May 13, 2022
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  • REGAL REXNORD CORP MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

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

By on May 5, 2022 0
Unless the context requires otherwise, references in this Item 2 to "we," "us,"
"our" or the "Company" refer collectively to Regal Rexnord Corporation and its
subsidiaries.

Overview

Regal Rexnord Corporation (NYSE: RRX), based in Beloit, Wisconsin (USA), is a
global leader in the engineering and manufacturing of industrial powertrain
solutions, power transmission components, electrical motors and electronic
controls, air moving products and specialty electrical components and systems,
serving customers around the world. Through longstanding technology leadership
and an intentional focus on producing more energy-efficient products and
systems, we help create a better tomorrow - for our customers and for the
planet.

Operating segments

Our company is comprised of four operating segments: Commercial Systems, Industrial Systems, Climate Solutions and Motion Control Solutions.

Here is a description of our four operating segments:

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

•Industrial Systems segment designs and produces integral motors, automatic
transfer switches, 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 designs and produces small motors, variable speed electronic controls and air circulation solutions serving markets such as residential and light commercial HVAC, water heaters and commercial refrigeration.

•Motion Control Solutions segment designs, produces and services mounted and
unmounted bearings, conveyor products, conveying automation solutions,
couplings, mechanical power transmission drives and components, gearboxes and
gear motors, aerospace components, special components products and industrial
powertrain components and solutions serving a broad range of markets including
food and beverage, bulk handling, eCommerce/warehouse distribution, energy,
aerospace and general industrial.

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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 Motion Control
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.

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.

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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. 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 including cost
synergies related to the Rexnord Transaction. 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 recognized
when the severance liability is determined to be probable of being paid and
reasonably estimable while plant relocation costs and related costs are
generally required to be expensed as incurred.

Covid-19 pandemic

COVID-19 has evolved in 2020 into a global pandemic, resulting in a severe global health crisis that has led to a dramatic slowdown in global economic and social activity. As the COVID-19 pandemic continues, health risks remain.

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 evolved, 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; inconsistent
criteria in certain international jurisdictions for establishing the
essentiality of our business; 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 necessary adjustments to the business to address any limitations or negative impacts.

Rexnord and Arrowhead Transactions

On October 4, 2021, in accordance with the terms and conditions of the Agreement
and Plan of Merger, dated February 15, 2021 (the "Merger Agreement"), we
completed our combination with the Rexnord 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, (1) Zurn transferred to its then-subsidiary Land Newco, Inc.
("Land") substantially all of the assets, and Land assumed substantially all of
the liabilities, of the Rexnord 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, one of our subsidiaries
("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 Rexnord PMC business, became our wholly owned subsidiary.

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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 in the October 1, 2021 received an exceptional dividend of $6.99 per share (i.e. approximately $284.4 million in aggregate) pursuant to a special dividend in connection with the transaction with Rexnord.

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

On November 23, 2021we acquired Arrowhead Systems, LLC(“Arrowhead”) for
$315.6 million in cash, net of $1.1 million cash acquired (the “Arrowhead Transaction”). Arrowhead is a global leader in providing industrial process automation solutions, including conveyors and (de)palletizers for the food and beverage, aluminum can and consumer staples end markets, among others . Arrowhead is a division of our Motion Control Solutions segment, and its financial data has been included in that segment’s results from the date of acquisition.

Year-end change

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 made the fiscal year
change on a prospective basis and will not adjust operating results for prior
periods. 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.

Change in accounting principle

From January 2, 2022, we changed our method of valuing certain inventory from the first-in, first-out (“FIFO”) method to the last-in, first-out (“LIFO”) method. The effects of this change have been applied retrospectively to all periods presented.

Outlook

We expect mid-single-digit high-single-digit sales growth. We expect to see a positive impact from our transactions and new products.

