Good morning, and welcome to the Regal Rexnord third quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Robert Barry, Vice President of Investor Relations. Please go ahead. Great. Thank you, operator. Good morning, and welcome to Regal Rexnord's third quarter 2022 earnings conference call. Joining me this morning are Louis Pinkham, our Chief Executive Officer, and Rob Rehard, our Vice President and Chief Financial Officer. Before turning the call over to Louis, I'd like to remind you that the statements made in this conference call that are not historical in nature are forward-looking statements. Forward-looking statements are not guarantees, since there are inherent difficulties in predicting future results, and actual results could differ materially from those expressed or implied in forward-looking statements. For a list of factors that could cause actual results to differ materially from projected results, please refer to today's earnings release and our SEC filings. On slide three, we state that we are presenting certain non-GAAP financial measures in this presentation. We believe that these are useful financial measures to provide you with additional insight into our operating performance and for helping investors understand and compare our operating results across accounting periods and in the same manner as management. Please read this slide for information regarding these non-GAAP financial measures, and please see the appendix for reconciliations of these measures to the most comparable measures in accordance with GAAP. Turning to slide four, let me briefly review the agenda for today's call. Louis will lead off with his opening comments. Rob Rehard will then provide our third quarter financial results in more detail and discuss updates to our 2022 guidance. Louis will then share some brief comments about our recently announced acquisition of Altra. We will then move to Q&A, after which Louis will have some closing remarks. With that, I'll turn the call over to Louis. Great. Thanks, Rob, and good morning, everyone. Thanks for joining us to discuss our third quarter earnings and to get an update on our business, and thank you for your interest in Regal Rexnord. As you saw in our announcement last week regarding our planned acquisition of Altra, it is clear that our team is working on a number of fronts to continue advancing Regal Rexnord's transformation into a faster growing, higher margin, more cash generative, and higher return enterprise. I am excited to report the product of those efforts are also apparent in our strong third quarter results. Even in the face of persistent inflationary and supply chain headwinds and some incremental macro-related caution at our customers, our Regal Rexnord team delivered strong third quarter performance. That includes 8% organic top line growth, 120 basis points of adjusted EBITDA margin expansion, and further evidence of share gains supported by our digital and e-commerce investments, new products, and competitive service levels. The margin gains we achieved were enabled by a host of factors, chief among them, continued strong performance realizing merger synergies, where we remain ahead of plan and continuing to achieve a positive price-cost position. Also notable, the team's disciplined approach to managing working capital improved our free cash flow performance in the quarter. As we forge ahead into the fourth quarter, we are firmly on track to meeting our earnings guidance commitment, which we have revised to reflect a modestly higher midpoint in our targeted range for earnings per share. For this strong edge execution, pursued with a sense of urgency as well as continued adherence to our Regal Rexnord values, I wanna say a sincere thank you to our approximately 29,000 Regal Rexnord associates around the world. Turning to orders, we did see some moderation as expected. Daily organic orders were down 3.6% for the quarter on an FX neutral basis, in line with what we shared at our September investor day. Even so, we remain cautiously optimistic about our top line prospects, especially given our strong backlog position, up roughly 70% from the beginning of 2021, plus commentary from many of our customers across a range of end markets that remains fairly positive. In addition, for certain of our end markets, including aerospace, mining, ag, and non-res construction, which makes up over 25% of Regal Rexnord, there are signs of growing momentum. Beyond what markets give us, we have many outgrowth initiatives underway, including a healthy pipeline of new mixed positive products and high-impact digital and e-commerce investments. Which brings me to controllable execution. It's our mantra at Regal Rexnord. Regardless of what the macro does, we will manage it by focusing on what is under our control. We have a lot under our control on the growth, margin, and free cash flow fronts. Controllable execution is evident in our third quarter segment performance. Commercial is a great example. The segment turned in another quarter of double-digit organic top-line growth as the benefits of 80/20 initiatives, new products, and digital and e-commerce investments are driving our