81.4 million in Q3 2026 ($174.4 million in Q3 2025) and $449.3 million in 9M 2026 ($516.3 million in 9M 2025), matching consolidated operating income.

Balance sheet and cash flow

Subtracting goodwill and other intangible assets from shareholders’ equity implies tangible common equity of $(2,672.7) million. Goodwill declined in part due to $119.3 million of impairment and $44.2 million of adverse currency translation; cumulative goodwill impairment charges were $342.9 million. AMS held-for-sale balances included $16.3 million current assets, $52.4 million noncurrent assets (including $46.0 million net intangible assets), $6.7 million current liabilities and $13.8 million noncurrent liabilities.

The $411.6 million decline in operating cash flow included a $431.3 million adverse swing in receivables cash flow: a $72.0 million use versus a $359.3 million source. Financing cash outflow was $420.5 million, including $69.9 million of dividends. Declared dividends were $1.05 per share in 9M. Cash interest paid was $221.5 million versus $232.0 million.

Financing, outlook and risks

The company borrowed $850.0 million under its term facility in February to refinance 2026 notes and prepaid $350.0 million in September. Quarter-end term borrowings were $500.0 million; revolver borrowings were $268.8 million, including $260.9 million of euro-denominated debt. The $1.5 billion revolver runs through November 2030, and the term facility matures in February 2029. The company was compliant with financial covenants; it repaid $18.1 million principal of assumed Altra Notes at their October 1 maturity.

The receivables securitization facility was renewed for 18 months in June and expanded from $400 million to $430 million. Receivables sold and derecognized outstanding were $375.8 million at quarter-end; another $71.3 million of unsold receivables was pledged. 9M receivables sold were $1,741.8 million versus $1,036.5 million, while facility charges were $11.9 million versus $5.0 million.

Remaining performance obligations were $812.6 million: 9.3% expected in the remainder of 2026, 74.8% in 2027 and 15.9% thereafter. The company expects a further $13.0 million of restructuring charges in the remainder of 2026; Q3 restructuring costs were $9.5 million versus $8.8 million, and 9M costs were $24.4 million versus $23.9 million.

Foreign-currency translation losses were $82.6 million in 9M 2026, compared with a $325.8 million gain in 9M 2025. A subsidiary also faces numerous claims alleging fires involving sub-fractional motors manufactured primarily through 2004; although a liability is accrued, outcomes and potential remedial costs remain uncertain and could be significant.

Regal Rexnord — Q3 and nine months ended September 30, 2026

Sales grew in Q3, led by Automation & Motion Control (AMC), but operating and net income fell sharply, principally because of a $119.3 million goodwill impairment related to the expected sale of AMS. Gross profit benefited from tariff refunds. For the nine months, revenue and gross profit increased, while operating income and net income declined.

Consolidated results

Q3 sales grew 6.1%, all organically. The $17.8 million of tariff refunds recorded in cost of sales contributed to gross profit growth. Operating expenses rose 34.0%, driven primarily by the impairment, and operating margin contracted to 5.1% from 11.6%. The effective tax rate was 216.0%, largely reflecting the non-deductible impairment; the nine-month rate was 26.9% versus 18.4%, reflecting permanent and discrete items partly offset by tax-planning benefits.

For the nine months, sales grew 4.9%, comprising 3.7% organic growth and 1.3% favorable currency translation. Gross profit included $49.8 million of tariff-refund benefits. Operating margin fell to 9.7% from 11.7%. Lower outstanding debt helped reduce nine-month interest expense.

Q3 segment results

AMC revenue grew 24.5% (25.2% organically), led by data center—including $25 million in E-Pod sales—and discrete automation; aerospace and defense also contributed to its strong year-to-date growth. Its $81.3 million operating loss reflected the impairment, despite higher gross profit. IPS revenue declined 1.9% (1.8% organically) as metals and mining weakness outweighed strength in discrete automation and energy; operating income increased modestly. PES revenue rose 1.2% in Q3 (0.4% organically), with commercial HVAC growth partly offset by weakness in residential HVAC and pools. This was an improvement from its 5.4% organic sales decline for the nine months: year-to-date revenue was $1,222.9 million versus $1,277.0 million, and operating income was $185.1 million versus $167.9 million. Year-to-date AMC revenue was $1,435.4 million versus $1,209.4 million, with operating loss of $1.3 million versus operating income of $88.2 million; IPS revenue was $1,967.2 million versus $1,924.8 million, with operating income of $265.5 million versus $260.2 million.

Cash flow and investment

Operating cash flow fell by $411.6 million, mainly because the prior-year period included $398.3 million of receivables-securitization proceeds, along with other working-capital changes. Investing outflow was higher largely because the prior year included proceeds from property and equipment sales. Expected FY2026 capital spending is approximately $110.0 million, planned to be funded from operating cash flow; the company expects existing manufacturing capacity to be sufficient through year-end.

Liquidity, debt and risks

At September 30, 2026, working capital was $1,587.1 million, up from $1,448.0 million at December 31, 2025, and the current ratio improved to 2.2:1 from 2.1:1. Cash was $449.6 million versus $521.7 million; trade receivables, net, were $584.7 million versus $524.2 million; inventory was $1,392.7 million versus $1,321.7 million; and accounts payable was $653.4 million versus $607.3 million. Of cash, $444.3 million was held by foreign subsidiaries; $440.4 million of foreign cash had been repatriated during 2026, and the company was evaluating further repatriation.

