Slide 1: Second Quarter 2019 Earnings Conference Call
2Q AUGUST 6, 2019 Second Quarter 2019 Earnings CONFERENCE CALL Louis Pinkham Jon Schlemmer Rob Rehard Rob Cherry Chief Executive Officer Chief Operating Officer Vice President Vice President Chief Financial Officer Business Development & Investor Relations
Slide 2: Safe Harbor Statement
2Q 2019 SAFE HARBOR STATEMENT The following is a cautionary statement made under the Private Securities Litigation Reform Act rates, recession, government policies, including policy changes affecting taxation, trade, tariffs, of 1995: With the exception of historical facts, the statements contained
Slide 3: Non-GAAP Financial Measures
2Q 2019 NON-GAAP FINANCIAL MEASURES We prepare financial statements in accordance with accounting principles generally accepted Corporation, adjusted income before taxes, adjusted provision for income taxes, adjusted in the United States (“GAAP”). We also periodically disclose certain financial meas
Slide 4: Agenda
2Q 2019 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 2Q 2019 Results & 2019 Outlook ROB REHARD, CFO Questions & Answers ALL Closing Remarks LOUIS PINKHAM, CEO ©2019 Regal Beloit Corporation, Proprietary and Confidential 4
Slide 5: Overview: Leveraging Reorganization to Drive P&L Focus Deeper
2Q 2019 OVERVIEW Highlights ($ in millions, except per share data) 2Q 2019 2Q 2018 • Organic Growth* of (2.2%) • Adjusted Diluted EPS* of $1.52 Adjusted Net Sales* $868. 1 $901.3 • Adjusted Operating Margin* of 11.0% • Total Company Delevered at 16% Adjusted Income from Operations* $95.4 $100.8 • Re
Slide 6: Commercial & Industrial Systems
2Q 2019 COMMERCIAL & INDUSTRIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income from • Organic Sales* Down 5.5% ($ Millions) Operations* ($ Millions) • Market Performance – NA Pool Pump – China $435 – Commercial HVAC $402 – Power Generation + Distribution Share $33 Adjusted Operating Margin* • 6.0
Slide 7: Climate Solutions
2Q 2019 CLIMATE SOLUTIONS Sales Adjusted Net Sales* Adjusted Income from • Organic Sales* Up 2.3% ($ Millions) Operations* ($ Millions) • Market Performance + FER Pre-buy + NA Residential HVAC – Commercial Refrigeration $258 $262 – Account Pruning $46 $43 Adjusted Operating Margin* • 17.6% of Adj. N
Slide 8: Power Transmission Solutions
2Q 2019 POWER TRANSMISSION SOLUTIONS Sales Adjusted Net Sales* Adjusted Income from • Organic Sales* Down 0.8% ($ Millions) Operations* ($ Millions) • Market Performance – Industrial Distribution De-stocking – Upstream Oil & Gas $208 $204 – Agriculture – Beverage + Renewable Energy $25 $25 Adjusted
Slide 9: Key Financial Metrics
2Q 2019 KEY FINANCIAL METRICS Capital Expenditures Balance Sheet as June 29,2019 • $36.0 Million in 2Q 2019 • Total Debt of $1,223 Million • $85.0 Million Expected in FY 2019 • Net Debt of $932 Million • Net Debt/Adj. EBITDA* of 1.8 Restructuring & Related Costs Free Cash Flow* • $3.6 Million in 2Q
Slide 10: Full Year 2019 Guidance
2Q 2019 FULL YEAR 2019 GUIDANCE FY 2019 Expected Performance • Organic Growth Down Low to Mid-Single Digit • Weather Conditions • Global Trade Uncertainties • Excess Channel Inventories • Economic Slowdown in Asia & Europe FY 2019 GAAP Diluted EPS Guidance Lowered to $6.00 to $6.30 FY 2019 Adjusted
Slide 11: 2Q Questions & Answers
2Q Questions & Answers Louis Pinkham Jon Schlemmer Rob Rehard Rob Cherry Chief Executive Officer Chief Operating Officer Vice President Vice President Chief Financial Officer Business Development & Investor Relations
Slide 12: Adjusted Diluted Earnings Per Share
2Q 2019 APPENDIX ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Six Months Ended Jun 29, Jun 30, Jun 29, Jun 30, 2019 2018 2019 2018 GAAP Diluted Earnings Per Share $ 1.55 $ 1.50 $ 3.54 $ 2.81 Restructuring and Related Costs 0.07 0.03 0.11 0.06 Purchase Accounting and Transaction Costs — 0.0
Slide 13: Adjusted Income from Operations
2Q 2019 APPENDIX Three Months Ended Commercial & Power Transmission ADJUSTED INCOME FROM OPERATIONS Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30, 2019 2018 2019 2018 2019 2018 2019 2018 GAAP Income fro
Slide 14: Adjusted Net Sales
2Q 2019 APPENDIX Three Months Ended Commercial & Industrial Power Transmission ADJUSTED NET SALES Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30, 2019 2018 2019 2018 2019 2018 2019 2018 Net Sales $ 401.8 $ 469.0 $
Slide 15: Adjusted Effective Tax Rate
2Q 2019 APPENDIX ADJUSTED EFFECTIVE TAX RATE Three Months Ended Six Months Ended Jun 29, Jun 30, Jun 29, Jun 30, 2019 2018 2019 2018 Income before Taxes $ 83.8 $ 85.6 $ 191.8 $ 160.6 Provision for Income Taxes 16.4 18.3 37.6 34.0 Effective Tax Rate 19.6% 21.4% 19.6% 21.2% Income before Taxes $ 83.8
Slide 16: Free Cash Flow
2Q 2019 APPENDIX FREE CASH FLOW Three Months Ended Six Months Ended (Dollars in Millions) Jun 29, Jun 30, Jun 29, Jun 30, 2019 2018 2019 2018 Net Cash Provided by Operating Activities $ 112.3 $ 101.8 $ 130.6 $ 144.3 Additions to Property Plant and Equipment (36.0) (21.2) (56.2) (40.5) Free Cash Flow
Slide 17: Organic Sales Growth
2Q 2019 APPENDIX ORGANIC SALES GROWTH Three Months Ended (Dollars in Millions) Commercial & Power Industrial Climate Transmission Systems Solutions Solutions Total Regal Net Sales Three Months Ended Jun 29, 2019 $ 401.8 $ 267.9 $ 204.0 $ 873.7 Net Sales from Business Divested/to be Exited - (5.6) -
Slide 18: Total Net Debt/Adjusted EBITDA
2Q 2019 APPENDIX TOTAL NET DEBT/ADJUSTED EBITDA (Dollars in Millions) LTM Jun 29, 2019 Net Income $ 263.4 Plus: Taxes 60.0 Plus: Interest Expense 55.0 Less: Interest Income (3.6) Plus: Depreciation and Amortization 137.9 Plus: Restructuring and Related Costs 10.4 Plus: Purchase Accounting & Transact
Slide 19: First and Second Quarter 2018 Ongoing Business Schedules
2Q 2019 APPENDIX 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 Industrial Climate Tr
Slide 20: Third and Fourth Quarter 2018 Ongoing Business Schedules
2Q 2019 APPENDIX 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 Industrial Climate Tr
Slide 21: Full Year 2018 Ongoing Business Schedule
2Q 2019 APPENDIX 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 actual performance.
Slide 22: Fiscal Calendar: Weeks per Quarter
2Q 2019 APPENDIX 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 and 2019 have