Regal Rexnord Corporation · NYSE:RRX

Regal Rexnord — Regal Beloit — Q1 2018 Earnings Presentation

29 slides from Regal Rexnord's earnings presentation, May 8, 2018

1. Slide 1: First Quarter 2018 Earnings Conference Call

   Regal Beloit Corporation First Quarter 2018 Earnings Conference Call May 8, 2018 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Rob Rehard Robert Cherry Vice President Vice President Chief Financial Officer Business Development & Investor Relations ©2018 Regal

2. Slide 2: Safe Harbor Statement

   Safe Harbor Statement The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: With the exception of historical facts, the statements contained in this presentation may be forward-looking statements. Forward-looking statements represent our management’

3. 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

4. Slide 4: Agenda and Opening Comments

   Agenda and Opening Comments Opening Comments Mark Gliebe 1Q Results & 2018 Outlook Rob Rehard Operations Update Jon Schlemmer Summary Mark Gliebe Q&A All 4

5. Slide 5: Opening Comments – 1st Quarter Results

   Opening Comments – 1st Quarter Results  Organic Sales* Up 5.8% – Commercial & Industrial Systems Up 5.6% – Climate Solutions Up 3.9% – Power Transmission Solutions Up 8.8%  Adjusted Operating Margin* Up 60 bps from Prior Year – Benefitted from Strong Volume, Incremental Price and Productivity – Co

6. Slide 6: Opening Comments – Looking Forward

   Opening Comments – Looking Forward  Encouraging Start to 2Q – Orders Up Versus Prior Year – Markets Robust Globally – General Price Increase in C&I and Climate Effective in April  Expecting Mid-Single Digit Organic Sales Growth in 2018 – Continued Growth in Residential & Light Commercial HVAC – Ro

7. Slide 7: Opening Comments – U.S. Tariffs

   Opening Comments – U.S. Tariffs  Section 232 – Steel Sourced from United States – No Direct Impact Expected – Aluminum Sourced from North America – No Direct Impact Expected – General Steel and Aluminum Inflation Could Result  Section 301 – Has Not Been Enacted – Uncertainty Remains – Analyzing an

8. Slide 8: 1st Quarter 2018 Financial Results

   1st Quarter 2018 Financial Results  Prior Year Results Reflect Adoption of New U.S. GAAP Pension Accounting Rules  1Q 2018 Sales of $878.8 Million, Up 8.0% – Foreign Currency Translation of 2.2% – Organic Sales* Up 5.8% – C&I Systems Segment Organic Sales Growth of 5.6% – Climate Solutions Segment

9. Slide 9: 1st Quarter 2018 Financial Results

   1st Quarter 2018 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE * Three Months Ended Mar 31, Apr 1, 2018 2017 GAAP Diluted Earnings Per Share $ 1.31 $ 1.02 Restructuring and Related Costs 0.03 0.05 Adjusted Diluted Earnings Per Share $ 1.34 $ 1.07 Adjustments  $1.7 Million Restructuring and

10. Slide 10: 1st Quarter 2018 Key Financial Metrics

    1st Quarter 2018 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR)  $19.3 Million in 1Q 2018  21.0% ETR in 1Q 2018  $75.0 Million Expected in FY 2018  ~21.0% Expected in FY 2018 Restructuring and Related Costs  $1.7 Million in 1Q 2018  $10.0 Million Expected in FY 2018 Balanc

11. Slide 11: Nicotra Gebhardt – Financial Summary

    Nicotra Gebhardt – Financial Summary  €125 Million (~$154 Million) Purchase Price  2017 EBITDA Multiple of 7.8x  Expected to Be Accretive to Adjusted EPS in 2018 and Beyond Earnings Impact  Expected Adjusted EPS* Accretion of $0.13 - $0.15 per Share in 2018  Expecting Closing Pro Forma Net Debt

12. Slide 12: 2018 Full Year Guidance

    2018 Full Year Guidance  Mid-Single Digit Organic Sales* Growth in 2018  Improvement in 2018 Adjusted Operating Margin  FY 2018 GAAP Diluted EPS Guidance of $5.29 to $5.69  FY 2018 Adjusted Diluted EPS* Guidance of $5.60 to $6.00 − Restructuring and Related Costs of $10.0 Million or $0.16 per Sh

13. Slide 13: Nicotra Gebhardt – Transaction Overview

    Nicotra Gebhardt – Transaction Overview  Closed on Acquisition of Nicotra Gebhardt on April 10, 2018  A Premier Air Moving Business with ~$150 Million in Annual Sales  Adds to Regal’s Growing Lineup of Energy Efficient Air Moving Systems  Integrating into Commercial and Industrial Systems Segmen

14. Slide 14: Nicotra Gebhardt – Product Offering

    Nicotra Gebhardt – Product Offering Roof Fan Air Handling Unit Ventilation Unit Packaged Air Conditioning 14

15. Slide 15: Nicotra Gebhardt – Strategic Rationale

    Nicotra Gebhardt – Strategic Rationale  Enhances Regal’s Portfolio of High-efficiency Products Energy  Supports Customer Demand Trends for More Integrated Solutions Efficiency  Enabling Our Customers to Meet and Exceed Energy Regulations  Aligns with Regal Investments in ECM & Air Moving Technol

