REGAL REXNORD CORP (RRX) FY 2024 MD&A

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars In Millions Except Per Share Data, Unless Otherwise Noted)

Overview

General

Regal Rexnord Corporation (NYSE: RRX) (“we,” “us,” “our” or the “Company”) and its associates around the world help create a better tomorrow by providing sustainable solutions that power, transmit and control motion. The Company’s electric motors and air moving subsystems provide the power to create motion. A portfolio of highly engineered power transmission components and subsystems efficiently transmits motion to power industrial applications. The Company's automation offering, comprised of controllers, drives, precision motors, and actuators, controls motion in applications ranging from factory automation to precision tools used in surgical applications. We are headquartered in Milwaukee, Wisconsin and have manufacturing, sales and service facilities worldwide.

As of December 31, 2024, the Company, including its subsidiaries, employed approximately 30,300 full-time people in its global manufacturing, sales, and service facilities and corporate offices. For the year ended December 31, 2024, we reported annual net sales of $6.0 billion compared to $6.3 billion for the year ended December 31, 2023.

Our company is comprised of three operating segments: Industrial Powertrain Solutions ("IPS"), Power Efficiency Solutions ("PES") and Automation & Motion Control ("AMC").

A description of our three operating segments is as follows:

•The IPS segment designs, produces and services a broad portfolio of highly-engineered transmission products, including mounted and unmounted bearings, couplings, mechanical power transmission drives and components, gearboxes and gear motors, clutches, brakes, and industrial powertrain components and solutions. Increasingly, the segment produces industrial powertrain solutions, which are integrated sub-systems comprised of Regal Rexnord motors plus the critical power transmission components that efficiently transmit motion to power industrial applications. The segment serves a broad range of markets that include metals and mining, general industrial, energy, alternative energy, machinery / off-highway, discrete automation and other markets.

•The PES segment designs and produces fractional to approximately 5 horsepower AC and DC motors, electronic variable speed controls, electronic drives, fans and blowers, as well as integrated subsystems comprised of two or more of these components. The segment's products are used in residential and commercial HVAC, water heaters, commercial refrigeration, commercial building ventilation, pool and spa, irrigation, dewatering, agricultural, conveying and other applications.

•The AMC segment designs, produces and services conveyor products, conveying automation subsystems, aerospace components, precision motion control solutions, high-efficiency miniature servo motors, controls, drives and linear actuators, as well as power management products that include automatic transfer switches and paralleling switchgear. The segment sells into markets that include industrial automation, robotics, food and beverage, aerospace, medical, agricultural and construction, general industrial, data center, and other markets.

On September 23, 2023, we signed an agreement to sell our industrial motors and generators businesses which represented the substantial majority of the Industrial Systems operating segment. The transaction closed on April 30, 2024. See Note 3 - Acquisitions and Divestitures and Note 5 - Segment Information of the Notes to the Consolidated Financial Statements for further information and a description of the Company's operating segments, respectively.

We have omitted discussion of trends from 2022 to 2023 as this information has been previously disclosed within Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations of our 10-K for the year ended December 31, 2023 filed with the SEC on February 26, 2024.

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 OEMs, who incorporate our products into products they manufacture, and many of our products are built to the requirements of our

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customers. The majority of our sales are derived 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. 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 meet customer demands in a timely manner; and (v) the selling price of our products. 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 an 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. Organic sales, organic sales growth and acquisition growth are non-GAAP financial measures. See reconciliation of these measures to GAAP net sales in the section entitled "Non-GAAP Measures" below.

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 portions of the commodity price fluctuations through fixed-price agreements with suppliers and our hedging strategies. When we experience commodity price increases, we have tended to announce price increases to our customers, with such increases generally taking effect a period of time after the public announcements. For those sales we make under long-term arrangements, 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 sales from quarter to quarter based on factors specific to each business. For example, a portion of our PES 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 IPS and AMC segments each 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.

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 products and enhancements to existing products; (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. In particular, a large driver of our research and development efforts is to raise the energy efficiency, and lower the environmental impact of our products and sub-systems.

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Goodwill & Other Asset Impairments.

The following table presents impairments by segment as of December 31, 2024, December 31, 2023 and December 31, 2022:

(1) The goodwill impairment in 2023 was in the global industrial motors reporting unit. See Note 4 – Goodwill and Intangible Asserts in the Notes to the Consolidated Financial Statements for additional information.