growth. Industrial also continued to demonstrate strong execution. Adjusted EBITDA margins up 370 basis points and mid-teens organic order growth are quantifiable signs that the turnaround at Industrial is continuing and even gaining momentum. Climate performed just slightly below what we had communicated in our last earnings call, with incremental temporary margin pressure largely tied to non-metals inflation and mix. However, the Climate team has a plan for improvement back to the segment's more normal high teens to low 20s margin levels with a step up in Q4 and improvement throughout 2023. We remained very excited about Climate's prospects as we head into 2023. Given regulatory changes we are well-positioned to address, plus government incentives around heat pumps and meaningful new product tailwinds. Which brings me to MCS. Solid growth and very strong margin performance, in large part related to that team continuing to realize merger synergies, but also strong operational performance. Our powertrain team is also gaining momentum in the market, and I'll share an example of one of its recent powertrain wins on the next slide. As we discussed at our September investor day, we assembled a cross-functional team dedicated to selling integrated industrial powertrain solutions, leveraging end market, application, and product expertise spanning our motors and power transmission businesses. The team has accelerated our traction selling powertrains, and our opportunity funnel is growing nicely. Pictured on this slide is a recent powertrain win, the product of the team's collaborative efforts. This win was with a grain processing customer involved in the production of ethanol, renewable diesel, and biodiesel fuels. The customer was looking for an integrated solution that improved efficiency and reliability and lowered install time. What our team came back with was a subsystem that integrates our Marathon motors, our Falk gearbox and couplings, and Rexnord bearings. What makes the solution differentiated is a design that leveraged our powertrain team's relevant application expertise. In this example, a bucket elevator for the ag end market. The result was lower complexity, reduced install time, and greater efficiency and reliability. We made it easier for our customer and gave them a superior product. Having deep application expertise is part of the secret sauce to selling powertrains, and one of the reasons we're excited about adding Altra is because it enhances our capabilities in relevant powertrain components and extends our application expertise into new markets. We will share more on this front post-closing. With that, I'll turn the call over to Rob to take you through our third quarter performance in more detail. Thanks, Louis, and good morning, everyone. I'd also like to send my thanks to our global team for their strong execution in what continues to be a challenging operating environment. Now, let's turn to our third quarter segment financial performance. Starting with our Motion Control Solutions segment, or MCS, organic sales in the third quarter were up 3.6% from the prior year. The result reflects broad-based growth, but with particular strength in the general, industrial, and aerospace end markets, partially offset by weakness in alternative energy, in particular, the China wind market. Adjusted EBITDA margin in the quarter for MCS was 27.2%, up 30 basis points compared to the prior year, factoring favorable price realization, merger synergies, and volume, partially offset by mix, higher freight costs, and FX headwinds. As expected, the segment posted a nice sequential improvement in margin in the quarter. Orders in MCS for the quarter were flat on an organic FX neutral basis. In October, book-to-bill tracked at roughly 1.0. Turning to Climate Solutions, organic sales in the third quarter were up 4.9% from the prior year. The increase was driven by healthy price realization and modest volume gains in our North America resi HVAC OEM business, partially offset by modest volume declines elsewhere, particularly in Europe. We'd attribute our volume gains in HVAC to outgrowth, since we believe end market volumes moderated against a challenging prior year compare. The adjusted EBITDA margin in the quarter for Climate was 16.4%. Factors impacting margins in the quarter include commodity inflation, including plastics, unfavorable mix and higher freight costs, partially offset by strong price realization. We also had some carryover impacts from second quarter related to intentional decisions the business made to over-serve certain high-value customers, which resulted in lower past dues, but also higher freight and component costs. While climate margins were a bit slower to improve relative to our expectations, we continue to see this margin performance as temporary. The climate team has a path to modestly higher margins in the fourth quarter and plans for a more significant recovery in 2023, when we expect the segment's adjusted EBITDA margin to move back into the high teens or low twenties. Turning to orders. Orders in climate for the third quarter were down 10% on an FX neutral basis, adjusted to exclude the impact