Regal Rexnord Corporation · NYSE:RRX
Regal Rexnord — Regal Beloit — Q4 2019 Earnings Presentation
37 slides from Regal Rexnord's earnings presentation, Feb 4, 2020
Slide 1: Fourth Quarter 2019 Earnings Conference Call
4Q February 4, 2020 Fourth Quarter 2019 Earnings CONFERENCE CALL Louis Pinkham Rob Rehard Rob Cherry Chief Executive Officer Vice President Vice President Chief Financial Officer Investor Relations
Slide 2: Cautionary Statement
4Q 2019 CAUTIONARY STATEMENT The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: and other external factors that we cannot control; product liability and other litigation, or claims by end With the exception of historical facts, the statements con
Slide 3: Non-GAAP Financial Measures
4Q 2019 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 (“GAAP”). We also periodically disclose certain financial m
Slide 4: Agenda
4Q 2019 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 4Q 2019 Results & 2020 Outlook ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 4
Slide 5: Overview
4Q 2019 OVERVIEW • U.S. & China Industrial Slowdown, Distribution, OEM De-Stocking ($ in millions, except per share data) 4Q 2019 4Q 2018 • Reorganization and Cost-Out Initiatives Driving Performance • Adj. Operating Margin Delevered* at 12.2%, 15.5% YoY Adjusted Net Sales* $738.0 $817.8 • Sales per
Slide 6: Industrial Systems
4Q 2019 INDUSTRIAL SYSTEMS TerraMAX® Industrial Motor Platform New Generator Platform ©2020 Regal Beloit Corporation 6
Slide 7: Overview – Commercial Systems
4Q 2019 OVERVIEW – COMMERCIAL SYSTEMS Energy Efficient Direct Drive Integrated Motorized Pool Pump Motor Fans & Blowers ©2020 Regal Beloit Corporation 7
Slide 8: Overview
4Q 2019 OVERVIEW • Climate Solutions and PTS Operating Solidly • Climate Adj. OP Margin* Up 240 bps, PTS Up 120 bps • Overcame Weather and Inventory De-Stocking Headwinds • Operating Profit Up YoY Despite Down Sales * Non-GAAP Financial Measurement, See Appendix for Reconciliation. ©2020 Regal Beloi
Slide 9: Climate Solutions
4Q 2019 CLIMATE SOLUTIONS FER Compliant Furnace Products Global Boiler Gas Pre-Mix Efficiency and Features ©2020 Regal Beloit Corporation 9
Slide 10: Power Transmission Solutions
4Q 2019 POWER TRANSMISSION SOLUTIONS Modsort™ Material Handling Solutions Renewable Energy ©2020 Regal Beloit Corporation 10
Slide 11: Overview
4Q 2019 OVERVIEW • New Leadership in 12 of 25 Business Unit Management Roles ($ in millions, except per share data) 4Q 2019 4Q 2018 • Systematically Executing on 80/20 • ~$14M in Low Margin Sales Pruned in 4Q, ~1.7% of Sales Decline Adjusted Net Sales* $738.0 $817.8 • 900+ Associates Trained or 22%
Slide 12: Agenda
4Q 2019 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 4Q 2019 Results & 2020 Outlook ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 12
Slide 13: Commercial Systems
4Q 2019 COMMERCIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 10.4% ($ Millions) from Operations* ($ Millions) • Market Performance – NA Pool Pump – OEM & Distribution – NA General Industry – China $227.1 – 80/20 Account Pruning (~2%) $202.0 Adjusted Operating Margin* •
Slide 14: Industrial Systems
4Q 2019 INDUSTRIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 14.2% ($ Millions) from Operations* ($ Millions) • Market Performance – Power Generation – NA Industrial – China Industrial – 80/20 Account Pruning (~1.5%) $162.1 $138.0 Adjusted Operating Margin* • 1.2% of Ad
Slide 15: Climate Solutions
4Q 2019 CLIMATE SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 6.5% ($ Millions) from Operations* ($ Millions) • Market Performance – NA HVAC Mild Winter Start – FER Pre-buy Inventory – 80/20 Account Pruning (~2%) $221.0 $206.2 + Asia Pacific $35.3 Adjusted Operating Margi
Slide 16: Power Transmission Solutions
4Q 2019 POWER TRANSMISSION SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 7.2% ($ Millions) from Operations* ($ Millions) • Market Performance – Upstream & Midstream Oil & Gas – Industrial Distribution $207.6 – Beverage Conveying $191.8 – 80/20 Account Pruning (~1%) + Rene
Slide 17: Key Financial Metrics
4Q 2019 KEY FINANCIAL METRICS Capital Expenditures Balance Sheet as December 28, 2019 • $15.1 Million in 4Q 2019 • Total Debt of $1,137.5 Million • $92.4 Million in FY 2019 • Net Debt of $806.1 Million • Down $101.8 Million from 3Q 2019 Restructuring & Related Costs • Down $252.4 Million from FY2018
Slide 18: Full Year 2020 Guidance
4Q 2019 FULL YEAR 2020 GUIDANCE FY 2020 Organic Growth Flat to Slightly Down with Recovery in Second Half FY 2020 Macroeconomic Considerations • Global Trade Uncertainties • Coronavirus Uncertainties • U.S. Industrial Slowdown FY 2020 GAAP Diluted EPS Guidance of $5.35 to $5.75 FY 2020 Adjusted Dilu
Slide 19: Agenda
