Slide 1: Third Quarter 2020 Earnings Conference Call
3Q October 29, 2020 Third Quarter 2020 Earnings CONFERENCE CALL Louis Pinkham Rob Rehard Chief Executive Officer Vice President Chief Financial Officer
Slide 2: Cautionary Statement
3Q 2020 CAUTIONARY STATEMENT The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: rates, inflation rates, interest rates, recession, government policies, including policy changes affecting With the exception of historical facts, the statements cont
Slide 3: Non-GAAP Financial Measures
3Q 2020 NON-GAAP FINANCIAL MEASURES We prepare financial statements in accordance with accounting principles generally accepted percentage of adjusted net income attributable to Regal Beloit Corporation, adjusted income in the United States of America (“GAAP”). We also periodically disclose certain
Slide 4: Agenda
3Q 2020 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 3Q 2020 Results & 4Q 2020 Outlook ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 4
Slide 5: CEO Commentary and Overview
3Q 2020 CEO COMMENTARY AND OVERVIEW • Sales Down 1.5% on an Organic Basis ($ in millions, except per share data) 3Q 2019 3Q 2020 • Moderating Headwinds From COVID-19 • 80/20 Pruning Initiatives Reduced Sales by ~200bps Adjusted Net Sales* $771.4 $758.2 • Operating Margin Up 230bps On Cost-Out Initia
Slide 6: Agenda
3Q 2020 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 3Q 2020 Results & 4Q 2020 Outlook ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 6
Slide 7: Commercial Systems
3Q 2020 COMMERCIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Up 1.3% ($ Millions) from Operations* ($ Millions) • Key Drivers + Pool + China Share Gain + N.A. Non-Res (C-HVAC) $214.8 $218.5 – Mexico Output Challenges ‒ 80/20 Account Pruning (~2.0%) Adjusted Operating Margin*
Slide 8: Industrial Systems
3Q 2020 INDUSTRIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 2.9% ($ Millions) from Operations* ($ Millions) • Key Drivers – General Industrial (N.A., APAC) – Oil & Gas – 80/20 Account Pruning (~1.8%) + Data Centers $143.8 $9.3 $138.8 Adjusted Operating Margin* • 6.7% o
Slide 9: Climate Solutions
3Q 2020 CLIMATE SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Up 2.5% ($ Millions) from Operations* ($ Millions) • Key Drivers + N.A. HVAC – 80/20 Pruning (~3.0%) $230.0 $234.0 – Commercial Refrigeration – Light C-HVAC $39.4 $40.1 Adjusted Operating Margin* • 17.1% of Adj. Net
Slide 10: Power Transmission Solutions
3Q 2020 POWER TRANSMISSION SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 8.9% ($ Millions) from Operations* ($ Millions) • Key Drivers – N.A. General Industrial – Upstream Oil & Gas – Alternative Energy lumpiness – 80/20 Account Pruning (~0.7%) $182.8 $166.9 + Unit handli
Slide 11: Key Financial Metrics
3Q 2020 KEY FINANCIAL METRICS Capital Expenditures Balance Sheet as September 26, 2020 • $9.3 Million in 3Q 2020 • Total Debt of $1,070.8 Million • $45.0 Million Expected in FY 2020 • Net Debt of $583.3 Million • Down $110.2 Million from 2Q 2020 Effective Tax Rate (ETR) • Net Debt/Adj. EBITDA* of 1.
Slide 12: 4Q 2020 Outlook
3Q 2020 4Q 2020 OUTLOOK Introducing 4Q 2020 Guidance • Adjusted Diluted Earnings per Share* in a Range of $1.46 to $1.66 for 4Q, Up Almost 25% Y/Y at the Mid-Point • Implies Adjusted Diluted Earnings per Share in a Range of $5.45 to $5.65 for FY 2020, Up Y/Y at the Mid-Point Other FY 2020 Modeling A
Slide 13: Agenda
3Q 2020 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 3Q 2020 Results & 4Q 2020 Outlook ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 13
Slide 14: 3Q Appendix
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Slide 15: Adjusted Diluted Earnings Per Share
3Q 2020 APPENDIX ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Nine Months Ended Sep 26, Sep 28, Sep 26, Sep 28, 2020 2019 2020 2019 GAAP Diluted Earnings Per Share $ 1.60 $ 1.19 $ 3.41 $ 4.75 Restructuring and Related Costs 0.12 0.14 0.43 0.24 Loss (Gain) on Businesses Divested and Assets
Slide 16: 2020 Adjusted Annual Guidance