from an OEM customer pushing out orders tied to several key platform changes. Book-to-bill in October is tracking at roughly 0.95. While the orders reflected deceleration from recent periods, this performance is broadly in line with our expectations as our lead times continue to shrink given a moderate improvement in the supply chain environment, along with the fact that a number of our customers decided to take a more conservative stance on inventories into the end of the year. More broadly, we remain very enthusiastic about Climate's prospects in 2023, when we expect several tailwinds to support growth and margin gains, including higher U.S. minimum efficiency standards in resi HVAC, rebates on heat pumps in the Inflation Reduction Act, and significant new products that we are launching. You may recall that we discussed all these tailwinds in more detail at our September investor day. Turning to Commercial Systems. Organic sales in the third quarter were up 11.5% from the prior year. Growth in the quarter reflects strong performance in large commercial HVAC, North America general industrial, and our air moving business. The strength we are seeing in general industrial continues to reflect meaningful share gains tied to investments we are making in digital, e-commerce, and new products. The adjusted EBITDA margin in the third quarter for Commercial Systems was 16.7%, up 20 basis points compared to the prior year, reflecting favorable price realization, partially offset by commodity and other non-material product cost inflation, weaker mix, and higher freight costs. Shifting to orders. Segment orders for the third quarter were down just over 9% on an FX neutral basis, or flat after adjusting for orders from pool pump OEMs, which have been actively rightsizing their inventories as we move into the off-peak season for pool. Looking to October, book-to-bill tracked at roughly 0.9. In Industrial Systems, organic sales in the third quarter were up 14.7% versus the prior year. Principal drivers include strong price realization and volume. The latter tied mostly to share gains as greatly improved operating performance is allowing the industrial team to win in the market. The business is, however, seeing some modest weakening in China, which we expect to become slightly more pronounced in the fourth quarter and temper the segment's growth. The adjusted EBITDA margin in the quarter for industrial was 13.2%, an increase of 370 basis points versus the prior year period. While the margin did fall a bit shy of where we anticipated in the quarter, we continue to be extremely pleased with the performance at industrial, which we feel remains on a sustainable path to stronger performance. Orders in industrial for the quarter were up approximately 16% on an FX neutral basis. Very strong performance that we think provides further evidence that industrial's operational recovery is gaining momentum. In October, book-to-bill was 1.0. On the following slide, we highlight some key financial metrics for your review. A couple notable highlights. First, on the right side of this page, you'll see we ended the quarter with a net debt to adjusted EBITDA ratio of 1.4 times. Second, our free cash flow in the quarter was $111.1 million, which equates to a conversion rate of roughly 93%. Our team did a great job improving free cash flow performance in the quarter, and we expect to see further improvement in the fourth quarter. That said, as much progress as we are making on free cash flow, based on what we know today, while we will continue to push for a 100% free cash flow conversion rate in 2022, we believe we may end closer to 95%, mainly due to persistent supply chain challenges and our focus on maintaining high service levels with our highly valued customers. We expect fourth quarter to demonstrate very strong cash flow performance as we close out the year. As we've previously stated, our focus will continue to be on paying down our debt with the improving cash generation. Moving to the outlook. We are raising our guidance at the midpoint by revising our expectation for adjusted earnings per share to a narrowed range of $10.35-$10.75 from our prior range of $10.20-$10.80, which is a 5% increase at the midpoint. Considering the revised range now contemplates a sizable increase in net interest expense, our updated outlook embeds core operating performance that is tracking nicely above our prior expectations. Now, let me provide a bit more color by segment for the fourth quarter. From a top-line perspective, we would expect the revenues for the commercial, climate, and industrial segments to moderate slightly lower from third quarter levels, due mostly to normal seasonality. We would expect the revenues for the MCS segment to come in relatively flat to third quarter levels. Moving to margins, we would expect commercial margins to move to low to mid-teens, industrial to low double digits, and then both climate and MCS to improve modestly from third quarter levels. I'll wrap up this section by saying that on the whole, we are very pleased with the Q3 results and our team's ability to execute in an extremely challenging environment. We are meeting