(2) Related to assets held for sale.

(3) Primarily related to the sale of the industrial motors and generators businesses. See Note 3 - Acquisitions and Divestitures for additional information.

Income (Loss) from Operations. Our income (loss) from operations consists of segment gross profit less segment operating expenses. In addition, there are shared operating costs that cover corporate, engineering and IT expenses that are consistently allocated to the operating segments and are included in segment operating expenses. Income (loss) from operations is a key metric used to measure year-over-year performance of the segments.

Altra Transaction

On March 27, 2023, in accordance with the terms and conditions of the Altra Merger Agreement, by and among us, Altra, and Merger Sub, pursuant to the satisfaction of specified conditions, Merger Sub merged with and into Altra, with Altra surviving the Altra Merger as our wholly owned subsidiary. See Note 3 - Acquisitions and Divestitures of the Notes to the Consolidated Financial Statements for further information regarding the Altra Transaction.

In connection with the Altra Transaction, we entered into certain financing arrangements, which are described within Note 6 - Debt and Bank Credit Facilities.

2025 Outlook

In 2025, we expect diluted earnings per share to be $4.42 to $5.22. Our 2025 diluted earnings per share guidance is based on an effective tax rate of 21.5%.

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Results of Operations

The following table sets forth selected information for the years indicated:

(1) Results for the Industrial Systems segment covers results through the close of the sale on April 30, 2024.

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Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net sales for 2024 were $6,033.8 million, a decrease of $216.9 million, or 3.5% as compared to 2023. The decrease consisted of an organic sales decline of 5.0% and a negative foreign currency translation impact of 0.3%, partially offset by acquisition growth of 7.5%. In addition, the decrease includes a negative impact of $342.7 million related to the sale of the industrial motors and generators businesses, which closed on April 30, 2024. The acquisition growth of $442.5 million relates to the acquisition of Altra. The $295.9 million organic sales decline was due to lower organic sales of $158.1 million within PES, $77.2 million within AMC, $41.0 million within IPS, and $19.6 million within Industrial Systems. Gross profit increased $123.7 million or 6.0% as compared to the prior year due to $175.2 million from the acquisition of Altra, the absence of $53.6 million of acquisition-related inventory step-up amortization at IPS and AMC in 2024, and the benefits of productivity and acquisition-related cost synergies, partially offset by a decrease of $66.2 million within PES and a decrease of $76.7 million due to the divestiture of the industrial motors and generators businesses. Total operating expenses for 2024 were $1,561.0 million, a decrease of $129.2 million, or 7.6% as compared to 2023. The decrease was primarily due to a reduction of $208.1 million from the divestiture of the industrial motors and generators businesses which included an $83.4 million decrease to loss on the sale of the industrial motors and generators businesses, the impact of a $57.3 million goodwill impairment recorded during 2023 in connection with the sale, and a decrease of $63.0 million in transaction and integration related costs, offset by an increase of $122.0 million from the acquisition of Altra.

IPS net sales for 2024 were $2,598.1 million, an increase of $194.6 million or 8.1% as compared to 2023. The increase consisted of acquisition growth of 10.1%, partially offset by an organic sales decline of 1.7% and a negative foreign currency translation impact of 0.3%. The acquisition growth of $243.2 million relates to the acquisition of Altra. The $41.0 million decrease in organic sales was due to weakness in machinery/off-highway, alternative energy and general industrial markets, partially offset by strength in the energy and aerospace markets, and gains from cross-selling synergies. Gross profit increased $207.4 million or 24.6% due to $92.4 from the acquisition of Altra, the absence of $39.6 million of acquisition-related inventory step-up amortization in 2024, and the benefits of productivity and acquisition-related cost synergies. Total operating expenses for 2024 were $728.8 million, an increase of $36.5 million, or 5.3% as compared to 2023. The increase was due to $60.0 million from the acquisition of Altra, partially offset by a decrease of $37.6 million in transaction and integration costs.

