RRX 10-K & 10-Q changes, risk factors and insider trading

Our competitive position and financial condition may suffer if we fail to keep pace with rapidly evolving technological developments related to advances in AI, machine-learning and generative AI technologies.

The potential introduction of evolving technologies into new and existing offerings may result in new or expanded risks and liabilities, including enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality, or security risks, as well as other factors that could adversely affect our business, reputation, and results or operations and financial condition. In addition, our vendors may incorporate AI tools into their offerings, and, despite our vendor due diligence, these tools may not meet existing or rapidly evolving regulatory or industry standards and may inhibit our or our vendors’ ability to maintain an adequate level of service and experience. The use of AI can lead to unintended consequences, including generating factually inaccurate content, misleading or otherwise flawed information, or unintended biases and skewed outcomes, which could expose us to risks related to inaccuracies or errors in the output of such technologies. We also face risks of competitive disadvantage if our competitors more effectively use AI to create new or enhanced products or services that we are unable to compete against. Malicious actors may also use generative AI to strengthen social engineering capabilities or create more targeted phishing narratives or otherwise, which may increase the threat of a cybersecurity incident. If we, or our vendors, experience an actual or perceived breach or security incident because of the use of generative AI, we may lose valuable intellectual property and confidential information and our reputation and the public perception of the effectiveness of our security measures could be harmed. In addition, many US and international governmental bodies and regulators have proposed, or are in the process of developing, new regulations related to the use of AI and machine-learning technologies. The final form of these regulations may impose obligations related to our development, offering, and use of AI technologies and expose us to increased risk of regulatory enforcement and litigation.

We may be subject to demand uncertainty and order volatility.

A significant portion of our revenue is generated from customers that place orders through purchase orders (“POs”) rather than pursuant to long-term contracts. Even where we have entered into long-term or framework agreements with customers, such agreements establish commercial terms governing the relationship, but do not generally require customers to purchase a minimum volume of products. In these cases, customers continue to issue POs on an as-needed basis and retain discretion over the timing and size of the orders.

Our customers have sought, and may in the future continue to seek, cancellations, modifications, deferrals, or reductions to POs in response to factors such as design changes, supply-chain realignment, changes in end-market demand, production footprint adjustments, cost pressures, or other operational considerations. Therefore, the final realized value of a customer order has in some cases differed, and may differ in the future, from the original PO value with fluctuations over the course of fulfillment. While some of our customers are subject to POs or other agreements that do not allow for modification or cancellation, there can be no assurance that these customers will fulfill all contract terms, and any attempted cancellation of these orders could adversely affect our business, results of operations, financial condition and cash flows.

This variability can lead to unpredictable revenue patterns, uneven manufacturing capacity utilization, higher per-unit production costs, challenges in workforce and inventory planning, and, in some cases, lost sales opportunities. These factors may adversely affect our operating results, margins, and ability to accurately forecast demand and financial performance.

Portions of our total sales come directly from customers in key markets and industries, some of which may be highly cyclical or seasonal. A significant or prolonged decline or disruption in one of those markets or industries, or milder or cooler weather in certain situations, could result in lower capital expenditures by customers, which could have a material adverse effect on our results of operations and financial condition.

Portions of our total sales are dependent directly upon the level of capital expenditures by customers in key markets and industries, such as HVAC, refrigeration, power generation, oil and gas, unit material handling, water heating, data center, and aerospace. Some of these key markets and industries are inherently cyclical and can be impacted by governmental policy and the general macroeconomic climate. A significant or prolonged decline or disruption in one of those markets or industries may result in some of such customers delaying, canceling or modifying projects, or may result in nonpayment of amounts that are owed to us. These effects could have a material adverse effect on our business, results of operations and financial condition.

Additionally, many of our motors are incorporated into HVAC systems and other residential applications that OEMs sell to end users. The number of installations of new and replacement HVAC systems or components and other residential applications is higher during the spring and summer seasons due to the increased use of air conditioning during warmer months. Mild or cooler weather conditions during the spring and summer season often result in end users deferring the purchase of new or replacement HVAC systems or components. As a result, prolonged periods of mild or cooler weather conditions in the spring or summer season in broad geographical areas could have a negative impact on the demand for our HVAC motors and, therefore, could have an adverse effect on our results of operations. In addition, due to variations in weather conditions from year to year, our operating performance in any single year may not be indicative of our performance in any future year.

