DISCUSSION AND ANALYSIS BY REGAL REXNORD CORP MANAGEMENT OF THE FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)


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 made up of four operating segments: Business Systems, Industrial Systems, Climate Solutions and Power Transmission Solutions. Effective from October 4, 2021, the Company’s Power Transmissions Solutions operating segment was renamed Motion Control Solutions.

A description of the four operational areas is as follows:

• The Commercial Systems segment produces fractional horsepower AC and DC motors at approximately 5 horsepower, electronic variable speed controls, fans and blowers for commercial applications. These products serve markets such as commercial building ventilation and HVAC, swimming pools and spas, 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.

• The Climate Solutions segment produces small motors, electronic variable speed controls and air circulation solutions serving markets such as 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 needed to deal with 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 registered with October 1, 2021 received a special dividend of $ 6.99 per share (or approximately $ 284.4 million in total) by virtue of a special dividend as part of the Rexnord Transaction.

In connection with the transaction with Rexnord, we 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 of 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
                                                                    September 26,                                September 26,
                                             October 2, 2021             2020             October 2, 2021            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 percentage 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 a selection of financial information and statistics for the
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).

                                       46
--------------------------------------------------------------------------------

Respect of financial commitments

The credit agreement requires us to meet specified financial ratios and to meet certain financial condition tests. We were in compliance with all financial covenants contained in the credit agreement dated October 2, 2021.

Other bills to pay

TO October 2, 2021, other bills to pay of approximately $ 4.3 million were outstanding at a weighted average interest rate of 4.9%. TO January 2, 2021, other bills to pay of approximately $ 4.6 million were outstanding with a weighted average rate of 4.9%.

Financing agreements related to the transaction with Rexnord

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 information on critical accounting policies, which is contained in our annual report on Form 10-K for the year ended January 2, 2021, have not changed significantly since this report was tabled.

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