PES net sales for 2024 were $1,644.1 million, a decrease of $164.8 million or 9.1% as compared to 2023. The decrease consisted of an organic sales decline of 8.8% and a negative foreign currency translation impact of 0.2%. The $158.1 million decrease in organic sales was due to declines in residential HVAC, general commercial, and non-U.S. commercial HVAC markets, partially offset by strength in the commercial HVAC market in North America. Gross profit decreased $66.2 million or 12.6% due to lower sales volumes, partially offset by management's control over discretionary spending and lower freight costs. Total operating expenses for 2024 were relatively consistent with 2023.

AMC net sales for 2024 were $1,633.8 million, an increase of $117.0 million or 7.7% as compared to 2023. The increase consisted of acquisition growth of 13.1% offset by an organic sales decline of 5.1% and a negative foreign currency translation impact of 0.3%. The acquisition growth of $199.3 million relates to the acquisition of Altra. The $77.2 million decrease in organic sales was due to weakness in discrete automation and general industrial markets, partially offset by strength in the aerospace, data center, medical, and food and beverage markets. Gross profit increased $59.2 million or 10.2% due to $82.8 million from the acquisition of Altra, the absence of $14.0 million of acquisition-related inventory step-up amortization in 2024, and the benefits of productivity and acquisition-related cost synergies, partially offset by the organic sales decline. Total operating expenses for 2024 increased $53.8 million, or 12.1% as compared to 2023. The increase in operating expenses was due to $62.0 million from the acquisition of Altra, partially offset by a decrease of $25.5 million in transaction and integration costs.

On April 30, 2024, the Company completed the sale of its industrial motors and generators businesses, which represented the substantial majority of the Industrial Systems segment, and recognized a $4.3 million loss on the sale during 2024. The changes in Industrial Systems sales, gross profit and other operating expenses were due to timing of the sale.

The effective tax rate for 2024 was 20.0% compared to (3,293.8)% for 2023. The effective tax rate in 2024 reflects lower US tax on foreign earnings and discrete tax benefits associated with a reduction in withholding taxes, while the effective tax rate in 2023 was largely driven by the impact of the nondeductible goodwill impairment and held for sale loss related to the divestiture of the industrial motors and generators businesses.

Non-GAAP Measures

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As noted above, we disclose organic sales, organic sales growth and acquisition growth non-GAAP financial measures, and we reconcile these measures in the table below to GAAP net sales. We believe that these non-GAAP financial measures are useful measures for providing investors with additional information regarding our results of operations and for helping investors understand and compare our operating results across accounting periods and compared to our peers. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for the Company's results of operations prepared and presented in accordance with GAAP.

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 flows 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 $609.4 million in 2024, a $105.9 million decrease from 2023. This decrease was driven primarily by working capital changes.

Our working capital was $1,535.6 million and $2,057.6 million as of December 31, 2024 and December 31, 2023, respectively. The prior year included $257.8 million net assets held for sale related primarily to the industrial motors and generators businesses. The remaining decline in working capital was primarily due to the timing of payments and collections on accounts payable and accounts receivable, as well as improvements in managing inventory levels.

Cash flow provided by investing activities was $275.4 million in 2024, compared to cash flow used in investing activities of $4,983.0 million in 2023. The change was driven primarily by the use of $4,870.2 million of cash to acquire Altra in 2023 and $374.8 million in proceeds received from the sale of the industrial motors and generators businesses in 2024. Capital expenditures were $109.5 million in 2024, compared to $119.1 million in 2023.

In 2025, we anticipate capital spending for property, plant and equipment to be approximately $120 million. We believe that our present manufacturing facilities will be sufficient to provide adequate capacity for our operations in 2025. We anticipate funding 2025 capital spending with operating cash flows.

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Cash flow used in financing activities was $1,095.8 million in 2024, compared to $4,203.6 million cash flow provided by financing activities in 2023. Net debt repayments totaled $938.3 million in 2024, compared to net debt borrowings of $4,372.5 million in 2023. The net debt repayments in the current year primarily resulted from payments of $388.5 million on the term loan, $486.8 million on the land term loan and $58.1 million net repayments made on the revolver. The net borrowings in the prior year were primarily the result of the $4.7 billion of Senior Notes issued in January 2023 and the $840.0 million upsize of the unsecured term loan facility in March 2023, partially offset by the repayment in January 2023 of the $500.0 million 3.90% notes originally issued on April 7, 2022, payments of $322.8 million on the term loan and $330.9 million net repayments made on the revolver. The Company repurchased and retired $50.0 million of common stock during the year ended December 31, 2024 to partially offset the dilutive impact of share-based compensation awards. There were no share repurchases in 2023. We paid $93.0 million in dividends to shareholders in 2024 compared to $92.8 million in 2023. In 2024, we paid distributions of $3.3 million to noncontrolling interests compared to $16.2 million in 2023.