nearly all of our expectations, and while the macro outlook has certainly become less certain, our outlook remains very positive, considering the tremendous amount of self-help we have in front of us on the growth, margin, and cash flow fronts. Now, before we open the line for questions, I will turn the call back over to Louis for a few comments highlighting last week's announcement to acquire Altra Industrial Motion. Thanks, Rob. I'm sure you're aware, last week we announced our decision to acquire Altra Industrial Motion. The industrial logic for adding Altra to Regal Rexnord is crystal clear. It transforms our automation capabilities and enhances our industrial powertrain offering, creating clear benefits for our customers and a host of new opportunities for profitable growth. Expected financial returns are incredibly strong. Accretion in year one, double-digit accretion thereafter. ROIC above 10% by year five, and a path to a 40% enterprise gross margins, supported by $160 million in cost synergies, plus upside from substantial expected cross-marketing synergies. Notably, our expected 2025 free cash flow rises from about $1 billion, as shared at our Investor Day, to about $1.1 billion in 2025, and then to nearly $1.4 billion in 2026, as our interest costs and cash tax rate both decline significantly in 2026 and beyond. We believe the valuation is compelling and reflects the quality of the Altra business, its synergies with our business, and the transaction's timing. The acquisition is unique because it will deliver significant synergies and catalyze our growth while further enhancing our scale and diversification, which improves our already strong credit profile. We have always managed Regal Rexnord in a manner consistent with an investment-grade credit profile. Low leverage, abundant liquidity, consistently strong free cash flow conversion, and manageable debt maturities. We are larger, more diversified, and lower-levered than our investment-grade-rated peers today, and the acquisition of Altra further enhances our scale, diversification, and exposure to resilient end markets. We are adding leverage to fund the transaction, and we believe it will be manageable. We expect our enhanced credit profile will give us broad access to financing in both the bank loan and bond markets. We've designed a permanent debt structure that will give us the flexibility to acquire and integrate Altra while repaying debt expeditiously to achieve our leverage targets, which are consistent with an investment-grade profile. We recognize the macro uncertainty on the horizon, but are encouraged by the quality of the record backlogs at Regal Rexnord and Altra. We have run extensive sensitivity scenarios for interest rates in our forecasted EBITDA, and we expect the combined Regal Rexnord and Altra to be resilient, aided by strong pro forma cash flows and our underlevered balance sheet ahead of the transaction. We closed out the third quarter with net debt to adjusted EBITDA of 1.4x, and we expect further standalone delevering in advance of the transaction closing next year. We're putting our balance sheet to work to acquire a highly strategic asset and create meaningful value for our shareholders. We've already begun the process of putting our new permanent debt structure in place. Yesterday, we hosted a meeting with our relationship lenders, which was very well attended and received. We'll have more details on the outcome shortly, but we are moving quickly to amend our existing debt structure to facilitate the acquisition and put in place flexible, attractively priced, and pre-payable debt to facilitate our de-levering targets. The motion control and the automation industries are undergoing significant change, and we are operating from a position of strength. We are ready to do this transaction. We've made significant progress on Regal Rexnord's operational transformation and PMC's merger integration and have a clean balance sheet. We expect the heaviest lifting on integrating PMC to be complete before starting footprint moves at Altra. The playbook and team that worked so well with PMC will be deployed at Altra. For all these reasons, we are excited about Altra associates joining our Regal Rexnord team and confident in our team's ability to create meaningful value for all of our stakeholders with this transaction, for our customers, our associates, and our shareholders. With that operator, we are now ready to take questions. We will now begin the question- and- answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble the roster. Our first question will come from Michael Halloran of Baird. Please go ahead. Hey, good morning, everyone. Morning, Mike. Can we talk a little bit about the order trajectory as you sit here and kind of end market thoughts in the next year? Obviously, at the Analyst Day, you threw out a low single digit kind of growth number. We're seeing some weakening in some of the markets, obviously some nice offsets with what you're doing internally, SEER coming on some other things. Just maybe some commentary on that side and how we should be thinking about things as we track into next year. Yeah, sure, Mike. You