| Accounting Policies | Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries. In addition, the Company has joint ventures that are consolidated in accordance with consolidation accounting guidance. All intercompany accounts and transactions are eliminated. Use of Estimates The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”), which require the Company to make estimates and assumptions that affect 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. The Company uses estimates in accounting for, among other items, allowance for credit losses; excess and obsolete inventory; share-based compensation; acquisitions; product warranty obligations; pension and post-retirement assets and liabilities; derivative fair values; goodwill and other asset impairments; health care reserves; rebates and incentives; litigation claims and contingencies, including environmental matters; and income taxes. The Company accounts for changes to estimates and assumptions when warranted by factually based experience. Acquisitions The Company recognizes assets acquired, liabilities assumed, contractual contingencies and contingent consideration at their fair value on the acquisition date. The operating results of the acquired companies are included in the Company’s consolidated financial statements from the date of acquisition. Acquisition-related costs are expensed as incurred, restructuring costs are recognized as post-acquisition expense and changes in deferred tax asset valuation allowances and income tax uncertainties after the measurement period are recorded in Provision for Income Taxes. See Note 3 - Acquisitions and Divestitures for more information. Revenue Recognition The Company recognizes revenue from the sale of premium-efficiency electric motors and air moving subsystems, highly engineered industrial power transmission components and subsystems, and a portfolio of discrete automation products that include controls, actuators, drives, and high-precision servo motors. The Company recognizes revenue when control of the product passes to the customer or the service is provided. Revenue is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services. For a limited number of contracts, the Company recognizes revenue over time in proportion to costs incurred. The pricing of products sold is generally supported by customer purchase orders, and accounts receivable collection is reasonably assured. Estimated discounts and rebates are recorded as a reduction of gross sales in the same period revenue is recognized. Product returns and credits are estimated and recorded at the time of shipment based upon historical experience. Shipping and handling costs are recorded as revenue when billed to the customers. The costs incurred from shipping are recorded in Cost of Sales and handling costs incurred in connection with selling and distribution activities are recorded in Operating Expenses. The Company derives a significant portion of its revenues from several original equipment manufacturing ("OEM") customers. Despite this relative concentration, there were no customers that accounted for more than 10% of consolidated net sales in 2024, 2023 or 2022. 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. Products include, but are not limited to, automation components and sub-systems, bearings, air-moving systems, clutches and brakes, conveyor technologies, couplings, premium efficiency electric motors, electronic components, gearing, industrial powertrains, linear motion components, power transmission components, switchgear, transfer switches and controls, and miniature servo motors. 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 three 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 systems/solutions. Product: The nature of products varies from segment to segment but across all segments, individual products are generally not integrated and represent separate performance obligations. Customized systems/solutions: The Company provides customized systems/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 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 recognition 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 contract asset or contract liability position and classified as such on the Consolidated Balance Sheet. 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. See Note 11 - Contingencies for more information. 