In February, Regal Rexnord borrowed $850.0 million under its 2025 Term Facility to refinance $1,100.0 million of 2026 Senior Notes, then prepaid $350.0 million on the term facility in September. At quarter-end, $500.0 million remained outstanding under the term facility and $268.8 million was borrowed under the 2025 Revolving Facility, including €230.0 million ($260.9 million) of euro-denominated borrowings; available borrowing capacity was $1,231.2 million. The company plans to use operating cash to meet interest obligations and reduce debt.

Management concluded in Q3 that a sale of AMS, which provides autonomous-guided-vehicle navigation hardware and software, was more likely than not. The resulting goodwill test produced a $95.5 million impairment using a 13.0% discount rate; after AMS qualified as held for sale, a further $23.8 million impairment fully wrote off its allocated goodwill. Valuations remain sensitive to forecasts, discount rates, market multiples and terminal growth assumptions.

The February 20, 2026 U.S. Supreme Court ruling that IEEPA tariffs were unauthorized led the company to record cost-of-sales reductions of $17.8 million in Q3 and $49.8 million year to date for certain tariff refunds. Further recoveries through future CAPE process phases are possible, but their amount and timing are uncertain. Commodity, labor, facility and shipping costs remain exposure areas; fixed-price supplier arrangements, hedging and customer price adjustments may not fully eliminate cost pressure or timing gaps. Results are also exposed to economic and end-market cyclicality; PES air-conditioning demand is typically stronger in Q2 and Q3.

For the Parent and guarantor subsidiaries, nine-month sales were $2,480.9 million, operating income $128.7 million, interest expense $220.1 million and net loss $131.2 million. At September 30, this group reported goodwill of $4,204.0 million, net intangible assets of $1,887.8 million, and long-term debt of $4,141.7 million. Senior Note claims are structurally subordinated to liabilities, including trade payables, of non-guarantor subsidiaries, whose creditors have priority over those subsidiaries’ assets.

Market risk as of September 30, 2026

Interest-rate risk and debt

Loans under the 2025 Credit Agreement bear floating interest rates plus a margin based on consolidated net leverage. No interest-rate swaps were outstanding at September 30, 2026 or December 31, 2025. Swaps related to repaid term facilities were terminated. Terminating the 2022 swaps in June 2025 generated a $3.1 million cash receipt and a gain recorded in interest expense. Proceeds of $16.2 million from swaps terminated in March 2022 had reduced interest expense through June 2025.

Foreign-currency risk

The company uses forward contracts to hedge forecast transactions, intercompany loans, and foreign-currency receivables and payables; it does not hedge the translation of foreign subsidiaries’ reported results.

At September 30, 2026, the foreign-exchange contracts had the following notionals and fair values. The sensitivity column shows the modeled gain/(loss) from a 10% appreciation of the counter-currency; a 10% depreciation would produce the opposite result.

The modeled derivative effects are expected to be offset by changes in the underlying forecast cash flows. Currency-hedge unrealized gains in accumulated other comprehensive income (AOCI), net of tax, were $0.9 million at September 30, 2026, down from $4.7 million at December 31, 2025. Closed currency-hedge gains in AOCI, net of tax, were $4.2 million and $2.3 million, respectively, and will be recognized in earnings when the hedged items affect earnings.

Commodity risk

The company periodically hedges forecast copper and aluminum purchases, generally using contract terms that mirror the hedged items.

Copper contracts had $115.3 million of notional and a $10.3 million fair value at September 30, 2026. A hypothetical 10% copper-price increase or decrease would produce an $11.5 million derivative gain or loss, respectively; the company expects the derivative effect to be offset by the actual commodity-price change. Commodity-hedge unrealized gains in AOCI, net of tax, were $7.9 million versus $7.8 million at December 31, 2025. Closed commodity-hedge gains in AOCI were $4.2 million versus $1.5 million, and will be realized as the related hedged items affect earnings.

Hedging, AOCI, and counterparty risk

The net AOCI hedging component was a $17.2 million gain at September 30, 2026, including $16.9 million of net current deferred gains expected to be realized within the next 12 months as the associated items affect earnings. Derivatives are used for hedging, not speculation. Most are designated as cash-flow hedges, with effective fair-value changes recorded in AOCI and subsequently reclassified to earnings alongside the hedged transactions.

The company faces counterparty credit risk on currency and commodity contracts. It limits counterparties to major financial institutions and monitors credit compliance, but does not obtain collateral or other security. It does not anticipate counterparty nonperformance, though it cannot assure that it will not occur.

Item 4. Controls and Procedures

For the quarter ended March 31, 2026, the CEO and CFO concluded that the company’s disclosure controls and procedures were effective as of period-end.

During the quarter, the company implemented a new global consolidation system to support financial statement close and consolidation, and updated internal controls for the reporting processes affected by the implementation. Other than these implementation-related updates, no changes materially affected, or were reasonably likely to materially affect, internal control over financial reporting.

The company states that its business and financial risks have not materially changed from those described in its Form 10-K for the year ended December 31, 2025, and incorporates those risk factors by reference. It also directs readers to the “Cautionary Statement” for additional information. This section identifies no specific new risks or business developments.