know, as a reminder, at Investor Day, we did say 3%-4% growth, assuming no recession, and end markets that are flat to up modestly. You know, that paradigm is still relatively intact, but more uncertain around market. It reflects a 2%-3% outgrowth tied to many of our growth initiatives, and of course, our strong backlog. You know, if investors have a different view on end markets, they can adjust the framework, but we feel very good about what's in our control, especially around our digital and e-commerce initiatives, our new product, and our superior service levels. You know, we're gonna provide more clarity on 2023 when we report fourth quarter. For now, I think that's about where I wanna end my commentary. No, fair. That was helpful. What about on the channel inventory side? You know, certainly some targeted areas where there seems to be some destocking happening at the customer level, but maybe some thoughts more broadly across the enterprise. Yeah. You know, some of the metrics are still strong, Mike, I'd say. ISM remains above 50, but you know, as of September, new orders and employment contracts were coming down a bit. I'll tell you, in the industrial distribution channel, they're still sounding quite positive. As you know, we have clear visibility to their sales out, and they're still strong. Given that, they are looking at some inventory adjustments, but we're feeling that the industrial channel is still really solid. Now, you know, pool is a very small part of Regal Rexnord. It's only about 2%-3%, but that had a big reset, if you will, during Q3. The HVAC OEMs in their normal pattern, they will take down their inventories going to the end of the year. Overall, you know, a little bit more mixed. I'll tell you, with 50% of our business being, you know, in more of that industrial space, we feel pretty good around the industrial distribution and continuing into next year. Now, one other comment that I would make is when I look at our business and what we've done to change the portfolio over the last few years, we're about a third early cycle, a third mid-cycle, and about a third late cycle. We're seeing some momentum in that late cycle. Non-res construction, aerospace, these are markets that are gaining some momentum, and we feel good about. You know, a little bit mixed bag, but hopefully that helps. No, that helps a lot. I appreciate it. Thanks for the color. Thanks, Mike. The next question comes from Julian Mitchell of Barclays. Please go ahead. Hi. Good morning. Morning. Good morning. Just wanted to circle back to the fourth quarter guide on a sort of firm-wide level. You know, Rob, you'd laid out some segment moving pieces, but just wanted to clarify if we're thinking kind of enterprise-wide at Regal Rexnord, is the guide midpoint based on kind of mid-single-digit organic sales growth, you know, sort of 21.5% EBITDA margins? Are those the right sort of rough ballpark figures for Q4? From your book-to-bill comments, do we assume that orders are probably down sort of high single digits in Q4? Julian, thank you for the question. First answer is yes. Assume about low to mid single digit growth in Q4. Your EBITDA comment on the margin side is tracking very closely to what our expectations are. Maybe slightly below, but pretty close to that, based on some of the comments that I made. The second part of your question was related to order expectations as we move into the fourth quarter. Again, we would expect orders to be down a bit in the fourth quarter, maybe low single digits in the fourth quarter. Yeah. That would be on an FX neutral perspective, Julian, just to be clear. That would probably translate more to down mid- to high-single-digit. We do expect orders to be down in the fourth quarter. That's helpful. Thank you. I suppose you know you mentioned some areas of kind of specific softness. I think around you know pool and HVAC destocking and then you know also China a little bit softer in the industrial side going into fourth quarter. Maybe just kind of flesh out on the pool and HVAC side you know how much sort of destock do you think is needed from this point from your channel partners and customers? Then maybe just flesh out you know sort of China and how you're thinking about that run rate into year end. Yeah. You know, I'm gonna hit pool quickly because it's only 2% of our sales. You know, we think that's leveled out and will continue into fourth quarter. I would tell you that it doesn't have a big impact on us. From an HVAC standpoint, you know, a lot of this is simply the adjustment from an order perspective on the fact that our lead times are coming down a little bit as well because of slightly improved supply chains. Therefore, you know, it's really just an ERP demand creation perspective. You know, the OEMs typically do this in fourth quarter with a slight reduction. We don't see a huge impact and Rob's already given you guidance on what we expect from a revenue perspective for fourth quarter. China. Yeah, China's under a little bit more pressure than we anticipated bluntly at the beginning of third quarter. China was down 8% to us on sales year-over-year. It was actually down with a big wind