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OTHER FINANCIAL INFORMATION
 9 Months Ended
Sep. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
OTHER FINANCIAL INFORMATION OTHER FINANCIAL INFORMATIONInventories
As of January 2, 2022, the Company changed its method for valuing certain inventories to the FIFO cost method from the LIFO cost method. The Company believes that this change in accounting is preferable as it provides a better matching of costs and revenues, more closely resembles the physical flow of inventory, better reflects acquisition cost of inventory on the balance sheet, conforms the Company's method of inventory valuation to a single method, results in improved comparability with industry peers and reduces the administrative burden of determining the LIFO valuation.

The effects of this change have been retrospectively applied to all periods presented. This change resulted in an increase to retained earnings of $38.4 million as of January 2, 2021.

In addition, certain financial statement line items in our Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 2, 2021, Condensed Consolidated Statements of Cash Flows for the nine months ended October 2, 2021 and our Condensed Consolidated Balance Sheet as of January 1, 2022, were adjusted as follows (dollars in millions):
As Originally ReportedEffect of ChangeAs Adjusted
Condensed Consolidated Statement of Operations for the three months ended October 2, 2021
Cost of Sales$638.1 $(13.5)$624.6 
Provision for Income Taxes$17.8 $3.2 $21.0 
Net income attributable to Regal Rexnord Corporation$69.5 $10.3 $79.8 
Earnings Per Share Attributable to Regal Rexnord Corporation:
   Basic$1.71 $0.25 $1.96 
   Assuming Dilution$1.70 $0.25 $1.95 
Condensed Consolidated Statement of Operations for the nine months ended October 2, 2021
Cost of Sales$1,842.2 $(24.1)$1,818.1 
Provision for Income Taxes$57.2 $5.7 $62.9 
Net income attributable to Regal Rexnord Corporation$214.7 $18.4 $233.1 
Earnings Per Share Attributable to Regal Rexnord Corporation:
Basic$5.28 $0.45 $5.73 
Assuming Dilution$5.24 $0.45 $5.69 
Condensed Consolidated Balance Sheet as of January 1, 2022
Inventories$1,106.6 $85.8 $1,192.4 
Deferred Income Taxes$652.0 $27.7 $679.7 
Retained Earnings$1,854.5 $58.1 $1,912.6 
Condensed Consolidated Statement of Cash Flows for the nine months ended October 2, 2021
Net Income$219.3 $18.4 $237.7 
Change in Operating Assets and Liabilities$(113.0)$(18.4)$(131.4)
Condensed Consolidated Statement of Comprehensive Income for the three months ended October 2, 2021
Comprehensive income attributable to Regal Rexnord Corporation$39.9 $10.3 $50.2 
Condensed Consolidated Statement of Comprehensive Income for the nine months ended October 2, 2021
Comprehensive income attributable to Regal Rexnord Corporation$184.3 $18.4 $202.7 

The following table presents approximate percentage distribution between major classes of inventories inclusive of the accounting method change discussed above:
September 30, 2022January 1, 2022
Raw Material and Work in Process55.4%43.4%
Finished Goods and Purchased Parts44.6%56.6%
Inventories are stated at the lower of cost or net realizable value. All inventory is valued using the FIFO cost method.

Trade Receivables

The Company's policy for estimating the allowance for credit losses on trade receivables considers several factors including historical write-off experience, overall customer credit quality in relation to general economic and market conditions, and specific customer account analyses to estimate expected credit losses. The specific customer account analysis considers such items as, credit worthiness, payment history, and historical bad debt experience. Trade receivables are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible. Adjustments to the allowance for credit losses are recorded in Operating Expenses. Trade receivables acquired in the Rexnord Transaction (see Note 3) were recorded at fair value at the acquisition date in an amount that reflected expected credit losses, and accordingly, an allowance for credit losses was not separately presented and disclosed. The allowance for credit losses has increased by approximately $10.5 million at September 30, 2022 when compared to January 1, 2022 primarily due to the presentation of post-merger trade receivables at carrying value, with an allowance for credit losses presented separately. There has not been a significant change in the amount of expected credit losses from the acquisition date to September 30, 2022.
Property, Plant, and Equipment
The following table presents property, plant, and equipment by major classification (dollars in millions):
Useful Life in YearsSeptember 30, 2022January 1, 2022
Land and Improvements$99.3 $109.1 
Buildings and Improvements
3 - 50
387.8 449.6 
Machinery and Equipment
3 - 15
1,102.5 1,164.8 
Property, Plant and Equipment1,589.6 1,723.5 
Less: Accumulated Depreciation(799.1)(815.0)
Net Property, Plant and Equipment$790.5 $908.5 

For the three and nine months ended September 30, 2022, the Company recognized no material asset impairments. For the three and nine months ended October 2, 2021, the Company recognized $2.8 million and $5.1 million of asset impairments related to the transfer of assets to held for sale.

