Slide 1: Fourth Quarter 2018 Earnings Conference Call
Fourth Quarter 2018 Earnings Conference Call February 5, 2019 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Rob Rehard Robert Cherry Vice President Vice President Chief Financial Officer Business Development & Investor Relations Creating a better tomorrow™… ©
Slide 2: Safe Harbor Statement
Safe Harbor Statement The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: With the exception of historical facts, the statements contained in this presentation may be forward-looking statements. Forward-looking statements represent our management’
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 periodically disclose certain financial measures in our quarterly earnings releases, on investor conference calls, and in investor presentati
Slide 4: Agenda and Opening Comments
Agenda and Opening Comments Opening Comments Mark Gliebe, CEO 4Q Results & 2019 Outlook Rob Rehard, CFO Operations Update Jon Schlemmer, COO 2018 Highlights Mark Gliebe, CEO Q&A All Creating a better tomorrow™… ©2019 Regal Beloit Corporation, Proprietary and Confidential 11/26/2018 │ 4
Slide 5: Opening Comments – 4th Quarter Results
Opening Comments – 4th Quarter Results ▪ Organic Sales Up 5.2% – Commercial & Industrial Systems Up 1.3% – Climate Solutions Up 9.4% – Power Transmission Solutions Up 9.0% ▪ Adjusted Operating Margin* Up 80 bps from Prior Year – Benefitted from Volume, Incremental Price, and Productivity – Constrain
Slide 6: Opening Comments – Looking Forward
Opening Comments – Looking Forward ▪ 2019 Expectations – Continued Growth – Tougher Comparisons ▪ Expecting Low to Mid-Single Digit Organic Sales Growth in 2019 – Positive Price Carryover from 2018 – Continued Growth in Residential & Light Commercial HVAC – FER Regulation Tailwind – Modest Growth in
Slide 7: 4th Quarter 2018 Financial Results
4th Quarter 2018 Financial Results ▪ 4Q 2018 Net Sales of $881.7 Million, Up 7.4% – Acquisitions Contributed 3.9% – Business Divested/to be Exited (0.4%) – Foreign Currency Impact of (1.4%) – Organic Sales Up 5.2% ▪ Adjusted Operating Margin* of 10.7% – Up 80 bps from 4Q 2017 – Volume Growth and Tak
Slide 8: 4th Quarter 2018 Financial Results
4th Quarter 2018 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE * Three Months Ended Twelve Months Ended Dec 29, Dec 30, Dec 29, Dec 30, 2018 2017 2018 2017 GAAP Diluted Earnings Per Share $ 1.28 $ 1.15 $ 5.26 $ 4.74 Restructuring and Related Costs 0.04 0.02 0.13 0.22 Purchase Accounting and
Slide 9: 4th Quarter 2018 Key Financial Metrics
4th Quarter 2018 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) ▪ $18.4 Million in 4Q 2018 ▪ 21.0% Adj. ETR* in 4Q 2018 ▪ $77.6 Million in FY 2018 ▪ 20.8% Adj. ETR* in FY 2018 Restructuring and Related Costs ▪ $2.2 Million in 4Q 2018 ▪ $7.7 Million in FY 2018 Balance Sheet at De
Slide 10: Divestiture/Exit Update
Divestiture/Exit Update Hermetic Engineered Motor Aluminum Motor Parts Drives & Controls Distributor Capacitors Castings 2018 Sales $53M $131M $1M $9M $5M Status Exiting Takeaway Divested messageDivested goes here (16 pt.) Signed Exiting Proceeds - ~$134M - Sales and Operating Margin Impact by Segme
Slide 11: 2019 Full Year Guidance
2019 Full Year Guidance ▪ Expected Performance − Low to Mid-Single Digit Organic Sales Growth − Improvement in Adjusted Operating Margin − Free Cash Flow to Exceed Net Income ▪ FY 2019 GAAP Diluted EPS Guidance of $6.59 to $6.99 ▪ FY 2019 Adjusted Diluted EPS* Guidance of $6.15 to $6.55 − Expecting
Slide 12: AHR Expo & FER Regulation
AHR Expo & FER Regulation AHR Innovation Award Energy Efficiency ▪ Upcoming Fan Energy Rating (FER) Regulation ▪ $40 Million Annual Sales Opportunity IoT ▪ Ensite® Motor & Control Takeaway message goes here (16 pt.) ▪ NFC Wireless Communication ▪ Winner of an AHR Innovation Award Disruptive Axial Te
Slide 13: 4Q 2018 Commercial & Industrial Systems
4Q 2018 Commercial & Industrial Systems Sales Adj. Income from Sales Operations* ▪ Organic Sales Up 1.3% ($ millions) ▪ Sales Performance – Demand Up in Oil & Gas, Power Gen, $437 $34 and Commercial HVAC $407 $25 – Distribution Flat – Weakness in Asia ▪ Price Up from 3Q 2018 and Prior Year Takeaway
Slide 14: 4Q 2018 Climate Solutions
4Q 2018 Climate Solutions Sales Adj. Income from Adj. Net Sales* Operations* ▪ Organic Sales Up 9.4% ($ millions) ▪ Sales Performance – NA Resi HVAC Up Low Double Digit $223 $206 $32 $33 – Commercial Refrig & Water Heating Up – Europe Up Slightly – Demand Down in Asia and ME ▪ Price Up from 3Q18Take
Slide 15: 4Q 2018 Power Transmission Solutions
4Q 2018 Power Transmission Solutions Adj. Income from Sales Sales Operations* ▪ Organic Sales Up 9.0% ($ millions) $213 ▪ Sales Performance $197 $24 $25 – Strength in Distribution, Oil & Gas, Marine, and Commercial HVAC – Headwind in Agriculture ▪ Price Up from 3Q18 and Prior Year Takeaway message g
Slide 16: Update on 2017 Investor Day Commitments