order, 74%. The total down of China for us was 34%, down 8% because of wind. That wind project lumpy, I wouldn't take that into consideration in modeling. It's really the 8% down ex wind, and we would say that will likely continue into Q4. Now, let me be clear. That wind project is an MCS specific project. It only impacted the MCS business. Hopefully that helps, Julian. That's perfect. Thank you. Sure. The next question comes from Jeff Hammond of KeyBank. Please go ahead. Hey, good morning, guys. Morning. Morning, Jeff. Hey, just on climate margin, I had thought that was gonna get better and it stepped down again. You know, I think the trajectory is maybe a little bit less into 4Q than you thought. Maybe just what's changed there and maybe speak to the mix dynamic. Yeah. I'll take this on, Jeff. You know, margins did come in modestly below our expectations, really largely due to factors outside our control. A weaker mix, and we saw incremental supply chain and inflationary headwinds, specifically around plastics, and that's a pretty big part of our supply there. Again, we believe the pressures on Climate though are temporary and expect improvements back to normal levels, especially going into 2023. Fourth quarter will see modest improvements just around, you know, improved mix and overall strong performance. We're, you know, Climate's a really strong business for us, has lots of room for upside into 2023, especially with the SEER regulation and our new products that we're launching. We're confident that we'll get back into those high teens and low twenties in 2023. Okay. You know, as we look at the Altra deal and the combined businesses, just, you know, if we go back, you know, clearly some concerns over the leverage. If you kind of run the stress test on, you know, recession for both businesses. Yeah, where does that take you from a leverage at a high watermark? Just if you were to get into that situation, anything you can really do to kinda accelerate the debt pay down, whether it be, you know, non-core business, you know, divestitures, et cetera? Thanks. Sure. This is Rob. Hey, so Jeff, I tell you that the stress testing that we did, you know, did with those dramatic shifts in EBITDA that we might stress test for 2023 and even 2024, still it never provided a scenario where we couldn't service the debt. The leverage did get above four, but still always were able to service the debt. To your second part of the question, which was, you know, would we look to accelerate anything? Hey, you know, as we've commented previously, you know, we are always evaluating our portfolio, but we have no plans at this time to do anything like that. If we did make that determination, we'll certainly communicate that at the appropriate time. Okay, thanks a lot. Thanks, Jeff. The next question comes from Joe Ritchie of Goldman Sachs. Please go ahead. Thanks. Good morning, guys. Morning, Joe. Hey, Louis, there's, you know, there's some concern around the timing of this Altra acquisition, you know, trying to integrate two assets, and the resourcing you have in place to do it successfully. Can you maybe just talk a little bit about the timing and then also your confidence in getting after the synergies associated with the Altra deal once it closes? Yeah, happy to. Hey, I thought about this a lot and got a pretty thoughtful response here that I'm gonna take you through. It really starts with certainty and actionability. We maintain a short list of transformative targets that we see as providing a unique combination of accretive margin growth and synergy that can provide a step change on our continued transformation journey. Altra was the crown jewel on that list for us. Put simply, we did not believe this deal would be available in the future. It wouldn't have been available for us a year ago. We felt we needed to act. The biggest challenge is finding the opportunity where one of these targets is actionable and acquirable under highly attractive terms, while we also have the readiness from an integration perspective and the balance sheet to transact. All of those elements lined up here, which we believe is very rare. The deal metrics are best in class and are as compared to our Rexnord PMC deal as well as other recent deals in the PT and automation landscape. We are also ready with a proven integration team on this deal that will quickly synergize and have high visibility into taking out public costs quickly and then dovetailing once we are finished with the PMC footprint moves to be able to move quickly into the Altra moves. The one element of question is leverage, I would say. We did extensive sensitivity analyses on both EBITDA downside as well as further interest rate increases, looking at past recessions, including multi-year downside scenarios. In all cases, we feel highly confident in our ability to navigate. We also worked with JP Morgan and met with the rating agencies prior to signing to ensure we felt confident in our path to securing the debt we need to close this transaction and maintain our commitment to an accelerated reduction in our leverage. Hey, ultimately, we sat down and outlined pros and cons. We made a disciplined