Slide 1: Third Quarter 2017 Earnings Conference Call
Regal Beloit Corporation Third Quarter 2017 Earnings Conference Call November 6, 2017 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Chuck Hinrichs Robert Cherry Vice President Vice President Chief Financial Officer Business Development & Investor Relations ©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’
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 and Opening Comments
Agenda and Opening Comments Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Operations Update Jon Schlemmer Summary Mark Gliebe Q&A All 4
Slide 5: Congratulations Rob Rehard
Congratulations Rob Rehard Chuck Hinrichs will retire from Regal effective March 31, 2018. Rob Rehard will be Regal’s Vice President and Chief Financial Officer, effective April 1, 2018. 5
Slide 6: Opening Comments – 3rd Quarter Results
Opening Comments – 3rd Quarter Results Organic Sales Growth* Up 5.2% – Climate Solutions Up 1.9% – Commercial & Industrial Systems Up 4.0% – Power Transmission Solutions Up 12.8% Adjusted Operating Margin* Up Sequentially, Down 30 bps from Prior Year – Commodity Inflation – Difficult Prior Year
Slide 7: Opening Comments – Looking Forward
Opening Comments – Looking Forward Entering 4Q, Orders Up Versus Prior Year Expecting Low to Mid Single Digit Organic Sales Growth in FY 2017 Expecting Improvement to Adjusted Operating Margin in FY 2017 Narrowed FY 2017 Adjusted Diluted EPS* Guidance to $4.80 - $4.90 Per Share 2017 Adjusted
Slide 8: 3rd Quarter 2017 Financial Results
3rd Quarter 2017 Financial Results Sales of $856.9 Million, Up 5.8% – Foreign Currency Translation of 0.7% – Organic Sales* Up 5.2% – Organic Sales Growth in All Three Segments Adjusted Operating Margin* of 10.8% – 40 bps Higher than 2Q 2017 – 30 bps Lower than Prior Year • Price/Cost Headwind a
Slide 9: 3rd Quarter 2017 Financial Results
3rd Quarter 2017 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE * Three Months Ended Sep 30, Oct 1, 2017 2016 GAAP Diluted Earnings Per Share $ 1.39 $ 1.32 Restructuring and Related Costs 0.03 0.02 Gain on Sale of Assets (0.05) (0.03) Adjusted Diluted Earnings Per Share $ 1.37 $ 1.31 Restru
Slide 10: 3rd Quarter 2017 Key Financial Metrics
3rd Quarter 2017 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) $15.3 Million in 3Q 2017 21.7% ETR in 3Q 2017 ~$70 Million Expected in FY 2017 Expecting 4Q 2017 ETR of ~22% ~$142 Million D&A Expected in FY 2017 Restructuring $1.6 Million in 3Q 2017 ~$14.5 Million E
Slide 11: 2017 Full Year Guidance
2017 Full Year Guidance Assumptions Low to Mid Single Digit Organic Sales Growth for FY 2017 Expecting Improvement in Adjusted Operating Margin for FY 2017 – Commodity Inflation and LIFO Expense are Headwinds Guidance Narrowed FY 2017 GAAP Diluted EPS Guidance to $4.64 - $4.74 Narrowed FY 20
Slide 12: 3Q 2017 Commercial & Industrial Systems
3Q 2017 Commercial & Industrial Systems Adj. Income from Sales Sales Operations* ($ millions) Organic Sales* Up 4.0% $408 $389 $35 Sales Performance $31 – Sales Up in Commercial HVAC and Pool Pump – Strength in Asia and Oil & Gas – Price Up from Prior Year and 2Q 2017 Adj. Operating Margin* 7.
Slide 13: 3Q 2017 Climate Solutions
3Q 2017 Climate Solutions Adj. Income from Sales Sales Operations* ($ millions) Organic Sales* Up 1.9% $251 $256 Sales Performance $42 $39 – NA Resi HVAC OEM Up Low Single Digit – HVAC Aftermarket Down – Strength in Europe, Middle East and Asia – Price Up from Prior Year and 2Q 2017 Adj. Operati
Slide 14: 3Q 2017 Power Transmission Solutions
3Q 2017 Power Transmission Solutions Adj. Income from Sales Sales Operations* ($ millions) Organic Sales* Up 12.8% $193 Sales Performance $23 $170 – Strength in Oil & Gas, Industrial Distribution and Renewable Energy – Distribution Up High Single Digit $12 Adj. Operating Margin* 11.9% of Sales
Slide 15: 3rd Quarter Summary Comments
3rd Quarter Summary Comments Organic Sales* Up 5.2% Orders Up Overall Adjusted Diluted EPS* Up 4.6% Free Cash Flow* 114% of Net Income Reduced Debt by $87 Million Repurchased $23 Million of Common Stock Total Debt/Adj. EBITDA* at 2.6 Repatriated $154 Million of Cash YTD 2017 Narrow
Slide 16: Questions and Answers
Questions and Answers REGAL 16
Slide 17: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Nine Months Ended Sep 30, Oct 1, Sep 30, Oct 1, 2017 2016 2017 2016 GAAP Diluted Earnings Per Share $ 1.39 $ 1.32 $ 3.59 $ 3.51 Restructuring and Related Costs 0.03 0.02 0.20 0.06 Gain on Disposal of Businesses
Slide 18: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Commercial & Industrial Power Transmission ADJUSTED OPERATING INCOME Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Sep 30, Oct 1, Sep 30, Oct 1, Sep 30, Oct 1, Sep 30, Oct 1, 2017 2016 2017 2016 2017 2016 2017 2016 GAAP Inc
Slide 19: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations FREE CASH FLOW Three Months Ended Nine Months Ended (Dollars in Millions) Sep 30, Oct 1, Sep 30, Oct 1, 2017 2016 2017 2016 Net Cash Provided by Operating Activities $ 86.1 $ 154.3 $ 235.0 $ 330.4 Additions to Property Plant and Equipment (15.3) (14.4) (49.0) (46.1)
Slide 20: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended ORGANIC SALES GROWTH September 30, 2017 (Dollars in Millions) Commercial & Industrial Power Transmission Systems Climate Solutions Solutions Total Regal Net Sales $ 408.0 $ 256.0 $ 192.9 $ 856.9 Impact from Foreign Currency Exchange Rates (3.2) (0
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations TOTAL DEBT/ADJUSTED EBITDA (Dollars in Millions) LTM Sep 30, 2017 Net Income Attributable to Regal Beloit Corporation $ 207.1 Plus: Minority Interest 5.5 Plus: Taxes 56.0 Plus: Interest Expense 57.1 Less: Interest Income (3.8) Plus: Depreciation and Amortization 141
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 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