In some instances, we rely on estimated demand forecasts, based on input from our customers, to determine how much material to purchase and product to manufacture. We may have limited visibility regarding our customers’ actual product needs. The quantities or timing required by our customers for our products could vary significantly from the forecasts provided to us. Also, from time to time, our customers may experience a deterioration of their businesses and may not be able to accurately estimate forecasted demand. Whether in response to changes affecting the industry or a customer’s specific business pressures, any cancellation, delay, inability to fulfill customer obligations, or other modification in our customers’ orders could significantly reduce our revenue, impact our working capital, cause our operating results to fluctuate from period to period and make it more difficult for us to predict our revenue. In the event of a cancellation or reduction of an order, we may not have enough time to reduce operating expenses to minimize the effect of the lost revenue on our business and we may purchase too much inventory and spend more capital than expected, which may have a material adverse effect on our results of operations, cash flows and financial condition.

We manufacture and sell a number of products for high volume applications, including electric motors used in pools and spas, residential and commercial heating, ventilation and air conditioning, and refrigeration equipment. Any failure of those products to perform as anticipated could result in significant product liability, product recall or rework, or other costs. The costs of product recalls and reworks are not generally covered by insurance.

If we were to experience a product recall or rework in connection with products of high volume applications, our results of operations or financial condition could be materially adversely affected.

One of our subsidiaries that we acquired in 2007 is subject to numerous claims filed in various jurisdictions relating to certain sub-fractional motors that were primarily manufactured through 2004 and that were included as components of residential and commercial ventilation units manufactured and sold in high volumes by a third party. These ventilation units are subject to regulation by government agencies such as the US Consumer Product Safety Commission (“CPSC”). The claims generally allege that the ventilation units were the cause of fires. Based on the current facts, we cannot assure that these claims, individually or in the aggregate, will not have a material adverse effect on our subsidiary's results of operations, financial condition or cash flows. We cannot reasonably predict the outcome of these claims, the nature or extent of any CPSC or other remedial actions, if any, that we may need to undertake with respect to motors that remain in the field, or the costs that may be incurred, some of which could be significant. See Note 12 – Contingencies of the Notes to the Consolidated Financial Statements for more information.

Our business may not generate cash flow from operations in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs. In such circumstances, we could become increasingly vulnerable to general adverse economic and industry conditions and interest rate trends, and our ability to obtain future financing may be limited.

As of December 31, 2025, we had approximately $4.8 billion in aggregate debt outstanding under our various financing arrangements, including a substantial amount of debt incurred in connection with the Altra Transaction. If we are unable to generate sufficient cash flows to service our debt, our business, results of operations and financial condition could be adversely affected. See Note 7 – Debt and Bank Credit Facilities of the Notes to the Consolidated Financial Statements for more information.

Our ability to make required payments of principal and interest on our debt levels will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control. Our indebtedness may result in the following:

•increase our vulnerability to interest rate changes, including with respect to any financing arrangements that bear interest at variable rates, and general adverse economic and industry conditions;

•limit our flexibility in planning for, or reacting to, changes in our business and our markets; and

Our credit facilities, including our Securitization Facility, contain financial and restrictive covenants, which require us to maintain specified financial ratios and satisfy certain financial condition tests. These covenants could limit our ability to, among other things, borrow additional funds or take advantage of business opportunities, and may require that we take action to reduce our debt or to act in a manner contrary to our business strategies. An event of default under one of our facilities, if not cured or waived, could result in the acceleration of our indebtedness or otherwise have a material adverse effect on our business, results of operations, financial condition, or debt service capability. See Note 7 - Debt and Bank Credit Facilities of the Notes to the Consolidated Financial Statements for more information.

The effects of climate change could create financial, reputational or other risks to our business. For example, the effects of climate change could disrupt our operations by impacting the availability and the cost of materials needed for manufacturing, exacerbate existing risks to our supply chain and increase insurance and other operating costs, including energy costs impacted by carbon prices or offsets. These factors may impact our decisions to construct new facilities or maintain existing facilities in areas most prone to physical climate risks. We could also face indirect financial risks passed through the supply chain and disruptions that could result in increased prices for our products and the resources needed to produce them. Additionally, we are subject to environmental laws that could impose significant costs on us. See "We are subject to environmental laws that could impose significant costs on us and the failure to comply with such laws could subject us to sanctions and material fines and expenses" in these Risk Factors for more information.