decision based on the facts and data. We debated this extensively, and there are external factors that we cannot yet get into, but we strongly believe this deal as it stands now, would not be available in the future. I'm highly optimistic, as is our team, and there's a lot to process here. As more of our investors have time to better get their arms around what we're doing, I'm confident that they will be compelled and as excited as we are about this transaction. Hopefully that helps. Yeah, that was comprehensive. Appreciate that. Maybe my one follow-up is, you know, once you've got this debt lined up, and I know that you've termed out, you know, a lot of your current debt, I'm just curious, how are you thinking about the structure of both variable versus fixed debt going forward? And then secondly, you know, is the number one priority for you at this point, once the deal gets executed to pay down debt? Joe, two parts to this. The first is, how are we gonna structure this? We're already out and we're upsizing our revolver and our term loan. That's going on right now as we speak, over the next couple of weeks. Whatever's remaining, we will then go to the bond market and look to potentially three, five, seven, 10-year bonds to stagger the pay down so that we can continue to pay down quickly, and there's no concentration in any one year. We'll minimize that, but at the same time stagger that so that we can pay down very quickly. We absolutely have a clear path to paying that down to, you know, 2.5x to 3x by the time, you know, we're through 2024, and then below 2.5x in 2025. Very clear path on that front, given the very strong cash flow generation of this business. Our priority and we've been running the company here as investment grade for many, many years and as an investment grade profile. You know, our priority will be to continue to pay down debt with the available cash that we have to get back down to that 2x to 2.5x leverage range that we're comfortable with. Great. Thank you. Thanks, Joe Ritchie. The next question comes from Christopher Glynn of Oppenheimer. Please go ahead. Thanks. Good morning, everyone. Good morning, Chris. Wanting to go back to the comment on Climate margins getting back to the high teens, low twenties in 2023. Was that comment meant to capture the full year or kind of a target rate by later in the year? Yeah. It really was to capture the full year. Honestly, when we get into the first quarter, we would expect to be very close to, if not right on that target, and then progress through the year in that range. Hopefully that helps. Great. For industrial, just curious, you know, margins kind of broke out last quarter with some one time, but held in your target range here. Just curious how that overall pivot to Mexico, relocating the supply chain and staffing there, if anything interesting is going on there or if it's all going according to plan. Yeah, it's really all going according to plan, Chris. You know, I'll remind you, given the size of the industrial business, and we broke out industrial to give more visibility, a million-dollar shift in performance can be magnified in the margin. The transition to Mexico is going. We're in a very stable state. Feel really good about the supply chain. The industrial business is seeing some headwinds around China. If you look at our profile of our businesses, industrial has still more presence in China than any of our businesses. China's about 8% of Regal Rexnord. For industrial, it's 25%. APAC is 35%. It's a bit more mixed there, and they are seeing some headwinds, and that's really the driver here. Okay. Thank you. Sure. The next question comes from Nigel Coe of Wolfe Research. Please go ahead. Thanks. Good morning, and thanks for the questions. Hi, Nigel. I wouldn't normally lead off with interest, but it's a big swing in the guides, and there's a big step up from 3 Q to 4 Q. Well, 2 Q to 3 Q to 4 Q. Are you baking in future rate increases into that number, or are you marking to market the current rates? You know, given the swing, obviously, in interest, the big swing, you know, you previously expressed confidence, Louis, in the high end. Are we now sort of more at the midpoint? Nigel, first of all, on the uptick in the interest. Certainly there's two components to this. One is based on rate increases that we've seen, and so we're using you know the yield curves to determine what our interest rates should be now and going forward that we're plugging into our profile to see where that interest should come out. There's that piece of it. Then there's the piece that as we've commented from a free cash flow cadence standpoint we haven't generated as much cash in the first three quarters of the year as we normally would. That's largely tied to inventory levels and what we're doing to kinda overserve our highly valued customers. We made great progress in the third quarter in that we're now over 90%, and expect to finish the year still at a 95% range as we exit the year, which means tremendous cash flow in Q4. In Q3, we didn't pay down as much debt as we had anticipated, which also drove some of the interest expense that you're referencing. Those are the two