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, it is 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 table presents the Company’s revenues disaggregated by geographical region for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively: December 31, 2024 Industrial Powertrain Solutions Power Efficiency Solutions Automation & Motion Control Industrial Systems Total North America $ 1,734.9 $ 1,276.5 $ 1,088.8 $ 79.4 $ 4,179.6 Asia 172.7 167.7 91.5 44.3 476.2 Europe 482.0 133.9 372.7 17.6 1,006.2 Rest-of-World 208.5 66.0 80.8 16.5 371.8 Total $ 2,598.1 $ 1,644.1 $ 1,633.8 $ 157.8 $ 6,033.8 December 31, 2023 Industrial Powertrain Solutions Power Efficiency Solutions Automation & Motion Control Industrial Systems Total North America $ 1,636.1 $ 1,419.2 $ 1,006.3 $ 274.6 $ 4,336.2 Asia 168.9 178.7 76.1 146.6 570.3 Europe 420.5 149.7 342.6 55.8 968.6 Rest-of-World 178.0 61.3 91.8 44.5 375.6 Total $ 2,403.5 $ 1,808.9 $ 1,516.8 $ 521.5 $ 6,250.7 December 31, 2022 Industrial Powertrain Solutions Power Efficiency Solutions Automation & Motion Control Industrial Systems Total North America $ 1,232.2 $ 1,766.9 $ 559.0 $ 298.5 $ 3,856.6 Asia 140.6 188.1 17.0 159.1 504.8 Europe 240.0 182.2 154.2 50.7 627.1 Rest-of-World 53.5 90.0 42.1 43.8 229.4 Total $ 1,666.3 $ 2,227.2 $ 772.3 $ 552.1 $ 5,217.9 Practical Expedients and Exemptions The Company typically expenses incremental direct costs of obtaining a contract, primarily sales commissions, as incurred because the amortization period is expected to be 12 months or less. Contract costs are included in Operating Expenses in the accompanying Consolidated Statements of Income (Loss). Due to the short nature of the Company’s contracts, the Company has adopted a practical expedient to not disclose revenue allocated to remaining performance obligations as substantially all of its contracts have original terms of 12 months or less. The Company typically does not include in its transaction price any amounts collected from customers for sales taxes. Research, Development and Engineering The Company performs research, development and engineering activities relating to new product development and the improvement of current products. The Company's research, development and engineering expenses consist primarily of costs for: (i) salaries and related personnel expenses; (ii) the design and development of new energy efficient products and enhancements; (iii) quality assurance and testing; and (iv) other related overhead. The Company's research, development and engineering efforts tend to be targeted toward developing new products that would allow it to gain additional market share, whether in new or existing segments. Research, development and engineering costs are expensed as incurred. The costs are primarily recorded in Operating Expenses and were as follows for the years noted in the table below: December 31, 2024 December 31, 2023 December 31, 2022 Research, Development and Engineering Costs $ 176.4 $ 171.0 $ 106.6 Cash and Cash Equivalents Cash equivalents consist of highly liquid investments which are readily convertible to cash, present insignificant risk of changes in value due to interest rate fluctuations and have original or purchased maturities of three months or less. Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash equivalents. The Company has material deposits with global financial institutions. The Company performs periodic evaluations of the relative credit standing of its financial institutions and monitors the amount of exposure. Concentration of credit risk with respect to trade accounts receivable is limited due to the large number of customers and their dispersion across many geographic areas. The Company monitors credit risk associated with its trade receivables. 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 Altra Transaction (see Note 3 - Acquisitions and Divestitures) 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. Inventories The major classes of inventory at year end are as follows: December 31, 2024 December 31, 2023 Raw Material and Work in Process 67.8% 66.7% Finished Goods and Purchased Parts 32.2% 33.3% Inventories are stated at the lower of cost or net realizable value, using the FIFO cost method. Material, labor and factory overhead costs are included in the inventories. The Company reviews inventories for excess and obsolete products or components. Based on an analysis of historical usage and management's evaluation of estimated future demand, market conditions and alternative uses for possible excess or obsolete parts, the Company records an excess and obsolete reserve. Property, Plant and Equipment Property, Plant and Equipment are stated at cost. Depreciation of plant and equipment is provided principally on a straight-line basis over the estimated useful lives (3 to 50 years) of the depreciable assets. Accelerated methods are used for income tax purposes. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures which extend the useful lives of existing equipment are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized. Leasehold improvements are capitalized and amortized over the lesser of the life of the lease or the estimated useful life of the asset. Property, plant and equipment by major classification was as follows: Useful Life (In Years) December 31, 2024 December 31, 2023 Land and Improvements $ 134.5 $ 139.2 Buildings and Improvements 3-50 387.2 414.5 Machinery, Equipment and Other 3-15 1,189.8 1,219.4 Property, Plant and Equipment 1,711.5 1,773.1 Less: Accumulated Depreciation (790.5) (731.9) Net Property, Plant and Equipment $ 921.0 $ 1,041.2 As of December 31, 2024 and December 31, 2023, $44.7 million and $44.4 million of ROU