Slide 1: Second Quarter 2016 Earnings Conference Call
Regal Beloit Corporation Second Quarter 2016 Earnings Conference Call August 9, 2016 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: 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 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
Agenda Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Segment Update Jon Schlemmer Summary Mark Gliebe Q&A All p4
Slide 5: Results Generally In Line with Expectations
Opening Comments 2nd Quarter Results (millions) 2Q Sales Versus Prior Year $942 ($9) ($2) ($92) $839 ($50) Global Industrial ($17) Two-Way MPFs ($13) Middle East ($ 9) HVAC/Water Prior Year FX Acquisition Organic Current Year Results Generally In Line with Expectations p5
Slide 6: Expecting Second Half Adj. EPS to Increase 8% - 18% Over First Half
Opening Comments 2nd Quarter Results > 2nd Quarter Adjusted Operating Profit Margin* 9.7% − Volume Driving $21 Million of Operating Profit Reduction − Simplification/Cost Savings Partially Offsetting Declines > Cash/Debt − Delivered 175% Free Cash Flow* to Net Income − Improved Cash Cycle Days** by
Slide 7: 2nd Quarter 2016 Financial Results
2nd Quarter 2016 Financial Results > Sales of $839 Million, Down 11.0% – Foreign Currency Translation of (1.0%) – Business Divestiture (0.2%) – Organic Sales* of (9.8%) > Adjusted Operating Profit Margin* of 9.7%, Down 220 Basis Points from Prior Year – Lower Sales Volume Pressured Margins – Simplif
Slide 8: 2nd Quarter 2016 Financial Results
2nd Quarter 2016 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended Six Months Ended Jul 2, Jul 4, Jul 2, Jul 4, 2016 2015 2016 2015 Diluted Earnings Per Share $ 1.26 $ 1.39 $ 2.19 $ 2.20 Purchase Accounting and Transaction Costs - 0.11 - 0.47 Restructuring and Related Costs 0
Slide 9: 2nd Quarter 2016 Key Financial Metrics
2nd Quarter 2016 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) > $17 Million in 2Q 2016 > 24.9% ETR in 2Q 2016 > $32 Million in 1H 2016 > Expect 23% ETR for 2H 2016 > $80 Million Expected in FY 2016 Balance Sheet at July 2, 2016 Free Cash Flow* > Total Debt of $1,614 Million >
Slide 10: 2016 Full Year Guidance
2016 Full Year Guidance > 2nd Half Organic Sales Expected to be Down Low Single Digits − Warmer Weather Driving Strong HVAC Demand − Normal Heating Season vs Prior Year − Easier Comparisons in Oil and Gas Businesses − Sequentially Improving Two-Way Material Price Formula Impact − Lower Impact of F/X
Slide 11: Commercial & Industrial Systems
Commercial & Industrial Systems (millions) 2Q Sales Versus Prior Year Key Thoughts $441 ($7) ($39) > N.A. C&I Motors Sales Flat $395 > Adj. Operating Margin* 6.5% ($21) O&G / Power Down 340 bps from Prior Year ($9) MPF / Price but Up 70 bps vs 1Q 2016 ($8) China > Oil & Gas and Power Gen Drove Resi
Slide 12: Climate Solutions
Climate Solutions (millions) 2Q Sales Versus Prior Year Key Thoughts $286 ($2) ($30) > HVAC Demand Picked Up in $254 June after a Slow Start and Have Remained Strong into 3Q ($13) Middle East Mkt ($9) MPF / Price > Adj. Operating Margin* 14.4% ($5) NA HVAC/Water Htr Down 80 bps from Prior Year ($4)
Slide 13: Power Transmission Solutions
Power Transmission Solutions (millions) 2Q Sales Versus Prior Year Key Thoughts > Adj. Operating Margin* 10.1% Down 170 bps from Prior Year and $215 ($0.5) ($2) ($24) Down 140 bps from 1Q 2016 $189 > Closed on the Sale of Mastergear ($10) Oil & Gas > Synergies and Cost Saving ($7) Ag and Metals ($4)
Slide 14: Future Revenue and Margin Growth
Future Revenue and Margin Growth Energy Legislation and New Products Simplification and Cost Savings Standard ® > Cost Reduction Programs Underway - 8 Production Line Transitions - 7 Warehouses Consolidating to 2 NEW - 80% on Common ERP Platform - 5th Design Platform Consolidation > Restructuring an
Slide 15: Free Cash Flow Performance
Free Cash Flow Performance Free Cash Flow* % of Adj. Net Income* (millions) $350 150% $300 120% $250 90% $200 $150 60% $100 30% $50 $- 0% 2011 2012 2013 2014 2015 2016e** Consistently Delivering Strong FCF – 129% Annual Average * Non-GAAP Financial Measurement, See Appendix for Reconciliation. p 15
Slide 16: Summary
Summary > 2nd Quarter Sales − Oil & Gas and Power Generation Market Headwinds − Global Industrial Market Weakness > Margin Decline Mainly Driven by Oil & Gas and Power Generation > Delivered 175% Free Cash Flow* to Net Income and Reduced Debt by $93 Million > 2nd Half Organic Sales Expected to be Do
Slide 17: Questions and Answers
REGAL Questions and Answers
Slide 18: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended Six Months Ended Jul 2, Jul 4, Jul 2, Jul 4, 2016 2015 2016 2015 Diluted Earnings Per Share $ 1.26 $ 1.39 $ 2.19 $ 2.20 Purchase Accounting and Transaction Costs - 0.11 - 0.47 Restructuring and Related Costs 0.
Slide 19: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Commercial & Industrial Power Transmission ADJUSTED OPERATING INCOME Systems Climate Solutions Solutions Total Regal Jul 2, Jul 4, Jul 2, Jul 4, Jul 2, Jul 4, Jul 2, Jul 4, 2016 2015 2016 2015 2016 2015 2016 2015 Income from Operations $ 25.1 $ 41
Slide 20: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations FREE CASH FLOW RECONCILIATION Three Months Ended Six Months Ended Jul 2, Jul 4, Jul 2, Jul 4, 2016 2015 2016 2015 Net Cash Provided by Operating Activities $ 116.1 $ 118.2 $ 174.3 $ 135.7 Additions to Property Plant and Equipment (16.8) (23.5) (31.7) (44.7) Free Cas
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED NET INCOME Fiscal Years Dollars in Millions 2011 2012 2013 2014 2015 2016 (E) GAAP Net Income Attributable to Regal Beloit Corporation $ 152.3 $ 195.6 $ 120.0 $ 31.0 $ 143.3 $ 200.0 Goodwill and Asset Impairments and Other $ — $ — $ 81.0 $ 159.5 $ 92.7 $ —
Slide 22: Appendix 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 > 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 22