16. Slide 16: Nicotra Gebhardt – Day 1 Celebration

    Nicotra Gebhardt – Day 1 Celebration Italy Malaysia Germany China 16

17. Slide 17: 1Q 2018 Commercial & Industrial Systems

    1Q 2018 Commercial & Industrial Systems Adj. Income from Sales Sales Operations* ($ millions)  Organic Sales* Up 5.6% $414 $381  Sales Performance $30 $27 – Demand Up in Commercial HVAC, Power Generation, and Oil & Gas – Strong Demand in China and Europe – Up Slightly in Distribution, Down in Pool

18. Slide 18: Commercial & Industrial 2018 Improvement Plan

    Commercial & Industrial 2018 Improvement Plan  Simplification Programs – Expecting $6 - $7 Million Cost Benefit in 2018 from 2017 Programs – Two Additional Programs Initiated in 2018  Pricing – Additional Price Increase Implemented in April 2018 – Expecting Price/Cost to Remain Neutral to Slightly

19. Slide 19: 1Q 2018 Climate Solutions

    1Q 2018 Climate Solutions Adj. Income from Sales Sales Operations*  Organic Sales* Up 3.9% ($ millions)  Sales Performance $260 $248 – NA Resi HVAC Up Mid-Single Digit – International Up Slightly $33 $33 – Commercial Refrigeration Down  Price Up from 4Q 2017 and Prior Year Adj. Operating Margin*

20. Slide 20: 1Q 2018 Power Transmission Solutions

    1Q 2018 Power Transmission Solutions Adj. Income from Sales Sales Operations* ($ millions)  Organic Sales* Up 8.8% $205  Sales Performance $185 $27 – Strength in Oil & Gas, Renewable Energy, Material Handling, and Aerospace $18 Adj. Operating Margin*  13.1% of Sales  Up 320 bps from Prior Year,

21. Slide 21: 1st Quarter 2018 Summary

    1st Quarter 2018 Summary  Organic Sales* Up 5.8%  Price/Cost Neutral  Adjusted Operating Margin* Up 60 bps  Adjusted Diluted EPS* Up 25%  Repurchased $26 Million of Shares  Nicotra Gebhardt Acquisition Closed in April  Orders Up Entering 2Q in All Segments  Global Markets Remain Strong 2018

22. Slide 22: Questions and Answers

    Questions and Answers REGAL 22

23. Slide 23: Appendix Non-GAAP Reconciliations

    Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Mar 31, Apr 1, 2018 2017 GAAP Diluted Earnings Per Share $ 1.31 $ 1.02 Restructuring and Related Costs 0.03 0.05 Adjusted Diluted Earnings Per Share $ 1.34 $ 1.07 2018 ADJUSTED ANNUAL GUIDANCE Minimum Maximum 20

24. Slide 24: Appendix Non-GAAP Reconciliations

    Appendix Non-GAAP Reconciliations Three Months Ended Commercial & Power Transmission ADJUSTED OPERATING INCOME Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Mar 31, Apr 1, Mar 31, Apr 1, Mar 31, Apr 1, Mar 31, Apr 1, 2018 2017 2018 2017 2018 2017 2018 2017 GAAP Inc

25. Slide 25: Appendix Non-GAAP Reconciliations

    Appendix Non-GAAP Reconciliations FREE CASH FLOW Three Months Ended (Dollars in Millions) Mar 31, Apr 1, 2018 2017 Net Cash Provided by Operating Activities $ 42.5 $ 50.5 Additions to Property Plant and Equipment (19.3) (17.0) Free Cash Flow $ 23.2 $ 33.5 Free Cash Flow as a Percentage of Net Income

26. Slide 26: Appendix Non-GAAP Reconciliations

    Appendix Non-GAAP Reconciliations Three Months Ended ORGANIC SALES GROWTH March 31, 2018 (Dollars in Millions) Commercial & Power Industrial Climate Transmission Systems Solutions Solutions Total Regal Net Sales $ 414.0 $ 259.9 $ 204.9 $ 878.8 Impact from Foreign Currency Exchange Rates (11.3) (2.5)

27. Slide 27: Appendix Non-GAAP Reconciliations

    Appendix Non-GAAP Reconciliations TOTAL GROSS DEBT/ADJUSTED EBITDA TOTAL NET DEBT/ADJUSTED EBITDA (Dollars in Millions) (Dollars in Millions) LTM Mar 31, LTM Mar 31, 2018 2018 Net Income Attributable to Regal Beloit Corporation $ 225.1 Net Income Attributable to Regal Beloit Corporation $ 225.1 Plus

28. Slide 28: Appendix Non-GAAP Reconciliations

    Appendix Non-GAAP Reconciliations Quarter-to-Date Year-to-Date Commercial & Power Commercial & Power Industrial Transmission Industrial Transmission RECONCILIATION FOR PENSION ADJUSTMENT Systems Climate Solutions Solutions Total Regal Systems Climate Solutions Solutions Total Regal (Dollars in Milli

29. Slide 29: 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 2017 64 63 63 60 250 2018 63 64 63 61 251  Regal operates on a 52/53 week fiscal year ending on the Saturday closest to December 31  Fiscal Years 2015, 2016, 2017 and 2018 have 52 weeks  Fis

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