assets (as defined in Note 8 - Leases) were included in Net Property, Plant and Equipment, respectively. Goodwill The Company evaluates the carrying amount of goodwill annually as of October or more frequently if events or circumstances indicate that the goodwill might be impaired. Factors that could trigger an impairment review 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, companies have the option to first assess qualitative factors to determine whether a quantitative test is necessary. In performing qualitative assessments, the Company evaluates, 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. In performing quantitative tests, the Company uses a weighting of the market approach and the income approach (discounted cash flow method). In the market approach, the Company applies performance multiples from comparable public companies, adjusted for relative risk, profitability, and growth considerations, to each reporting unit's performance measure to estimate fair value. The key assumptions used in the discounted cash flow method used to estimate fair value include discount rates, revenue and EBITDA margin projections and terminal value rates because such assumptions are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using market and industry data as well as Company-specific risk factors for each reporting unit. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant discount rate and long-term growth rates. For the 2024 annual goodwill test, the Company performed a qualitative assessment to evaluate goodwill for each of its reporting units, except for two reporting units in the Automation & Motion Control segment which were quantitatively tested. For each of the reporting units qualitatively assessed, the Company 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 each of the two reporting units that were quantitatively tested, the fair value exceeded the carrying value and thus no goodwill impairments were recorded. There were no goodwill impairments recorded as a result of the 2023 and 2022 annual tests. In 2023 and 2022, the Company performed a quantitative test for all the reporting units. Some of the key considerations used in the Company's impairment testing included (i) market pricing of guideline publicly traded companies (ii) cost of capital, including the risk-free interest rate, and (iii) recent historical and projected operating results of the subject reporting unit. There is inherent uncertainty included in the assumptions used in goodwill impairment testing. A change to any of the assumptions could lead to a future impairment that could be material. See Note 4 - Goodwill and Intangible Assets for more information. During 2023, the prospective sale of the industrial motors and generators businesses triggered an interim goodwill impairment test. As a result, the Company recorded $57.3 million of goodwill impairment charges for its global industrial motors reporting unit. See Note 3 - Acquisitions and Divestitures for further information. In 2023, the transaction price for the proposed sale of the industrial motors and generators businesses was used as a key input into testing each of the reporting units. Intangible Assets Intangible assets with finite lives are amortized over their estimated useful lives using the straight line method. The Company evaluates amortizing intangibles whenever events or circumstances have occurred that indicate carrying values may not be recoverable. If an indicator is present, the Company uses an estimate of the related undiscounted cash flows over the remaining life of the primary asset to estimate recoverability of the asset group. If such estimated future cash flows are less than carrying value, an impairment would be recognized. There was no impairment of intangible assets during 2024, 2023 or 2022. Long-Lived Assets Impairment The Company evaluates the recoverability of the carrying amount of property, plant and equipment assets (collectively, "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. Factors that could trigger an impairment review include a significant decrease in the market value of an asset or significant negative 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 of the asset group. If the asset is not recoverable, the asset is written down to fair value. In 2024, 2023 and 2022, the Company concluded it had asset impairments of $4.0 million, $7.8 million and $0.9 million, respectively, which were related to assets held for sale, and a loss on sale of businesses of $8.5 million, $87.7 million and zero, respectively, which were primarily related to the sale of the industrial motors and generators businesses. Earnings (Loss) Per Share Diluted earnings per share is computed based upon earnings applicable to common shares divided by the weighted-average number of common shares outstanding during the period adjusted for the effect of dilutive securities. Share based compensation awards for common shares where the exercise price was above the market price have been excluded from the calculation of the