Slide 1: Regal Beloit Corporation Third Quarter 2014 Earnings Conference Call
Regal Beloit Corporation Third Quarter 2014 Earnings Conference Call November 4, 2014 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Chuck Hinrichs John Perino Vice President Vice President Chief Financial Officer Investor Relations
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our management’s judgment regarding future events. In many cases, you can identify forward-looking statements by term
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures We prepare financial statements in accordance with accounting principles generally accepted in the United States (GAAP). We also disclose adjusted diluted earnings per share (EPS), adjusted gross profit, adjusted gross profit as a percentage of net sales, adjusted income
Slide 4: Agenda
Agenda Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Operations Update Jon Schlemmer Summary Mark Gliebe Q&A All p4
Slide 5: Opening Comments – 3rd Quarter Results
Opening Comments – 3rd Quarter Results > Solid 3rd Quarter Results in Sales and Free Cash Flow > Adjusted EPS* in Line with Guidance > Revenues Up 8% Over Prior Year − N.A. Residential HVAC − N.A. Mechanical − N.A. C&I Motors − China − India − Venezuela − Acquisitions * Non-GAAP Financial Measuremen
Slide 6: Opening Comments – 3rd Quarter Results
Opening Comments – 3rd Quarter Results > Operating Profit Margin as Expected > Simplification Projects Progressing − Acuna Consolidation Completed − Springfield Transition to be Completed in February 2015 − Progress on Two Kentucky Plant Closures − Sale of China JV > Strong Free Cash Flow* Performan
Slide 7: Opening Comments – 4th Quarter Outlook
Opening Comments – 4th Quarter Outlook > Continued Growth in North America Residential HVAC > Strong Growth in Mechanical > Flat in North America C&I Motors > Venezuela Market Instability > Adjusted Operating Margins Up in the Quarter p7
Slide 8: 3rd Quarter Financial Results
3rd Quarter Financial Results ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended Nine Months Ended Sep 27, Sep 28, Sep 27, Sep 28, 2014 2013 2014 2013 GAAP Diluted Earnings Per Share $ 1.05 $ 1.16 $ 3.25 $ 3.38 Purchase Accounting Costs 0.02 — 0.05 — Restructuring Costs 0.04 0.02 0.15 0.05 Tax
Slide 9: 3rd Quarter Financial Results
3rd Quarter Financial Results > Sales of $830 Million, Up 8.0% from Prior Year – Foreign Currency Translation Increased Total Net Sales by 0.1% – Sales from Acquired Businesses $42.7 Million – Organic Sales* up 2.6% from Prior Year > Adjusted Gross Margin* of 25.1% – Adjusted for Restructuring and P
Slide 10: Key Financial Metrics
Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) > $17.6 Million in 3Q 2014 > 27.1% ETR in 3Q 2014 > $80 Million Est. for FY 2014 > 25% ETR Est. for 4Q 2014 Balance Sheet at Sep 27, 2014 3Q 2014 Free Cash Flow* > Total Debt of $677 Million > $64 Million > Net Debt of $350 Million
Slide 11: 4th Quarter 2014 Guidance
4th Quarter 2014 Guidance > GAAP EPS Guidance of $0.83 to $0.91 > Adjusted EPS Guidance of $0.90 to $0.98 – $0.06 of Restructuring Charges – $0.01 of Purchase Accounting Adjustments > Continued Headwinds from Venezuelan Operations > Guidance Excludes Potential Devaluation of the Venezuelan Bolivar –
Slide 12: End Market Update
End Market Update ~8% ~(1%) ~18% ~(1%) NA HVAC NA C&I Motors NA Mechanical Other > Overall Market > Refrigeration and > Strength in Power > Venezuela Down Strength Irrigation Down Transmission Distribution > Europe Flat, > SEER 13 OEM > Commercial Channel Orders Declining Pre-Build HVAC Up > Strengt
Slide 13: Design Platform Simplification
Design Platform Simplification Platform Description 48 Frame Fractional HVAC Motors Fractional HVACR Motors 3.3” and Blowers Worm Gear Mechanical Industrial Motors for Asia IEC (IE3) and Europe 48/56 Frame Fractional C&I Motors p 13
Slide 14: Footprint Simplification
Footprint Simplification > Acuna Now Completed > Largest Phase of the Australia Restructuring to be Completed by Year End > Expect to be Substantially Completed with Springfield Production by End of February > Kentucky Transitions Progressing as Planned > Announced Plans to Consolidate Mechanical Op
Slide 15: Energy Efficiency Retrofits
Energy Efficiency Retrofits High Efficiency Right Variable Speed Pool Commercial HVAC Commercial Angle (HERA) Motors & Controls ECM Motors Refrigeration ECM Fan Systems p 15
Slide 16: Closing Comments
Closing Comments > 3Q 2014 Results in Line with Guidance > Strong Free Cash Flow Performance > Expect 4Q 2014 Operating Margin Improvement > Focus on Simplification Initiatives > Successful Integration of Acquisitions > Strong Acquisition Pipeline > Balance Sheet Provides Flexibility p 16
Slide 17: Questions and Answers
REGAL Questions and Answers
Slide 18: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended Nine Months Ended Sep 27, Sep 28, Sep 27, Sep 28, 2014 2013 2014 2013 GAAP Diluted Earnings Per Share $ 1.05 $ 1.16 $ 3.25 $ 3.38 Purchase Accounting Costs 0.02 — 0.05 — Restructuring Costs 0.04 0.02 0.15 0.05
Slide 19: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED INCOME FROM OPERATIONS* Three Months Ended Nine Months Ended Dollars in Millions Sep 27, Sep 28, Sep 27, Sep 28, 2014 2013 2014 2013 GAAP Income from Operations $ 74.7 $ 78.8 $ 232.1 $ 235.8 Purchase Accounting and Transaction Costs 1.2 - 3.3 - Restructurin
Slide 20: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations EBITDA Reconciliation Dollars in Millions 4Q 2013 1Q 2014 2Q 2014 3Q 2014 LTM Net Income ($33.2) $43.8 $56.2 $47.5 $114.3 Asset Impairment and Other, Net 81.0 - 1.0 - 82.0 Plus: Minority Interest 0.4 1.2 1.9 1.3 4.8 Plus: Taxes -3.7 16.0 21.0 18.1 51.4 Plus: Interes
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Organic Growth Reconciliation Net Sales Quarter Ended Sept. 27, 2014 $829.8 Net Sales from Businesses Acquired Within Last Twelve Months (42.7) Impact of Foreign Currency Exchange Rates (0.6) Incremental Sales from Sold Joint Venture 1.5 Adjusted Net Sales Quarter E