3Q 2020 APPENDIX 2020 ADJUSTED ANNUAL GUIDANCE Minimum Maximum 2020 Diluted EPS Annual Guidance $ 4.75 $ 4.95 Restructuring and Related Costs 0.55 0.55 Loss on Businesses Divested and Assets to be Exited 0.08 0.08 Loss on Sales of Assets 0.01 0.01 Net Loss from Businesses Divested/to be Exited 0.01
Slide 17: Adjusted Income from Operations
3Q 2020 APPENDIX Three Months Ended Power Commercial Transmission ADJUSTED INCOME FROM OPERATIONS Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Sep 26, Sep 28, Sep 26, Sep 28, Sep 26, Sep 28, Sep 26, Sep 28, Sep 26, Sep 28, 2020 2019 2020 2019 2020 2019 202
Slide 18: Adjusted Net Sales
3Q 2020 APPENDIX Three Months Ended Commercial Power Transmission ADJUSTED NET SALES Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Sep 26, Sep 28, Sep 26, Sep 28, Sep 26, Sep 28, Sep 26, Sep 28, Sep 26, Sep 28, 2020 2019 2020 2019 2020 2019 2020 2019 2020 2
Slide 19: Adjusted Effective Tax Rate
3Q 2020 APPENDIX ADJUSTED EFFECTIVE TAX RATE Three Months Ended Nine Months Ended (Dollars in Millions) Sep 26, Sep 28, Sep 26, Sep 28, 2020 2019 2020 2019 Income before Taxes $ 83.4 $ 60.7 $ 181.8 $ 252.5 Provision for Income Taxes 17.1 9.9 39.5 47.5 Effective Tax Rate 20.5% 16.3% 21.7% 18.8% Incom
Slide 20: Free Cash Flow
3Q 2020 APPENDIX Three Months Nine Months FREE CASH FLOW Ended Ended (Dollars in Millions) Sep 26, Sep 28, Sep 26, Sep 28, 2020 2019 2020 2019 Net Cash Provided by Operating Activities $ 120.3 $ 140.6 $ 309.9 $ 271.2 Additions to Property Plant and Equipment (9.3) (21.1) (29.7) (77.3) Free Cash Flow
Slide 21: Organic Sales Growth
3Q 2020 APPENDIX ORGANIC SALES GROWTH Three Months Ended (Dollars in Millions) Power Commercial Industrial Climate Transmission Systems Systems Solutions Solutions Total Regal Net Sales Three Months Ended Sep 26, 2020 $ 218.5 $ 138.8 $ 234.0 $ 166.9 $ 758.2 Impact from Foreign Currency Exchange Rate
Slide 22: Operating Leverage - Power Transmission Solutions
3Q 2020 APPENDIX OPERATING LEVERAGE-POWER TRANSMISSION SOLUTIONS Three Months Ended (Dollars in Millions) Sep 26, Sep 28, 2020 2019 Change GAAP Income from Operations $ 18.9 $ 20.9 $ (2.0) Adjusted Income from Operations $ 21.3 $ 21.8 $ (0.5) Net Sales $ 166.9 $ 182.8 $ (15.9) Adjusted Net Sales $ 1
Slide 23: Total Gross Debt/EBITDA
3Q 2020 APPENDIX TOTAL GROSS DEBT/EBITDA TOTAL GROSS DEBT/ADJUSTED EBITDA (Dollars in Millions) (Dollars in Millions) LTM Sep 26, LTM Sep 26, 2020 2020 Net Income $ 179.9 Net Income $ 179.9 Plus: Taxes 53.2 Plus: Taxes 53.2 Plus: Interest Expense 43.7 Plus: Interest Expense 43.7 Less: Interest Incom
Slide 24: Total Net Debt/EBITDA
3Q 2020 APPENDIX TOTAL NET DEBT/EBITDA TOTAL NET DEBT/ADJUSTED EBITDA (Dollars in Millions) (Dollars in Millions) LTM Sep 26, LTM Sep 26, 2020 2020 Net Income $ 179.9 Net Income $ 179.9 Plus: Taxes 53.2 Plus: Taxes 53.2 Plus: Interest Expense 43.7 Plus: Interest Expense 43.7 Less: Interest Income (5
Slide 25: Fiscal 2019 First Quarter Schedule for Ongoing Business
3Q 2020 APPENDIX The following tables outline by quarter and full year the 2019 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. Power Commercial Industrial Climate Transmission Systems Syste
Slide 26: Fiscal 2019 Third Quarter Schedule for Ongoing Business
3Q 2020 APPENDIX Power Commercial Industrial Climate Transmission Systems Systems Solutions Solutions Total Regal Fiscal 2019 Third Quarter Schedule for Ongoing Business Net Sales Three Months Ended September 28, 2019 $ 214.8 $ 143.8 $ 230.9 $ 182.8 $ 772.3 Net Sales from Businesses Divested/to be E
Slide 27: Fiscal 2019 Twelve Months Ended for Ongoing Business
3Q 2020 APPENDIX Power Commercial Industrial Climate Transmission Systems Systems Solutions Solutions Total Regal Fiscal 2019 Twelve Months Ended for Ongoing Business Net Sales Twelve Months Ended December 28, 2019 $ 879.2 $ 558.0 $ 940.3 $ 756.4 $ 3,133.9 Net Sales from Businesses Divested/to be Ex
Slide 28: Shipping Days
3Q 2020 APPENDIX Shipping 1Q 2Q 3Q 4Q FY Days 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 2020 63 63 63 64 253 Regal operates on a 52/53 week fiscal year ending on the Saturday closest to December 31 Fiscal Years 2