effect of dilutive securities shown below; the amount of these shares were 0.3 million in 2024, 0.4 million in 2023 and 0.2 million in 2022. The following table reconciles the basic and diluted shares used in earnings (loss) per share calculations for the years ended: 2024 2023 2022 Denominator for Basic Earnings Per Share 66.4 66.3 66.7 Effect of Dilutive Securities (1) 0.3 — 0.4 Denominator for Diluted Earnings Per Share 66.7 66.3 67.1 (1) 2023 excludes 0.4 million of share based compensation awards as the Company had a net loss during the year. Defined Benefit Pension Plans The majority of the defined benefit pension plans covering the Company's domestic associates have been closed to new associates and frozen for existing associates. Most of the Company's foreign associates are covered by government sponsored plans in the countries in which they are employed. The Company's obligations under its defined benefit pension plans are determined with the assistance of actuarial firms. The actuaries, under management's direction, make certain assumptions regarding such factors as withdrawal rates and mortality rates. The actuaries also provide information and recommendations from which management makes further assumptions on such factors as the long-term expected rate of return on plan assets, the discount rate on benefit obligations and where applicable the rate of annual compensation increases. Based upon the assumptions made, the investments made by the plans, overall conditions and movement in financial markets, life-spans of benefit recipients and other factors, annual expenses and recorded assets or liabilities of these defined benefit pension plans may change significantly from year to year. The service cost component of the Company's net periodic benefit cost is included in Cost of Sales and Operating Expenses. All other components of net periodic benefit costs are included in Other (Income) Expenses, net on the Company's Consolidated Statements of Income (Loss). See Note 7 – Retirement Plans for more information. Derivative Financial Instruments Derivative instruments are recorded on the Consolidated Balance Sheets at fair value. Any fair value changes are recorded in Net Income (Loss) or Accumulated Other Comprehensive Income (Loss) ("AOCI") as determined under accounting guidance that establishes criteria for designation and effectiveness of the hedging relationships. Cash inflows and outflows related to derivative instruments are included as a component of Operating, Investing, or Financing Cash Flows within the Consolidated Statements of Cash Flows. The Company uses derivative instruments to manage its exposure to fluctuations in certain raw material commodity pricing, fluctuations in the cost of forecasted foreign currency transactions, and variability in interest rate exposure on floating rate borrowings. The majority of derivative instruments have been designated as cash flow hedges. See Note 12 – Derivative Financial Instruments for more information. Income Taxes The Company accounts for income taxes in accordance with Accounting Standards Codification ("ASC") 740, Accounting for Income Taxes (“ASC 740”). Deferred tax assets and liabilities arise from temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and consideration of operating loss and tax credit carryforwards. Deferred income taxes are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled. The impact on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Valuation allowances are provided to reduce deferred tax assets to the amount that will more likely than not be realized. This requires management to make judgments and estimates regarding the amount and timing of the reversal of taxable temporary differences, expected future taxable income, and the impact of tax planning strategies. Uncertainty exists regarding tax positions taken in previously filed tax returns which remain subject to examination, along with positions expected to be taken in future returns. The Company provides for unrecognized tax benefits, based on the technical merits, when it is more likely than not that an uncertain tax position will not be sustained upon examination. Adjustments are made to the uncertain tax positions when facts and circumstances change, such as the closing of a tax audit; changes in applicable tax laws, including tax case rulings and legislative guidance; or expiration of the applicable statute of limitations. See Note 10 – Income Taxes for more information. Foreign Currency Translation For those operations using a functional currency other than the US Dollar, assets and liabilities are translated into US Dollars at year-end exchange rates, and revenues and expenses are translated at monthly average rates. The resulting translation adjustments are recorded as a separate component of Shareholders' Equity. Foreign currency remeasurement gains and losses are included in Operating Expenses in the Consolidated Statements of Income (Loss). Product Warranty Reserves The Company maintains reserves for product warranty