There continues to be a lack of consistent climate regulation, which creates economic and regulatory uncertainty. Increased international, regional, state, and/or federal requirements or other stakeholder expectations have and could further mandate more restrictive or expansive standards, more prescriptive reporting of environmental, social and governance metrics than the voluntary commitments we have adopted, or require related changes on a more accelerated time frame than we anticipate. For example, we continue to be subject to the European Union’s Corporate Sustainability Reporting Directive (“CSRD”) and California’s climate disclosure rules, should the current scope and compliance deadline remain in effect for each. These regulations are inconsistent, and are rapidly emerging and evolving, and have increased, and are expected to continue to increase, our compliance costs. For example, the CSRD has established extensive ESG-related disclosure requirements based on the European Sustainability Reporting Standards, including certain assurance obligations. These mandatory disclosure requirements will require us to assess and report on key quantitative and qualitative metrics related to a range of topics, including governance, strategy, and our process for identifying and assessing material sustainability issues. In addition, a number of governmental bodies have finalized, proposed or are contemplating legislative and regulatory changes in response to the potential effect of climate change. These regulations may affect our operations, supply chain, and overall business strategy, potentially leading to increased expenses, operational disruptions or limitations on our ability to compete in certain markets. If our product portfolio does not align with these regulations, we may be required to make increased research and development and other capital expenditures to improve our product portfolio in order to meet new regulations and standards. Further, our customers and the markets we serve may impose emissions or other environmental standards through regulation, market-based emissions policies or consumer preference that we may not be able to meet due to the level of capital investment or technological advancement. While we are committed to continuous improvements to our product portfolio to meet and exceed anticipated regulations and preferences, there can be no assurance that our commitments will be successful, that our products will be accepted by the market, that proposed regulation or deregulation will not have a negative competitive impact, or that economic returns will reflect our investments in new product development.

As of the date of this filing, we have made several public commitments regarding our intended reduction of carbon emissions, including commitments to achieve absolute Scope 1 and Scope 2 carbon emission neutrality by 2032, and net zero across Scope 1, 2 and 3 emissions longer term. Although we intend to meet these commitments, we have expended resources and we may be required to further expend significant resources to do so, which could increase our operational costs. If we either are unable to meet these commitments, or progress toward our commitments more slowly than expected, or if such commitments are criticized by certain groups, then we could incur adverse publicity and reaction from investors, activist groups and other stakeholders, which could adversely impact the perception of our brands and our products by current and potential customers, as well as investors, which would in turn adversely impact our results of operations. Moreover, we may determine that it is in the best interest of the Company and our shareholders to prioritize other business investments over the achievement of our current sustainability commitments based on economic or technological developments, regulatory and social factors, business strategy or pressure from investors, activists, or other stakeholders.

Our success is highly dependent on qualified and sufficient staffing. Our failure to attract, transition, or retain qualified personnel, including our senior management team, could lead to a loss of revenue or profitability.

Our success is highly dependent on the efforts and abilities of our senior management team and key associates and the contributions of talented associates in various operations and functions, including but not limited to, engineering, finance, sales, marketing, and manufacturing. The skills, experience and industry contacts of our senior management team significantly benefit our operations and administration. The failure to attract, transition, or retain members of our senior management team, including in connection with our previously announced CEO transition, and other key talent could have an adverse effect on our business, results of operations and financial condition.

We depend heavily on our information technology infrastructure in order to achieve our business objectives. If we experience a problem that impairs this infrastructure, such as a computer virus, a problem with the functioning of an important IT application, or an intentional disruption of our IT systems by a third party, the resulting disruptions could impede our ability to record or process orders, manufacture and ship in a timely manner, or otherwise carry on our business in the ordinary course. Any such events could cause us to lose customers or revenue and could require us to incur significant expense to eliminate these problems and address related security concerns, including costs relating to investigation and remediation actions and any related litigation or regulatory scrutiny.