Revenue Recognition

The Company recognizes revenue from the sale of electric motors, electrical motion controls, power generation and power transmission products. The Company recognizes revenue when control of the product passes to the customer or the service is provided and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services.
Nature of Goods and Services
The Company sells products with multiple applications as well as customized products that have a single application such as those manufactured for its OEM customers. The Company reports in four operating segments: Commercial Systems, Industrial Systems, Climate Solutions and Motion Control Solutions. See Note 6 for a description of the different segments.
Nature of Performance Obligations
The Company’s contracts with customers typically consist of purchase orders, invoices and master supply agreements. At contract inception, across all four segments, the Company assesses the goods and services promised in its sales arrangements with customers and identifies a performance obligation for each promise to transfer to the customer a good or service that is distinct. The Company’s primary performance obligations consist of product sales and customized system/solutions.
Product:
The nature of products varies from segment to segment but across all segments, individual products are not integrated and represent separate performance obligations.
Customized system/solutions:
The Company provides customized system/solutions which consist of multiple products engineered and designed to specific customer specification, combined or integrated into one combined solution for a specific customer application. The goods are transferred to the customer and revenue is typically recognized over time as the performance obligations are satisfied.
When Performance Obligations are Satisfied
For performance obligations related to substantially all of the Company's product sales, the Company determines that the customer obtains control upon shipment and recognizes revenue accordingly. Once a product has shipped, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from the asset. The Company considers control to have transferred upon shipment because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.
For a limited number of contracts, the Company transfers control and recognizes revenue over time. The Company satisfies its performance obligations over time and the Company uses a cost-based input method to measure progress. In applying the cost-based method of revenue recognition, the Company uses actual costs incurred to date relative to the total estimated costs for the contract in conjunction with the customer's commitment to perform in determining the amount of revenue and cost to recognize. The Company has determined that the cost-based input method provides a faithful depiction of the transfer of goods to the customer.
Payment Terms
The arrangement with the customer states the final terms of the sale, including the description, quantity, and price of each product or service purchased. Payment terms vary by customer but typically range from due upon delivery to 120 days after delivery. For contracts recognized at a point in time, revenue and billing typically occur simultaneously. The Company generally has payment terms with its customers of one year or less and has elected the practical expedient applicable to such contracts not to consider the time value of money. For contracts recognized using the cost-based input method, revenue recognized in excess of customer billings and billings in excess of revenue recognized are reviewed to determine the net asset or net liability position and classified as such on the Condensed Consolidated Balance Sheets.
Returns, Refunds, and Warranties
The Company’s contracts do not explicitly offer a “general” right of return to its customers (e.g., customers ordered excess products and return unused items). Warranties are classified as either assurance type or service type warranties. A warranty is considered an assurance type warranty if it provides the customer with assurance that the product will function as intended. A warranty that goes above and beyond ensuring basic functionality is considered a service type warranty. The Company generally only offers limited warranties which are considered to be assurance type warranties and are not accounted for as separate performance obligations. Customers generally receive repair or replacement on products that do not function to specification. Estimated product warranties are provided for specific product groups and the Company accrues for estimated future warranty cost in the period in which the sale is recognized. The Company estimates the accrual requirements based on historical warranty loss experience and the cost is included in Cost of Sales.
Volume Rebates
In some cases, the nature of the Company’s contract may give rise to variable consideration including volume based sales incentives. If the customer achieves specific sales targets, they are entitled to rebates. The Company estimates the projected amount of the rebates that will be achieved and recognizes the estimated costs as a reduction to Net Sales as revenue is recognized.
Disaggregation of Revenue
The following tables presents the Company’s revenues disaggregated by geographical region (in millions):
Three Months Ended
September 30, 2022Commercial SystemsIndustrial SystemsClimate SolutionsMotion Control SolutionsTotal
North America$203.0 $95.2 $248.3 $444.9 $991.4 
Asia42.6 44.7 7.0 43.1 137.4 
Europe35.4 11.9 10.5 92.1 149.9 
Rest-of-World8.9 11.7 13.4 12.6 46.6 
Total$289.9 $163.5 $279.2 $592.7 $1,325.3 
October 2, 2021Commercial SystemsIndustrial SystemsClimate SolutionsMotion Control SolutionsTotal
North America$189.5 $74.8 $236.7 $165.1 $666.1 
Asia41.8 49.9 8.3 8.0 108.0 
Europe26.1 11.5 11.0 26.2 74.8 
Rest-of-World11.3 11.8 12.4 8.3 43.8 
Total$268.7 $148.0 $268.4 $207.6 $892.7 

Nine Months Ended
September 30, 2022Commercial SystemsIndustrial SystemsClimate SolutionsMotion Control SolutionsTotal
North America$619.7 $270.0 $741.1 $1,280.4 $2,911.2 
Asia129.4 121.7 25.2 115.9 392.2 
Europe102.0 37.5 38.2 293.1 470.8 
Rest-of-World34.0 33.7 42.1 89.2 199.0 
Total$885.1 $462.9 $846.6 $1,778.6 $3,973.2 
October 2, 2021Commercial SystemsIndustrial SystemsClimate SolutionsMotion Control SolutionsTotal
North America$519.7 $219.8 $673.1 $502.1 $1,914.7 
Asia141.3 140.0 25.3 22.3 328.9 
Europe77.5 35.2 30.9 74.8 218.4 
Rest-of-World36.5 34.6 35.5 25.1 131.7 
Total$775.0 $429.6 $764.8 $624.3 $2,593.7