Slide 1: Regal Beloit Corporation Third Quarter 2015 Earnings Conference Call
Regal Beloit Corporation Third Quarter 2015 Earnings Conference Call November 9, 2015 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Chuck Hinrichs Robert Cherry Vice President Vice President Chief Financial Officer Investor Relations
Slide 2: Welcome
Welcome Rob Cherry Vice President - Investor Relations robert.cherry@regalbeloit.com (608) 361-7530 p2
Slide 3: 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 4: 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 that may be considered “non- GAAP” financial measures. We believe that these non-GAAP financ
Slide 5: Agenda
Agenda Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Segment Update Jon Schlemmer Mark Gliebe Summary Mark Gliebe Q&A All p5
Slide 6: Opening Comments – 3rd Quarter Results
Opening Comments – 3rd Quarter Results > 3rd Quarter Highlights − Sales Up 6% − Increased Adjusted Operating Margin* to 11.5%, Up 180 Basis Points Over Prior Year − Adjusted Earnings Per Share* Up 24% − Free Cash Flow* 175% of Net Income, Reduced Debt by $79 Million > Challenging Sales and Orders En
Slide 7: Opening Comments – 3rd Quarter Results
Opening Comments – 3rd Quarter Results > Commercial & Industrial Systems – Organic Sales Down 5% − Steep Reduction in Oil & Gas and Weak Demand in China − Adjusted Operating Margin* Up 140 Basis Points > Climate Solutions – Organic Sales Down 7% − SEER 13 Pre-Build, Two-Way Material Price Formulas a
Slide 8: Opening Comments – 3rd Quarter Results
Opening Comments – 3rd Quarter Results PTS Integration Remains on Track > Completed the Philippines and India Sites in the Quarter > Expect PTS Site Integrations to be Complete in 4Q 2015 > ERP Integrated by 3Q 2016 > Synergies Expected to Exceed the Year 1 Target of $7 Million > Ongoing Positive Cu
Slide 9: Looking Forward
Looking Forward > Sales Headwinds − Oil & Gas Represents an Estimated $90 to $100 Million Headwind in 2015 − SEER 13 Becomes Tailwind in 2016 − Expect the Weakness in China to Continue Through the Year > Remain Focused on Margin Improvement and PTS Integration > Guidance Reflects Record Sales and Ea
Slide 10: 3rd Quarter 2015 Financial Results
3rd Quarter 2015 Financial Results > Sales of $882 Million, Up 6.3% from Prior Year – Net Acquisition Growth of 15.2% – Foreign Currency Translation of (3.0%) – Organic Sales Down 5.9% > Adjusted Operating Profit Margin* of 11.5%, Up 180 Basis Points from Prior Year – Contribution of Simplification
Slide 11: 3rd Quarter 2015 Financial Results
3rd Quarter 2015 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Oct 3, Sep 27, 2015 2014 GAAP Diluted Earnings Per Share $ 1.41 $ 1.05 Purchase Accounting and Transaction Costs $ — $ 0.02 Restructuring Costs $ 0.02 $ 0.04 Loss on Sale of Joint Venture $ — $ 0.04 Adjusted Di
Slide 12: 3Q 2015 Key Financial Metrics
3Q 2015 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) > $21 Million in 3Q 2015 > 25.2% ETR in 3Q 2015 > $65 Million in YTD 2015 > Expect 26% ETR for FY 2015 > $90 Million Expected in FY 2015 > Includes Tax Synergy from PTS Acquisition Balance Sheet at Oct. 3, 2015 Free Cash Flo
Slide 13: 2015 Full Year Guidance
2015 Full Year Guidance > 4th Quarter 2015 GAAP EPS Estimate of $0.98 to $1.08; Full Year 2015 GAAP EPS Guidance of $4.59 to $4.69 > 4th Quarter 2015 Adjusted EPS* Estimate of $1.08 to $1.18 − $0.10 of Restructuring Charges in 4Q 2015 > Full Year 2015 Adjusted EPS* Guidance of $5.25 to $5.35 > Assum