IT security threats via computer malware, social engineering and other “cyber-attacks,” which are increasing in both frequency and sophistication, could also result in unauthorized disclosures of information, such as customer data, personally identifiable information or other confidential or proprietary material, and create financial liability, subject us to legal or regulatory sanctions, or damage our reputation. The cost and operational consequences of implementing, maintaining and enhancing our IT systems and the other measures we employ, could increase significantly to overcome increasingly intense, complex and sophisticated cybersecurity threats, and certain of our IT systems and other measures may not perform as expected. There can be no assurance that the enhancements to our IT systems will be successfully implemented and failure to do so could have a material adverse effect on our business. Notwithstanding these IT systems enhancements and the other measures we employ, our systems, networks, products, solutions and services remain potentially vulnerable to known or unknown cybersecurity attacks and other threats, any of which could compromise security, data, control or access and have a material adverse effect on our competitive position, business, results of operations and financial condition.

We continuously monitor and develop our systems to protect our technology infrastructure and data from misappropriation or corruption. However, a cybersecurity attack could persist for an extended period of time before being detected, and, following detection, it could take considerable time for us to obtain full and reliable information about the extent, amount and type of information compromised. During the course of an investigation, we may not know the full impact of the event and how to remediate it, and actions, decisions and mistakes that are taken or made may further increase the negative effects of the event on our business, results of operations and reputation. Moreover, because the techniques used to gain access to or sabotage systems often are not recognized until launched against a target, we may be unable to anticipate the methods necessary to defend against these types of attacks, and we cannot predict the extent, frequency or impact these attacks may have. Although we maintain insurance coverage that may, subject to policy terms and conditions, provide coverage for certain aspects of cyber and information security risks, dependent upon the nature, location and extent of an event, such insurance coverage may be insufficient to cover all losses. While we maintain robust information security mechanisms and controls in order to mitigate these risks, the impact of a material IT event could have a material adverse effect on our competitive position, business, results of operations and financial condition.

Our operations can be negatively impacted by natural disasters, terrorism, acts of war, international conflict, pandemic outbreaks, general economic conditions, and political and governmental actions.

Natural disasters, acts or threats of war or terrorism, pandemic outbreaks such as COVID-19, international conflicts, worldwide economic conditions, and the actions taken by the US and other governments in response to such events could cause damage or disrupt our business operations, our suppliers, or our customers, and could create political or economic instability, any of which could have an adverse effect on global financial markets, and our business. Although it is not possible to predict such events or their consequences, these events could decrease demand for our products, could make it difficult or impossible for us to deliver products, could disrupt our supply chain or could result in disruption of our manufacturing processes. Deterioration in the global economy could lead to higher unemployment, lower consumer spending and reduced investment by businesses, and could lead our customers to slow spending on our products or make it difficult for our customers, our vendors and us to accurately forecast and plan future business activities. Worsening economic conditions could also affect the financial viability of our suppliers, some of which could be considered key suppliers. Additionally, our stock price could decrease if investors have concerns that our business, results of operations and financial condition will be negatively impacted by a worldwide economic downturn.

We may also be negatively impacted by actions or uncertainty caused by the US or foreign governments that could disrupt manufacturing and commercial operations, such as policy changes affecting taxation, trade, immigration, currency devaluation, tariffs, import and export controls, customs, border actions, trade relations between the US and China, and ongoing geopolitical tensions and conflicts. These disruptions and their related impacts on our business, including impacts on our management’s time and attention, could be exacerbated by uncertainty in or sudden changes or reversals in policy.

Similarly, unplanned equipment outages or failures, including those due to natural disasters or acts of terrorism, could result in the disruption of our manufacturing processes. Any interruption in our manufacturing processes would create challenges in meeting customer demands through the fulfillment of orders or otherwise reduce our income and cash flow and could result in a material adverse effect on our business, results of operations and financial condition, as well as our reputation and competitive positioning.

We may incur costs and charges as a result of restructuring activities, business optimization initiatives and operations consolidations that may be disruptive to our business and may not result in anticipated cost savings.

We expect to continue reviewing our overall manufacturing footprint and margin improvement initiatives in our operations in an effort to make our business more efficient. We have incurred and expect to continue to incur additional costs and restructuring charges in connection with such consolidations, divestitures, workforce reductions and other cost reduction measures that could, in certain instances, adversely affect our future earnings and cash flows. Furthermore, such actions may be disruptive to our business, and this may result in production inefficiencies, product quality issues, late product deliveries or lost orders as we begin production at consolidated facilities, which could adversely impact our sales levels, operating results and operating margins. In addition, we may not realize the cost savings that we expect to realize as a result of such actions.