The following table presents selected financial information and statistics as of December 31, 2024 and December 31, 2023:

As of December 31, 2024, $383.9 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 that may be subject to withholding taxes. Under current law, we do not expect restrictions or taxes on repatriation of cash held outside of the US to have a material effect on our overall liquidity, financial condition or the results of operations for the foreseeable future. We repatriated approximately $773.4 million of foreign cash in 2024 to support the repayment of debt. We are continuing to evaluate opportunities to repatriate additional foreign cash in 2025.

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.

In May 2024, the Company completed transactions to exchange the unregistered Senior Notes for the registered New Notes, which are described within Note 6 - Debt and Bank Credit Facilities.

The Company plans to use cash generated from operations to fund its interest obligations and reduce the principal balance of its debt over time. The Company also used the net proceeds from the sale of its industrial motors and generators businesses to repay outstanding debt.

As of December 31, 2024, the Company had $665.0 million of borrowings under the Term Facility and no borrowings under Land Term Facility. As of December 31, 2024 we had $40.0 million of borrowings under the Multicurrency Revolving Facility and $1,530.0 million of available borrowing capacity. 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.

See Note 6 - Debt and Bank Credit Facilities and Note 3 – Acquisitions and Divestitures of the Notes to the Consolidated Financial Statements for more information.

Litigation

See Part 1 - Item 3 - Legal Proceedings and Note 11 – Contingencies of the Notes to the Consolidated Financial Statements for more information.

Guarantor Information

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Regal Rexnord Corporation (the “Parent”) is the issuer of the Senior Notes, which are guaranteed by each of its direct and indirect wholly-owned subsidiaries that is a borrower or guarantor under the Credit Agreement (the “Guarantor Subsidiaries” and, each, a “Guarantor Subsidiary”). The Senior Notes are jointly and severally unconditionally guaranteed on a senior unsecured basis by the Guarantor Subsidiaries. The guarantees are subject to release in limited circumstances upon the occurrence of certain customary conditions. For example, a Guarantor Subsidiary may be released from its guarantee of the Senior Notes under certain circumstances, including following the Parent achieving certain corporate or similar credit ratings. In addition, the guarantee of a Guarantor Subsidiary will automatically terminate under certain circumstances, including if such Guarantor Subsidiary is permanently released from its guarantee of, and is not a borrower under, the Credit Agreement.

If any of the Parent’s subsidiaries that do not guarantee the Senior Notes (the “Non-Guarantor Subsidiaries”) becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, holders of its indebtedness and its trade creditors generally will be entitled to payment on their claims from the assets of such subsidiary before any of those assets would be made available to the Parent or any Guarantor Subsidiary. Consequently, the claims of holders of the Senior Notes are structurally subordinated to all of the existing and future liabilities, including trade payables, of the Non-Guarantor Subsidiaries.

The following tables set forth financial information attributable to the Parent and the Guarantor Subsidiaries (collectively the “Obligor Group”). The financial information of the Obligor Group is presented on a combined basis, excluding intercompany balances and transactions between entities in the Obligor Group which have been eliminated. The financial information of the Obligor Group excludes equity investments in, and equity income or loss from, subsidiaries that are not in the Obligor Group. Material amounts due from, due to, and transactions with Non-Guarantor Subsidiaries which are included in the condensed financial information of the Obligor Group are presented with each table.

The following table sets forth summarized balance sheet information of the Obligor Group as of December 31, 2024 and December 31, 2023. The December 31, 2023 balance sheet information includes balances of the industrial motors and generators businesses which were classified as held for sale in the Consolidated Balance Sheet at that time:

The following table sets forth summarized income statement information of the Obligor Group for the year ended December 31, 2024:

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Legislative Developments

Final laws enacting the Organisation for Economic Co-operation and Development's global minimum tax framework were in force beginning in 2024 in several countries where we do business, and similar laws could be enacted in other countries where we operate. The Company continually monitors legislation updates and administrative guidance. The current impact of the global minimum tax framework is not material to the Company's results of operations.