Slide 14: Margin Improvement Progress
Margin Improvement Progress Adj. Operating Profit Margin* Key Drivers 11.9% > Simplification Initiative 11.5% 11.1% 10.7% > SG&A and Cost Controls 10.0% 9.4% 9.8% 9.7% > PTS Acquisition 3Q15 Accomplishments > Completed Our Largest ERP Conversion > Completed the Manufacturing Exit as Planned in the K
Slide 15: Commercial & Industrial Systems
Commercial & Industrial Systems (millions) 3Q Sales Versus Prior Year Adj. Operating Margin* 9.3% > Up 140 Basis Points from Prior Year ($24) Oil & Gas > Significant Self Help Efforts ($ 6) China Power Gen − Completed the Simplification Distribution of the Kentucky-Based Parts Operations in 3Q 2015
Slide 16: Climate Solutions
Climate Solutions (millions) 3Q Sales Versus Prior Year Adj. Operating Margin* 15.5% > Up 320 Basis Points from Prior Year Regal Customers − Benefits of Simplification and Cost Reduction Efforts SEER 13 Mix − Prior Year Inefficiencies Price − Benefits from GSP Comm. Ref. Asia & ME Adjusted Operating
Slide 17: Power Transmission Solutions
Power Transmission Solutions (millions) 3Q Sales Versus Prior Year End Markets - Total Segment Oil & Gas Food & Beverage Ag Equipment Material Handling Distribution Renewable Energy Adj. Operating Margin* 10.8% > Downward Pressure from Volume Declines > PTS Synergies Help to Offset Impact from Volum
Slide 18: Summary Comments
Summary Comments 3rd Quarter Results > Sales Up 6% > Adjusted Operating Profit Margin* Up 180 Basis Points > PTS Integration On Track > Free Cash Flow* 175% of Net Income, Paid Down $79 Million Debt September YTD Results Sales Adj. Op Profit* Free Cash Flow* $303 $202 $2,736 $2,481 $167 $247 2014 20
Slide 19: Questions and Answers
REGAL Questions and Answers
Slide 20: Appendix Adjusted Diluted EPS
Appendix Adjusted Diluted EPS ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Nine Months Ended Oct 3, Sep 27, Oct 3, Sep 27, 2015 2014 2015 2014 Diluted Earnings Per Share $ 1.41 $ 1.05 $ 3.61 $ 3.25 Goodwill Impairment - - - 0.02 Purchase Accounting and Transaction Costs - 0.02 0.47 0.05 Re
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Dollars in Millions Three Months Ended Commercial & Industrial Power Transmission Adjusted Operating Income Systems Climate Solutions Solutions Total Regal Oct 3, Sep 27, Oct 3, Sep 27, Oct 3, Sep 27, Oct 3, Sep 27, 2015 2014 2015 2014 2015 2014 2015 2014 Income fro
Slide 22: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations FREE CASH FLOW RECONCILIATION Dollars in Millions Three Months Ended Nine Months Ended Oct 3, Sep 27, Oct 3, Sep 27, 2015 2014 2015 2014 Net Cash Provided by Operating Activities $ 129.7 $ 81.8 $ 265.4 $ 227.1 Additions to Property Plant and Equipment (18.9) (17.6)
Slide 23: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Nine Months ORGANIC GROWTH Ended Ended Dollars in Millions Oct 3, 2015 Net Sales $ 882.3 $ 2,736.2 Net Sales from Businesses Acquired (128.9) (424.5) Impact from Foreign Currency Exchange Rates 24.6 71.3 Net Sales from Businesses Divested 2.8 10.5 Adjus
Slide 24: Regal Shipping Days
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 > Regal operates on a 52/53 week fiscal year ending on the Saturday closest to December 31 > Fiscal Years 2015 and 2016 have 52 weeks > Fiscal Year 2014 had 53 weeks p 24