These activities require substantial management time and attention and may divert management from other important work or result in a failure to meet operational targets. Divestitures may also give rise to obligations to buyers or other parties that could have a financial effect after a transaction is completed. Moreover, we could encounter changes to, or delays in executing, any restructuring or divestiture plans, any of which could cause disruption and additional unanticipated expense.

Changes to and uncertainty in US trade policy, tariff and import/export regulations and foreign government regulations or other trade restrictions imposed by the US or other governments have adversely affected our business and could materially affect our business, foreign operations, sourcing, results of operations and financial condition.

Changes to tariffs and uncertainty in US and international trade policy have adversely impacted and will continue to adversely impact our business and the US and global economy or certain sectors thereof, including our industry, and could have a material adverse affect on our business, operating results, and financial condition. For example, the US has instituted changes in trade policies that include the imposition of higher tariffs on imports into the US, restrictions on imports of certain products in the US, the renegotiation or termination of trade agreements, and may impact other regulations affecting trade between the US and countries where we conduct our business. In particular, the US government imposed tariffs on imports from China, Canada, Mexico, India and other countries, and such countries have taken, or have threatened to take, retaliatory actions, including imposing retaliatory tariffs. To date, we have successfully navigated the changing trade policy environment and mitigated these tariffs, so as to avoid a material impact on our business and financial condition. However, the current volatility in global trade policy could ultimately affect our business and, while we have plans in place intended to mitigate the impacts of these tariffs on our business, there is no guarantee that such plans will fully mitigate the effects of such tariffs. In particular, the US imposition of reciprocal and penalty tariffs on imports from India in August 2025 has impacted the cost of materials and goods originating from India and we believe without a reduction in the US effective tariff rate on India, our business may be impacted.

Additionally, to date, our internal estimates reflect that the vast majority of goods the Company imports from Canada and Mexico are compliant with the United States-Mexico-Canada Agreement (the “USMCA”) and are therefore exempt from tariffs. While the current tariff regime contemplates that this exemption for USMCA-compliant imports will remain in effect, if this exemption is altered or removed, as a result of the expected USMCA re-negotiation or otherwise, there could be a material adverse effect on our business, operations and financial results to the extent we are unable to mitigate any resulting impacts. We cannot predict what additional changes to trade policy will be made that may have a material adverse effect on our business, results of operations and financial condition or could provide our competitors with an advantage over us.

Our business is also subject to other risks associated with US and foreign legislation and regulations relating to imports, including quotas, duties, fees, or taxes, and other charges or restrictions on imports and exports, which affect our operations and our ability to import products at current or increased levels, and substantially all of our import operations are subject to customs duties or fees on imported products imposed by the governments where our production facilities are located, including raw materials. For example, following the reciprocal tariffs imposed by the US on Chinese goods, China placed export controls on certain rare earth magnets. These restrictions create risk in our supply chain and may increase our costs or limit our ability to produce certain of our products that use rare earth magnets, to the extent we are unable to mitigate the related impacts of these restrictions. We cannot predict whether additional US and foreign customs quotas, duties, fees, taxes or other charges or restrictions, requirements as to raw materials, reporting obligations pertaining to “conflict minerals” and polyfluoroalkyl substances (commonly referred to as “PFAS”), or other restrictions will be imposed in the future or adversely modified, or what effect such actions would have on our operations. Future trade agreements, quotas, duties, fees, or the imposition of import or export requirements may have a material adverse effect on our business, results of operations and financial condition.

We operate in highly competitive global industries and markets and continue to expand and develop our markets.

We encounter a wide variety of domestic and international competitors due in part to the nature of the products we manufacture and the wide variety of applications and customers we serve. In order to compete effectively, we must retain relationships with major customers and establish relationships with new customers. Some of our competitors are larger and have greater financial and other resources than we do. There can be no assurance that we will be able to compete successfully with the products of these other companies. Additionally, we have continued to see a trend with some customers attempting to reduce the number of vendors from which they purchase products in order to reduce their costs. As a result, we may lose market share to our competitors in some of the markets in which we compete.