Cash Requirements for Other Financial Commitments

The following is a summary of our future estimated cash payments by period as of December 31, 2024:

(1) The timing and future spot prices affect the settlement values of our hedge obligations related to commodities and currency exchange rates. Accordingly, these obligations are not included above in the table of contractual obligations (See also Item 7A and Note 12 of the Notes to the Consolidated Financial Statements). The timing of settlement of our tax contingent liabilities cannot be reasonably determined and they are not included in the table above. Future pension obligation payments include contributions and benefit payments. Future pension contributions after 2024 are subject to revaluation based on changes in the benefit population and/or changes in the value of pension assets based on market conditions that are not determinable as of December 31, 2024.

(2) Variable rate debt interest is based on December 31, 2024 rates. See also Note 6 – Debt and Bank Credit Facilities of the Notes to the Consolidated Financial Statements.

We utilize blanket purchase orders (“Blankets”) to communicate expected annual requirements to many of our suppliers. Requirements under Blankets generally do not become “firm” until a varying number of weeks before our scheduled production. The purchase obligations shown in the above table represent the value we consider “firm”.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the US requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. We believe the following critical accounting policies could have the most significant effect on our reported results.

Purchase Accounting and Business Combinations

Assets acquired and the liabilities assumed as part of a business combination are recognized separately from goodwill at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. We, with the assistance of outside specialists as necessary, use estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable. We may refine these estimates during the measurement period which may be up to one year from the acquisition date. As a result, during the measurement period, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our Consolidated Statements of Income (Loss).

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Goodwill

We test goodwill for impairment at least annually and perform our annual impairment test as of the end of October. We monitor for goodwill impairment triggering events at least quarterly, and if a trigger is identified we test goodwill for impairment during the interim period. Factors that could trigger an impairment assessment include significant underperformance relative to historical or forecasted operating results, a significant decrease in the market value of an asset or significant negative industry or economic trends. Reporting units with recent impairments or those with goodwill resulting from recent acquisitions generally present the highest risk of impairment.

When testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether a quantitative test is necessary. In performing qualitative assessments, we evaluate, among other things, actual and forecasted operating results, certain market factors, including discount rates and peer company EBITDA multiples, and the passing margin of prior quantitative tests.

If a quantitative test is performed, we determine the fair value of each reporting unit utilizing an income approach (discounted cash flow method) weighted 75% and a market approach (consisting of a comparable public company multiples methodology) weighted 25%. The assumptions that have the most significant effect on the fair value calculations are discount rates, market multiples, forecasted revenue and EBITDA and terminal growth rates. Discount rates are determined using market and industry data and reflect the risks and uncertainties inherent to each reporting unit and our internally developed forecasts.

For the 2024 annual goodwill test, we performed a qualitative assessment to evaluate goodwill for each of our reporting units, except for two reporting units in the AMC segment which were quantitatively tested. For each of the reporting units we qualitatively assessed, we concluded that it was more likely that not that the fair value exceeded the carrying value and thus a quantitative test was not necessary. For the two reporting units we quantitatively tested, the discount rate used in the income approach was 12.5%. Based on the results of quantitative test, the fair value of each reporting unit exceeded its carrying value and thus no goodwill impairments were recorded. The fair value exceeded carrying value by more than 10% for one of the two reporting units. There is inherent uncertainty included in the assumptions used in goodwill impairment testing and a change to any of the assumptions could lead to a future impairment, which could be material. See Note 4 – Goodwill and Intangible Assets of the Notes to the Consolidated Financial Statements for more information.

Long-Lived Assets

We evaluate the recoverability of the carrying amount of long-lived assets whenever events or changes in circumstance indicate that the carrying amount of an asset may not be fully recoverable through future cash flows. When applying the accounting guidance, we use estimates to determine when an impairment is necessary. Factors that could trigger an impairment review include a significant decrease in the market value of an asset or significant negative or economic trends. For long-lived assets, the Company uses an estimate of the related undiscounted cash flows over the remaining life of the primary asset to estimate recoverability.

Other Disclosures

Dividends

Quarterly dividends declared by Regal Rexnord Corporation's Board of Directors during the year ended December 31, 2024 and for the first quarter of 2025 were as follows:

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