components to it that really impacted the number and the take-up. Again, the nice thing is despite that, we're overperforming from an operational perspective and still able to raise guidance at the midpoint. We feel really good that we're able to overcompensate for that as well as other FX headwinds that our business has been facing, as most others have as well, and still performing very well. Yeah. I would just add on to that, Nigel, exactly what Rob said. You know, we did say the upper end, we reset the midpoint up $0.05. Operationally, we're performing at that upper end. The two items of interest rate and FX should not be missed here, bring us to we feel confident at $10.55. Okay. That's very clear. Then just a quick one for Rob, I think. There's quite a big pickup in the accounts receivable allowances from 2Q to 3Q. I'm just wondering where that landed and what caused that? It really wasn't anything that went through the P&L. It's related to purchase accounting and the way we account for allowances when we purchased or when we merged with Rexnord. There really wasn't a take-up in the allowance that would go through the P&L. It's more just balance sheet related and reestablishing that allowance here in the third quarter. There you go. Nice and easy. Thanks a lot. Agreed. Thanks, Nigel. Once again, if you would like to ask a question, please press star then one. Our next question will come from Chris Dankert of Loop Capital Markets. Please go ahead. Hey, morning. Thanks for taking the question. Hey, Chris. I guess looking at the PMC business, you know, organic growth, I understand, you know, there's some pretty hefty comp issues there, a lot of noise with the PMC deal. You know, 3.6% organic, little bit light versus, you know, some of your major distributors and some of your peers here. I guess maybe I underappreciate it, just the China wind component. Any comment on kind of the organic growth in MCS this quarter and kind of how we're gonna trend forward a bit? Yeah, it was a really hard compare bluntly, and it was a hard compare on two fronts. Wind projects in China as well as solar projects in the U.S. That if you were to eliminate those, we would be at high single digits growth. We felt really good about the performance. Got it. Yeah, thanks so much for breaking that out a bit. Forgive me if I missed it, but on the PMC synergies, you know, both the sales and the cost synergies, any update kind of on what was realized in the quarter here? Yeah, Chris. You know, we did see about $14 million come through in the third quarter, related to the synergies on the PMC deal. That brings us after the third quarter up to about $33 million on a realized year to date. To be clear, we do expect that we should see fourth quarter about $17 million, right? Which would get you about over $50 million for the full year, and really just a bit ahead of our $70 million targeted exit rate from 2022. Chris, on the sales- Got it. Yeah, sorry, go ahead. No, that's exactly what I was gonna circle back on with the sales side. Yeah. Chris, we aren't in a position to give you a specific number here. We're still on our track to get $30 million of incremental sales synergies for this year. We're not prepared to report on Q3. Fair enough. Thanks for all the updates, guys. Yeah, thank you. The next question is a follow-up from Nigel Coe of Wolfe Research. Please go ahead. Thanks. I couldn't resist one more, so thanks for the opportunity. You know, obviously the leverage is sort of like, you know, Joe's already met that question. No doubt you'll take down leverage really quickly post the Altra deal. But I'm just wondering, you know, could non-core asset sales, you know, accelerate that process? You know, is that on the menu of opportunities? You know what? I apologize, Nigel. I didn't hear. Could what sales? What? I'm sorry. Yeah, non-core asset sales. You know, Oh. the extent that there are. Yeah. Yeah. Okay. I'm sorry. I figured that's what you meant, but I'm sorry I misunderstood. Hey, it could, but we're not in a position right now to comment on that. We did a full portfolio review, and we'll continue to do so on a very regular basis. We're not. We don't have a clear plan on anything at this time. Okay, thanks. This concludes our question and answer session. I would like to turn the conference back over to Louis Pinkham for any closing remarks. Thank you, operator, and thanks to our investors and analysts for joining us today. In summary, the Regal Rexnord team is continuing to deliver very strong performance. That gives me confidence that even if we head into a period of heightened macro uncertainty, our Regal Rexnord team can create value for our customers and shareholders and new opportunities for our associates by focusing on controllable execution. We have so many value-creating opportunities to pursue. As we outlined at our September Investor Day, we have a path to accelerated organic growth and material margin and free cash flow upside. With the addition of Altra, our targets move even higher. Thank you again for joining us today, and thank you for your interest in Regal Rexnord. The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.