Update on 2017 Investor Day Commitments 2019 Targets from 2017 Investor Day Organic Sales Adj. Operating ROIC* Free Cash Flow* Growth Margins* to Net Income 2% – 4% CAGR 200 – 250 bps 300 – 400 bps 100% – 125% Takeaway message goes here (16 pt.) Cumulative Results Through 2018 Free Cash Flow Organic
Slide 17: Full Year 2018 Highlights
Full Year 2018 Highlights ▪ Record Year for Sales and Adjusted Earnings ▪ Organic Sales Up 5.7% ▪ Adjusted Operating Margin* Up 60 bps ▪ Adjusted Diluted EPS* Up 23% ▪ Free Cash Flow to Adj. Net Income* of 116% ▪ Strategic Acquisition in Commercial Air Moving with Nicotra-Gebhardt ▪ Repurchased $128
Slide 18: 2019 Sustainability Report
2019 Sustainability Report ▪ Published Inaugural Sustainability Report ▪ Available at Regal’s Investors Website ▪ Increasing the Impact of Our Handprint ▪ Decreasing the Impact of Our Footprint Takeaway message goes here (16 pt.) We Believe Sustainability Delivers Long-Term Value for Shareholders Cr
Slide 19: Questions and Answers
Questions and Answers Creating a better tomorrow™… ©2019 Regal Beloit Corporation, Proprietary and Confidential
Slide 20: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Twelve Months Ended Dec 29, Dec 30, Dec 29, Dec 30, 2018 2017 2018 2017 GAAP Diluted Earnings Per Share $ 1.28 $ 1.15 $ 5.26 $ 4.74 Restructuring and Related Costs 0.04 0.02 0.13 0.22 Purchase Accounting and Tra
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Commercial & Power Transmission ADJUSTED INCOME FROM OPERATIONS Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Dec 29, Dec 30, Dec 29, Dec 30, Dec 29, Dec 30, Dec 29, Dec 30, 2018 2017 2018 2017 2018 2017 2018 201
Slide 22: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Commercial & Industrial Power Transmission ADJUSTED NET SALES Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Dec 29, Dec 30, Dec 29, Dec 30, Dec 29, Dec 30, Dec 29, Dec 30, 2018 2017 2018 2017 2018 2017 2018 2017 Net Sales $
Slide 23: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations The following tables outline the first and second quarter 2018 net sales and income from operations illustrating the impact of businesses divested and to be exited, which can be used to compare to Regal's 2019 guidance and actual performance. Commercial & Power Indu
Slide 24: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations The following tables outline the third and fourth quarter 2018 net sales and income from operations illustrating the impact of businesses divested and to be exited, which can be used to compare to Regal's 2019 guidance and actual performance. Commercial & Power Indu
Slide 25: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations The following tables outline the full year 2018 net sales and income from operations, and the full year adjusted diluted earnings per share, illustrating the impact of businesses divested and to be exited, which can be used to compare to Regal's 2019 guidance and ac
Slide 26: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED EFFECTIVE TAX RATE Three Months Ended Twelve Months Ended Dec 29, Dec 30, Dec 29, Dec 30, 2018 2017 2018 2017 Income before Taxes $ 75.3 $ 65.3 $ 292.2 $ 277.2 Provision for Income Taxes 18.8 12.7 56.4 59.1 Effective Tax Rate 25.0% 19.4% 19.3% 21.3% Income
Slide 27: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations FREE CASH FLOW Three Months Ended Twelve Months Ended (Dollars in Millions) Dec 29, Dec 30, Dec 29, Dec 30, 2018 2017 2018 2017 Net Cash Provided by Operating Activities $ 112.4 $ 56.9 $ 362.7 $ 291.9 Additions to Property Plant and Equipment (18.4) (16.2) (77.6) (6
Slide 28: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ORGANIC SALES GROWTH Three Months Ended (Dollars in Millions) Commercial & Power Industrial Climate Transmission Systems Solutions Solutions Total Regal Net Sales Three Months Ended Dec 29, 2018 $ 436.7 $ 232.2 $ 212.8 $ 881.7 Net Sales from Business Acquired (31.4)
Slide 29: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations TOTAL NET DEBT/ADJUSTED EBITDA (Dollars in Millions) LTM Dec 29, 2018 Net Income Attributable to Regal Beloit Corporation $ 231.2 Plus: Minority Interest 4.6 Plus: Taxes 56.4 Plus: Interest Expense 55.2 Less: Interest Income (1.9) Plus: Depreciation and Amortization
Slide 30: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations RETURN ON INVESTED CAPITAL (ROIC) (Dollars in Millions) Dec 29, Dec 30, Dec 31, Jan 2, 2018 2017 2016 2016 Cash and Cash Equivalents $ (248.6) $ (139.6) $ (284.5) $ (252.9) Current Maturities of Debt 0.5 101.2 100.6 6.3 Long-Term Debt 1,306.6 1,039.9 1,310.9 1,715.6
Slide 31: Regal Shipping Days
Appendix Regal Shipping Days 1Q 2Q 3Q 4Q FY 2014 63 63 63 64 253 2015 64 63 64 59 250 2016 64 64 63 60 251 2017 64 63 63 60 250 2018 63 64 63 61 251 2019 63 63 63 61 250 ▪ Regal operates on a 52/53 week fiscal year ending on the Saturday closest to December 31 ▪ Fiscal Years 2015, 2016, 2017, 2018 a