Additionally, as we enter into or expand or develop our offerings in new markers, we face additional and emerging risks that may be specific to those new markets. For instance, as we grow our data center business, we must manage new risks such as new and uncertain fluctuation in demand cycles, pricing pressures, expectations around execution, quality and performance, and supply chain and manufacturing disruptions, which may have an outsized impact on this business, and rapid technology changes that require continuous and ongoing investment to remain competitive. As we grow in this market and other markets, we must continue to manage these known risks and additional risks as they emerge in order to remain competitive and grow our market share. Moreover, entry or expansion into new markets requires significant investment and resources that otherwise could have been invested elsewhere in the Company. If we are not successful in realizing the benefits of those investments, it could have an adverse effect on our business, results of operations and financial condition.

In certain markets, customers exercise significant power over business terms. There is substantial and continuing pressure on major OEMs and larger distributors to reduce costs, including the cost of products purchased from outside suppliers. As a result of cost pressures from customers, our ability to compete depends in part on their ability to generate production cost savings and, in turn, to find reliable, cost-effective outside suppliers to source components or manufacture their products. If we are unable to generate sufficient cost savings in the future to offset price reductions, then our gross margin could be materially adversely affected.

As of December 31, 2025, approximately 20,000 of our approximate 28,700 total full-time associates and 101 of our principal manufacturing and warehouse facilities were located outside the US. International operations generally are subject to various risks, including political, societal and economic instability, local labor market conditions, public health crises, breakdowns in trade relations, the imposition of tariffs and other trade restrictions, lack of reliable legal systems, ownership restrictions, the impact of government regulations, the effects of income and withholding taxes, governmental expropriation or nationalization, and differences in business practices.

Unfavorable changes in the political, regulatory and business climates in countries where we have operations could have a material adverse effect on our business, results of operations, financial condition and cash flows, including, for example, the uncertainty surrounding trade relations between the US and China, Mexico, Canada, India and other countries. In particular, the US government imposed tariffs on imports from China, Canada, Mexico, India and other countries, and such countries have taken or have threatened to take retaliatory actions, including China's imposition of stricter export controls on certain types of rare earth magnets. We expect to incur increased costs in connection with the imposition of tariffs by the US government and of retaliatory tariffs imposed by other countries and may experience delays or disruptions in product deliveries and payments in connection with international manufacturing and sales that could cause loss of revenue or higher non-tariff costs.

Moreover, ongoing geopolitical conflicts, including those between Russia and Ukraine and those occurring in the Middle East and similar conflicts, have negatively impacted the global economy and in some instances, have led to various economic sanctions being imposed by the US, United Kingdom, European Union, and other countries. While the impacts have not been material on our operating results to date, it is not possible to predict the broader or longer-term consequences of these conflicts or new conflicts that may arise in the future. Continued escalation of geopolitical tensions could also result in the loss of property, supply chain disruptions, significant inflationary pressure on raw material prices and cost and supply of other resources (such as energy and natural gas), fluctuations in our customers’ buying patterns, credit and capital market disruptions that could impact our ability to obtain financing, increase interest rates and have adverse foreign exchange impacts. These broader consequences could have a material adverse effect on our business, results of operations and cash flows. Such sanctions and other measures, as well as the existing and potential further responses to such sanctions, tensions and military actions, could adversely affect the global economy and financial markets and could adversely affect the operations of our subsidiaries in impacted regions as well as our business, results of operations and financial condition.

We have a significant number of employees in Europe and other jurisdictions where trade union membership is common. Although we believe that our relations with our employees are strong, if our unionized workers were to engage in a strike, work stoppage or other slowdown in the future, we could experience a significant disruption of our operations, which could interfere with our ability to deliver products on a timely basis and could have other negative effects, such as decreased productivity and increased labor costs. In addition, if a greater percentage of our workforce becomes unionized as a result of legal or regulatory changes which may make union organizing easier, or otherwise, our costs could increase and our efficiency may be affected, negatively impacting our business and financial results. Further, many of our direct and indirect customers and their suppliers, and organizations responsible for shipping our products, have unionized workforces and their businesses may be impacted by strikes, work stoppages or slowdowns, any of which, in turn, could have a material adverse effect on our business, results of operations and financial condition.