Operating results

Three months completed March 31, 2022 Compared to April 3, 2021

Net sales increased $484.4 million or 59.5% for the first quarter 2022 compared
to the first quarter 2021. The increase consisted of positive impact from
acquisitions of 45.1% and positive organic sales of 15.2% offset by negative
foreign currency translation of 0.8%. The increase was primarily driven by sales
increases in North American markets and the acquisitions of the Rexnord PMC and
Arrowhead businesses. Gross profit increased $172.1 million or 68.9% for the
first quarter 2022 as compared to the first quarter 2021. The increase in gross
profit was driven by increase in volume and the acquisitions of the Rexnord PMC
and Arrowhead businesses, partially offset by increased freight and material
costs. Total operating expenses for the first quarter 2022 increased $103.7
million or 69.9% as compared to the first quarter 2021. The increase was
primarily driven by the acquisitions of the Rexnord PMC and Arrowhead
businesses, higher employee related wage and benefit costs and transaction
costs.

Commercial Systems segment net sales for the first quarter 2022 were $293.3
million, an increase of $56.3 million or 23.8% as compared to the first quarter
2021. The increase consisted of positive organic sales of 24.8% offset by
negative foreign currency translation of 1.0%. The increase was primarily driven
by strong growth in general industry in North America as well as solid gains in
the pool pump business. Gross profit increased $27.5 million or 41.2% as
compared to the first quarter 2021. The increase in gross profit was primarily
driven by the increase in price, volume and favorable product mix, partially
offset by higher material costs due to inflation. Total operating expenses for
the first quarter 2022 were $41.4 million compared to $38.0 million in the first
quarter 2021. The $3.4 million or 8.9% increase was primarily driven by higher
employee related wage and benefit costs as well as inflation.

Revenue for the Industrial Systems segment for the first quarter of 2022 is $144.7 millionan augmentation of $8.3 million or 6.1% compared to the first quarter of 2021. The increase consists of positive organic sales of 7.1% offset by negative exchange rates

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translation of 1.0%. The increase was primarily driven by strength in the data
center market for generators and demand for industrial motors in North America.
Gross profit increased $3.3 million or 11.8% as compared to the first quarter
2021. The increase in gross profit was primarily driven by the increase in
volume and price realization, partially offset by material inflation. Total
operating expenses for the first quarter 2022 and 2021 were $23.4 million and
$23.1 million, respectively. The slight increase in operating expenses was due
to employee related wage and benefit costs, higher variable selling costs on
stronger sales volume, and increased administrative costs.

Climate Solutions segment net sales were $273.9 million, an increase of $34.8
million or 14.6% as compared to the first quarter 2021. The increase consisted
of positive organic sales of 14.9% offset by negative foreign currency
translation of 0.3%. The increase was primarily due to continued strong demand
in North American residential HVAC and combustion markets and recovering demand
in EMEA. Gross profit increased $7.8 million or 10.3% compared to the first
quarter 2021. The increase in gross profit was primarily driven by increased
volume, favorable mix and 80/20 actions, partially offset by material and
freight inflation. Total operating expenses for the first quarter 2022 were
$31.7 million compared to $30.7 million in the first quarter 2021. The slight
increase was primarily due to higher expenses related to commissions (higher
volume), travel, compensation and benefits.

Motion Control Solutions segment net sales for the first quarter 2022 were
$586.6 million, an increase of $385.0 million or 191.0% compared to first
quarter 2021 net sales of $201.6 million. The increase consisted of positive
impact from acquisitions of 182.1% and positive organic sales of 9.9% offset by
negative foreign currency of 1.0%. The increase was primarily driven by the
acquisitions of the Rexnord PMC and Arrowhead businesses in addition to 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
first quarter 2022 increased $133.5 million or 167.7%. The increase was driven
by the acquisitions of the Rexnord PMC and Arrowhead businesses, higher sales
volume with favorable mix and lower overhead cost driven by cost reduction
initiatives. Total operating expenses for the first quarter 2022 increased
$99.0 million as compared to the first quarter 2021, primarily due to the
acquisitions of the Rexnord PMC and Arrowhead businesses.