4Q 2019 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 4Q 2019 Results & 2020 Outlook ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 19
Slide 20: 4Q Appendix
4Q Appendix
Slide 21: Adjusted Diluted Earnings Per Share
4Q 2019 APPENDIX ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Twelve Months Ended Dec 28, Dec 29, Dec 28, Dec 29, 2019 2018 2019 2018 GAAP Diluted Earnings Per Share $ 0.89 $ 1.28 $ 5.66 $ 5.26 Restructuring and Related Costs 0.33 0.04 0.57 0.13 Purchase Accounting and Transaction Costs —
Slide 22: Adjusted Income from Operations
4Q 2019 APPENDIX Three Months Ended Power Commercial Transmission ADJUSTED INCOME FROM OPERATIONS Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Dec 28, Dec 29, Dec 28, Dec 29, Dec 28, Dec 29, Dec 28, Dec 29, Dec 28, Dec 29, 2019 2018 2019 2018 2019 2018 201
Slide 23: Adjusted Net Sales
4Q 2019 APPENDIX Three Months Ended Commercial Power Transmission ADJUSTED NET SALES Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Dec 28, Dec 29, Dec 28, Dec 29, Dec 28, Dec 29, Dec 28, Dec 29, Dec 28, Dec 29, 2019 2018 2019 2018 2019 2018 2019 2018 2019 2
Slide 24: Adjusted Effective Tax Rate
4Q 2019 APPENDIX ADJUSTED EFFECTIVE TAX RATE Three Months Ended Twelve Months Ended (Dollars in Millions) Dec 28, Dec 29, Dec 28, Dec 29, 2019 2018 2019 2018 Income before Taxes $ 51.3 $ 75.3 $ 303.8 $ 292.2 Provision for Income Taxes 13.7 18.8 61.2 56.4 Effective Tax Rate 26.7% 25.0% 20.1% 19.3% In
Slide 25: Free Cash Flow
4Q 2019 APPENDIX Three Months Twelve Months FREE CASH FLOW Ended Ended (Dollars in Millions) Dec 28, Dec 29, Dec 28, Dec 29, 2019 2018 2019 2018 Net Cash Provided by Operating Activities $ 137.3 $ 112.4 $ 408.5 $ 362.7 Additions to Property Plant and Equipment (15.1) (18.4) (92.4) (77.6) Free Cash F
Slide 26: Organic Sales Growth
4Q 2019 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 Dec 28, 2019 $ 202.0 $ 138.0 $ 206.4 $ 191.8 $ 738.2 Net Sales from Business Divested/to be Exi
Slide 27: Total Gross Debt/EBITDA
4Q 2019 APPENDIX TOTAL GROSS DEBT/EBITDA TOTAL GROSS DEBT/ADJUSTED EBITDA (Dollars in Millions) (Dollars in Millions) LTM Dec 28, LTM Dec 28, 2019 2019 Net Income $ 242.6 Net Income $ 242.6 Plus: Taxes 61.2 Plus: Taxes 61.2 Plus: Interest Expense Plus: Interest Expense 53.0 53.0 Less: Interest Incom
Slide 28: Total Net Debt/EBITDA
4Q 2019 APPENDIX TOTAL NET DEBT/EBITDA TOTAL NET DEBT/ADJUSTED EBITDA (Dollars in Millions) (Dollars in Millions) LTM Dec 28, LTM Dec 28, 2019 2019 Net Income $ 242.6 Net Income $ 242.6 Plus: Taxes 61.2 Plus: Taxes 61.2 Plus: Interest Expense 53.0 Plus: Interest Expense 53.0 Less: Interest Income (5
Slide 29: Operating Leverage – Total Regal
4Q 2019 APPENDIX OPERATING LEVERAGE-TOTAL REGAL Three Months Ended Twelve Months Ended (Dollars in Millions) Dec 28, Dec 29, Dec 28, Dec 29, 2019 2018 Change 2019 2018 Change GAAP Income from Operations $ 61.7 $ 89.8 $ (28.1) $ 351.1 $ 347.0 $ 4.1 Adjusted Income from Operations $ 77.5 $ 87.2 $ (9.7
Slide 30: Operating Leverage by Segment
4Q 2019 APPENDIX OPERATING LEVERAGE-COMMERCIAL SYSTEMS Three Months Ended Twelve Months Ended (Dollars in Millions) Dec 28, Dec 29, Dec 28, Dec 29, 2019 2018 Change 2019 2018 Change GAAP Income from Operations $ 7.9 $ 27.7 $ (19.8) $ 103.1 $ 102.2 $ 0.9 Adjusted Income from Operations $ 15.1 $ 23.6
Slide 31: Fiscal 2018 Q1 and Q2 Ongoing Business Schedule
4Q 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 2020 guidance and actual performance. Power Commercial Industrial Climate Tran
Slide 32: Fiscal 2018 Q3 and Q4 Ongoing Business Schedule
4Q 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 2020 guidance and actual performance. Power Commercial Industrial Climate Tran
Slide 33: Fiscal 2018 Full Year Ongoing Business Schedule
4Q 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 2020 guidance and actual performance.
Slide 34: Fiscal 2019 Q1 and Q2 Ongoing Business Schedule
4Q 2019 APPENDIX The following tables outline the first and second quarter 2019 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 2020 guidance and actual performance. Power Commercial Industrial Climate Tran
Slide 35: Fiscal 2019 Q3 and Q4 Ongoing Business Schedule
4Q 2019 APPENDIX The following tables outline the third and fourth quarter 2019 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 2020 guidance and actual performance. Power Commercial Industrial Climate Tran
Slide 36: Fiscal 2019 Full Year Ongoing Business Schedule
4Q 2019 APPENDIX The following tables outline the full year 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, which can be used to compare to Regal’s 2020 guidance and actual performance.
Slide 37: Shipping Days
4Q 2019 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