•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 using power generated by the motor to various industrial applications. The segment serves a broad range of markets that include general industrial, metals and mining, energy, discrete automation and commercial HVAC.

•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 air moving subsystems comprised of two or more of these components. The segment's products are used in residential and commercial HVAC, and in a wide range of general commercial applications.

Net sales for 2025 were $5,934.5 million, a decrease of $99.3 million, or 1.6%, as compared to 2024. The decrease primarily consisted of a negative impact from divestitures of 2.8%, partially offset by an organic sales increase of 0.8% and a positive foreign currency translation impact of 0.4%. The decrease from divestitures was primarily due to a reduction of $157.8 million from the divestiture of the industrial motors and generators business. The increase in organic sales of $44.9 million was primarily driven by a $45.8 million increase within AMC and a $16.7 million increase within PES, partially offset by a decrease of $17.6 million within IPS. Gross profit increased $26.8 million or 1.2% as compared to 2024, primarily driven by a $41.9 million increase within IPS and a $26.8 million increase within PES, partially offset by a $39.2 million impact from divesting the industrial motors and generators business and a $2.7 million decrease within AMC. Total operating expenses for 2025 were $1,537.0 million, a decrease of $24.0 million, or 1.5% as compared to 2024, primarily driven by a $38.9 million impact from divesting the industrial motors and generators businesses and a $20.0 million decrease within PES, partially offset by a $27.1 million increase within IPS and a $7.8 million increase within AMC. Interest expense for 2025 was $349.2 million, a decrease of $50.5 million, or 12.6%. compared to 2024, primarily driven by a reduction in outstanding debt.

PES net sales for 2025 were $1,650.6 million, an increase of $6.5 million, or 0.4%, as compared to 2024. The increase consisted of an organic sales increase of 1.0% and a positive foreign currency translation impact of 0.2%, partially offset by a negative impact from divestitures of 0.8%. The $16.7 million increase in organic sales primarily reflects growth in the residential and commercial HVAC markets. Gross profit increased $26.8 million, or 5.8%, as compared to 2024, primarily driven by higher volume and lower restructuring and related expenses of $28.4 million. Total operating expenses for 2025 decreased $20.0 million, or 6.8%, as compared to 2024, primarily driven by discretionary cost reductions and lower allocated expenses.

The effective tax rate for 2025 was 20.3%, which is relatively consistent with the effective tax rate for 2024 of 20.0%.

As of December 31, 2025, the Company had no borrowings under the 2025 Term Facility. The Company borrowed $850.0 million under the 2025 Term Facility on February 12, 2026 and used the proceeds to refinance the 2026 Senior Notes.

As of December 31, 2025, the Company had $1,100.0 million of 2026 Senior Notes which matured on February 16, 2026. The Company used the proceeds from the 2025 Term Facility to refinance the 2026 Senior Notes on a long-term basis and, accordingly, the Company continues to classify the debt as non-current in the Consolidated Balance Sheet as of December 31, 2025.

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 following table sets forth summarized income statement information of the Obligor Group for the year ended December 31, 2025:

(2) Excludes $850.0 million for the 2025 Term Facility as there was no amount outstanding as of December 31, 2025. The Company borrowed $850.0 million under the 2025 Term Facility on February 12, 2026.

See Note 4 – Goodwill and Intangible Assets of the Notes to the Consolidated Financial Statements for more information.

On February 20, 2026, the US Supreme Court ruled that tariffs imposed under IEEPA were not authorized by the statute. The Company is the importer of record for certain raw materials and products that were previously subject to such tariffs under IEEPA. The Company recorded a $33.0 million pre-tax benefit related to certain IEEPA tariff refunds for the three and six months ended June 30, 2026. There are other IEEPA tariff duties that may be eligible for submission and recovery under future phases of the CAPE refund process, but the ultimate amount and timing of recovery is uncertain at this time. For the year ended December 31, 2026, the Company estimates a pre-tax benefit of $49 million, including $33.0 million recorded for the six months ended June 30, 2026. See Note 2 - Other Financial Information of the Notes to the Condensed Consolidated Financial Statements for more information.