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Three months completed

                                                                    March 31, 2022          April 3, 2021
(Dollars in Millions)
Net Sales:
 Commercial Systems                                                $        293.3          $      237.0
 Industrial Systems                                                         144.7                 136.4
 Climate Solutions                                                          273.9                 239.1
 Motion Control Solutions                                                   586.6                 201.6
Consolidated                                                       $      1,298.5          $      814.1

Gross profit as a percentage of Net sales:

 Commercial Systems                                                          32.2  %               28.2  %
 Industrial Systems                                                          21.6  %               20.5  %
 Climate Solutions                                                           30.4  %               31.5  %
 Motion Control Solutions                                                    36.3  %               39.5  %
Consolidated                                                                 32.5  %               30.7  %

Operating expenses as a percentage of Net sales:

 Commercial Systems                                                          14.1  %               16.0  %
 Industrial Systems                                                          16.2  %               16.9  %
 Climate Solutions                                                           11.6  %               12.8  %
 Motion Control Solutions                                                    26.5  %               28.0  %
Consolidated                                                                 19.4  %               18.2  %

Operating income as a percentage of Net sales:

 Commercial Systems                                                          18.0  %               12.2  %
 Industrial Systems                                                           5.5  %                3.6  %
 Climate Solutions                                                           18.8  %               18.7  %
 Motion Control Solutions                                                     9.8  %               11.5  %
Consolidated                                                                 13.1  %               12.5  %

Income from Operations                                             $        169.9          $      101.5
Other Income, Net                                                            (1.3)                 (1.2)
Interest Expense                                                              9.0                  12.6
Interest Income                                                              (1.1)                 (1.5)
 Income before Taxes                                                        163.3                  91.6
Provision for Income Taxes                                                   36.2                  21.3
 Net Income                                                                 127.1                  70.3
Less: Net Income Attributable to Noncontrolling Interests                     1.5                   1.4
 Net Income Attributable to Regal Rexnord Corporation              $        125.6          $       68.9




The effective tax rate for the three months ended March 31, 2022 was 22.2%
versus 23.3% for the three months ended April 3, 2021. The effective tax rate
for the three months ended March 31, 2022 was lower than the same period in the
prior year due to additional tax reserves in the three months ended April 3,
2021 for the repatriation of foreign earnings. The reduction in the effective
rate for the three months ended March 31, 2022 was partially offset by the
impacts of the Rexnord Transaction in fiscal 2021.
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Cash 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 used in operating activities was $5.9 million for the three months
ended March 31, 2022, a $55.4 million decrease from the three months ended
April 3, 2021. The change is a result of an increase in working capital which is
partially offset by proceeds received from the early termination of interest
rate swaps for the three months ended March 31, 2022 compared to the three
months ended April 3, 2021.

Cash flow used in investing activities was $47.0 million for the three months
ended March 31, 2022 as compared to cash flow used in investing activities of
$11.7 million for the three months ended April 3, 2021. The change was driven
primarily by higher cash used for capital purchases and business acquisitions in
the current year compared to the prior year.

Cash flow provided by financing activities was $3.7 million for the three months
ended March 31, 2022, compared to $76.7 million used in financing activities for
the three months ended April 3, 2021. We had net debt borrowings of $145.7
million during the three months ended March 31, 2022, compared to net debt
repayments of $50.3 million during the three months ended April 3, 2021. There
were $114.2 million share repurchases for the three months ended March 31, 2022,
compared to no shares repurchases for the three months ended April 3, 2021.
There were $22.3 million of dividends paid for the three months ended March 31,
2022, compared to $12.2 million of dividends in the prior year. There were $4.5
million in financing fees paid for the three months ended March 31, 2022,
compared to $12.4 million of fees in the prior year.

Our working capital was $1,915.8 million at March 31, 2022, compared to $1,713.3
million at January 1, 2022. At March 31, 2022 and January 1, 2022, our current
ratio (which is the ratio of our current assets to current liabilities) was
2.8:1 and 2.6:1, respectively. Our working capital increased primarily due to
the increase in accounts receivables and inventory offset by an increase in
accounts payable and decrease in cash.