to cover the stated warranty periods for its products. Such reserves are established based on an evaluation of historical warranty experience and specific significant warranty matters when they become known and can reasonably be estimated. See Note 11 – Contingencies for more information. Accumulated Other Comprehensive Income (Loss) Foreign currency translation adjustments, unrealized gains and losses on derivative instruments designated as hedges and pension and post retirement liability adjustments are included in Shareholders' Equity under AOCI. The components of the ending balances of AOCI are as follows: 2024 2023 Foreign Currency Translation Adjustments $ (415.7) $ (286.2) Hedging Activities, Net of Tax of $(2.1) in 2024 and $8.8 in 2023 (5.5) 28.8 Pension and Post-Retirement Benefits, Net of Tax of $(6.7) in 2024 and $(7.8) in 2023 (21.5) (25.0) Total $ (442.7) $ (282.4) Legal Claims and Contingent Liabilities The Company is subject to various legal proceedings, claims and regulatory matters, the outcomes of which are subject to significant uncertainty and will only be resolved when one or more future events occur or fail to occur. Management conducts regular reviews, including updates from legal counsel, to assess the need for accounting recognition or disclosure of these contingencies. The Company records expenses and liabilities when the Company believes that an obligation of the Company or a subsidiary on a specific matter is probable and there is a basis to reasonably estimate the value of the obligation, and such assessment inherently involves an exercise in judgment. This methodology is used for legal claims that are filed against the Company or a subsidiary from time to time. The uncertainty that is associated with such matters frequently requires adjustments to the liabilities previously recorded. See Note 11 – Contingencies for more information. Fair Values of Financial Instruments The fair values of cash equivalents, term deposits, trade receivables and accounts payable approximate their carrying values due to the short period of time to maturity. The fair value of fixed rate debt is estimated using discounted cash flows based on rates for instruments with comparable maturities and credit ratings as further described in Note 6 – Debt and Bank Credit Facilities. The fair value of pension assets and derivative instruments is determined based on the methods disclosed in Note 7 - Retirement Plans and Note 12 – Derivative Financial Instruments. Supplier Finance Program The Company's supplier finance program with Bank of America (the "Bank") offers the Company's designated suppliers the option to receive payments of outstanding invoices in advance of the invoice maturity dates at a discount. The Company's payment obligation to the Bank remains subject to the respective supplier's invoice maturity date. The Bank acts as a payment agent, making payments on invoices the Company confirms are valid. The supplier finance program is offered for open account transactions only and may be terminated by either the Company or the Bank upon 15 days notice. The Company has not pledged any assets under this program. The Company has not incurred any subscription, service or other fees related to the Company's supplier finance program. The following information presents changes to the Company's outstanding obligations under the supplier finance program, which are classified within Accounts Payable Balance as of December 31, 2023 $ 60.8 Plus: Obligations Added 169.7 Less: Obligations Settled 189.5 Balance as of December 31, 2024 $ 41.0 New Accounting Standards New Accounting Standards Adopted In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The ASU requires enhanced segment disclosures, such as significant segment expenses, and is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this new accounting guidance in 2024, and has included the required disclosures within Note 5 - Segment Information. In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations . The Company adopted this new accounting guidance during the first quarter of 2023, except that the requirement to include roll forward information became effective for fiscal years beginning after December 15, 2023. The Company completed the adoption of this new accounting guidance in 2024, and has included the required roll forward disclosures within this Note. Recently Issued Accounting Standards In November 2024, the FASB issued ASU 2024-03, I ncome Statement (Subtopic 220-40): Disaggregation of Income Statement Expenses . The ASU requires additional information about certain expenses in the notes to financial statements. The new guidance will be effective for annual periods beginning after December 15, 2026. The Company is evaluating the effect of adopting this new accounting guidance. In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The ASU requires consistent categories and greater disaggregation of information in the rate reconciliation, income taxes paid disaggregated by jurisdiction and certain other amendm |