PES net sales for the second quarter 2026 were $411.3 million, a decrease of $23.9 million, or 5.5%, as compared to the second quarter 2025. The decrease consisted of an organic sales decline of 6.6%, partially offset by a positive foreign currency translation impact of 1.1%. The $28.7 million decrease in organic sales primarily reflects weakness in the residential HVAC and pool markets, which was partially offset by growth in the commercial HVAC market. Gross profit for the second quarter of 2026 was $141.4 million, an increase of $11.7 million, or 9.0%, as compared to the second quarter of 2025, primarily driven by a benefit from IEEPA tariff refunds of $17.8 million. Total operating expenses for the second quarter of 2026 were relatively consistent with the second quarter of 2025.

Six Months Ended June 30, 2026 Compared to June 30, 2025

Net sales increased $123.3 million or 4.2% for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase consisted of an organic sales increase of 2.5% and a positive foreign currency translation impact of 1.8%. The increase in organic sales of $71.2 million was driven by a $112.2 million increase within AMC and a $30.0 million increase within IPS, partially offset by a $71.0 million decrease in organic sales within PES. Gross profit increased $69.2 million, or 6.3%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily driven by a benefit from IEEPA tariff refunds of $32.0 million and increases of $26.5 million and $15.4 million, (excluding the benefit from IEEPA tariff refunds) at AMC and IPS, respectively. Total operating expenses for the six months ended June 30, 2026 increased $43.4 million, or 5.8%, compared to the six months ended June 30, 2025, primarily driven by a $21.0 million increase within IPS and a $17.9 million increase within AMC. Interest expense for the six months ended June 30, 2026 was $158.0 million, a decrease of $17.5 million, or 10.0%, compared to the six months ended June 30, 2025, primarily driven by a reduction in outstanding debt.

AMC net sales for the six months ended June 30, 2026 were $934.8 million, an increase of $127.4 million, or 15.8%, compared to the six months ended June 30, 2025. The increase consisted of an organic sales increase of 13.9% and a positive foreign currency translation impact of 1.9%. The $112.2 million increase in organic sales was primarily driven by broad-based growth, but with particular strength in the data center and discrete automation markets, as well as continued positive trends in the aerospace & defense market. Gross profit increased $32.4 million, or 10.4%, compared to the six months ended June 30, 2025, primarily driven by higher sales volumes and a benefit from IEEPA tariff refunds of $5.9 million. Total operating expenses increased by $17.9 million, or 7.2%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily driven by labor and benefit costs due to inflation and growth investments, and foreign currency impacts.

IPS net sales for the six months ended June 30, 2026 were $1,317.7 million, an increase of $55.2 million, or 4.4%, compared to the six months ended June 30, 2025. The increase primarily consisted of an organic sales increase of 2.4% and a positive foreign currency translation impact of 2.1%. The $30.0 million increase in organic sales was primarily driven by strength in the general industrial and energy markets. Gross profit increased $23.7 million, or 4.4%, compared to the six months ended June 30, 2025 primarily driven by higher sales volumes, synergy benefits, a benefit from IEEPA tariff refunds of $8.3 million, and lower restructuring and related costs of $4.3 million. Total operating expenses increased $21.0 million, or 5.8%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily driven by increased labor and benefit costs due to inflation, foreign currency impacts, and a $6.0 million gain on the sale of assets in the first quarter of 2025.

PES net sales for the six months ended June 30, 2026 were $785.0 million, a decrease of $59.3 million, or 7.0%, compared to the six months ended June 30, 2025. The decrease consisted of an organic sales decrease of 8.4%, partially offset by a positive foreign currency translation impact of 1.4%. The $71.0 million decrease in organic sales primarily reflects weakness in the residential HVAC and pool markets, which was partially offset by growth in the commercial HVAC market. Gross profit increased $13.1 million, or 5.4%, as compared to the six months ended June 30, 2025, primarily driven by a benefit from IEEPA tariff refunds of $17.8 million. Total operating expenses for the six months ended June 30, 2026 are relatively consistent with the six months ended June 30, 2025.

The effective tax rate for the six months ended June 30, 2026 was 17.7% versus 21.3% for the six months ended June 30, 2025. The decrease was primarily due to a discrete tax benefit related to stock option exercises in the current year, changes in the amount and mix of pre-tax earnings, the relative impact of permanent and discrete tax items, and benefits from tax planning strategies.