The following table presents selected financial information and statistics at
March 31, 2022 and January 1, 2022 (in millions):

                                             March 31, 2022      January 1, 2022
           Cash and Cash Equivalents        $        624.7      $          672.8
           Trade Receivables, Net                    832.2                 785.8
           Inventories                             1,336.9               1,192.4
           Working Capital                         1,915.8               1,713.3
           Current Ratio                               2.8:1                 2.6:1



As of March 31, 2022, $580.8 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.

credit agreement

On March 28, 2022, we entered into a Second Amended and Restated Credit
Agreement with our lenders (the "Credit Agreement") with JPMorgan Chase Bank,
N.A., as Administrative Agent and the lenders named therein. The Credit
Agreement (i) replaces in its entirety the Amended and Restated Credit
Agreement, dated as of August 27, 2018, as amended by that First Amendment,
dated March 17, 2021, among the Company and other parties thereto and (ii)
amends and restates in its entirety the Amended and Restated Credit Agreement,
dated as of October 4, 2021, among Land and the other parties thereto
(collectively, the "Former Credit Agreements").

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The Credit Agreement provides for, among other things, an extension of the
maturity date of the revolving credit facility and term loans provided under the
Former Credit Agreements. The credit facilities extended under the Credit
Agreement consist of (i) an unsecured term loan facility in the initial
principal amount of up to $550,000,000, maturing on March 28, 2027 (the "Term
Facility"); (ii) an unsecured term loan facility in the initial principal amount
of $486,827,669, under which Land remains the sole borrower, maturing on March
28, 2027 (the "Land Term Facility"); and (iii) an unsecured revolving loan in
the initial principal amount of up to $1,000,000,000, maturing on March 28, 2027
(the "Multicurrency Revolving Facility"). Interest for benchmark rate loans is
calculated based on a SOFR benchmark rate, plus a margin spread to be adjusted
quarterly based on our funded debt to EBITDA ratio. The Credit Agreement is
subject to customary and market provisions. Our subsidiaries that provide a
guaranty of our and Land's obligations under the Former Credit Agreements also
entered into subsidiary guaranty agreements with respect to the obligations
under the Credit Agreement.

The Term Facility was drawn in full on March 28, 2022 to refinance the Former
Credit Agreements, pay fees, costs, and other expenses incurred therewith, to
fund working capital needs and for our general corporate purposes. The Term
Facility requires quarterly amortization at 5.0% per annum, unless previously
prepaid. Per the terms of the Credit 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 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 March 31, 2022, we had $955.0 million of borrowings under the Multicurrency
Revolving Facility, $0.1 million of standby letters of credit issued under the
facility, and $44.9 million of available borrowing capacity. For the three
months ended March 31, 2022 and April 3, 2021 under the Multicurrency Revolving
Facility, the average daily balance in borrowings was $773.7 million and $7.4
million, respectively, and the weighted average interest rate was 1.7% and 1.4%,
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.

As of March 31, 2022, we had $486.8 million of borrowings under the Land Term
Facility. The Land Term Facility has no required amortization. The weighted
average interest rate on the Land Term Facility for three months ended March 31,
2022 was 1.7%.

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.

Compliance with financial clauses

The credit agreement requires us to meet specified financial ratios and meet certain financial condition tests. We complied with all financial covenants contained in the credit agreement at the March 31, 2022.

Other notes payable

To March 31, 2022other notes payable of approximately $76.2 million were outstanding with a weighted average interest rate of 5.1%. To January 1, 2022other notes payable of approximately $78.7 million were in progress with a weighted average rate of 5.2%.

Other Disclosures

Based on rates for instruments with comparable maturities and credit quality,
which are classified as Level 2 inputs (see also Note 14 of Notes to the
Condensed Consolidated Financial Statements), the approximate fair value of our
total debt was $2,060.6 million and $1,918.5 million as of March 31, 2022 and
January 1, 2022, respectively.

Critical accounting policies

Our disclosures of critical accounting policies, which are contained in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022have not changed significantly since the tabling of this report.

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