Slide 1: Fourth Quarter 2017 Earnings Conference Call
Regal Beloit Corporation Fourth Quarter 2017 Earnings Conference Call February 6, 2018 Mark Gliebe Jon Schlemmer Rob Rehard Chairman and Chief Operating Officer Vice President Chief Executive Officer Financial Planning & Analysis Chuck Hinrichs Robert Cherry Vice President Vice President Chief Finan
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 4Q & FY 2017 Results Chuck Hinrichs Tax Reform & 2018 Outlook Rob Rehard Operations Update Jon Schlemmer Summary Mark Gliebe Q&A All 4
Slide 5: Opening Comments – 4th Quarter Results
Opening Comments – 4th Quarter Results Organic Sales* Up 6.9% – Commercial & Industrial Systems Up 8.7% – Climate Solutions Flat – Power Transmission Solutions Up 11.9% Adjusted Operating Margin* Up 20 bps from Prior Year – Benefitted from Strong Volume, Incremental Price and Productivity – Cons
Slide 6: Opening Comments – Looking Forward
Opening Comments – Looking Forward Entering 2018 – Orders Up Versus Prior Year in All Three Segments – Manufacturing Facilities Performing Expecting Low to Mid-Single Digit Organic Sales Growth in 2018 Sales – Continued Growth in Residential & Light Commercial HVAC – Robust Commercial and Indust
Slide 7: 4th Quarter 2017 Sales Performance
4th Quarter 2017 Sales Performance 4Q 2017 Sales of $820.7 Million, Up 8.3% – Foreign Currency Translation of 1.3% – Organic Sales* Up 6.9% FY 2017 Organic Sales Growth of 4.3% – C&I Systems Segment Organic Sales Growth of 4.6% – Climate Solutions Segment Organic Sales Growth of 3.1% – Power Tra
Slide 8: 4th Quarter 2017 Adj. Operating Profit Performance
4th Quarter 2017 Adj. Operating Profit Performance Adjusted Operating Margin* of 9.7% – 20 bps Higher than 4Q 2016 Volume Growth Benefits Partially Offset by Price/Cost $2.7 million LIFO Expense – C&I Segment $11.2 Million Expense – Climate Segment $6.1 Million Benefit – PTS Segment $2.4 Milli
Slide 9: 4th Quarter 2017 Financial Results
4th Quarter 2017 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE * Three Months Ended Twelve Months Ended Dec 30, Dec 31, Dec 30, Dec 31, 2017 2016 2017 2016 GAAP Diluted Earnings Per Share $ 1.15 $ 1.01 $ 4.74 $ 4.52 Restructuring and Related Costs 0.02 0.04 0.22 0.10 Gain on Disposal of Busi
Slide 10: 4th Quarter 2017 Key Financial Metrics
4th Quarter 2017 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) $16.2 Million in 4Q 2017 21.0% ETR in 4Q 2017, Excluding the Tax $65.2 Million in FY 2017 Reform Impact 21.7% ETR in FY 2017, Excluding the Tax Restructuring and Related Costs Reform Impact $1.6 Million in
Slide 11: Impact of U.S. Tax Reform
Impact of U.S. Tax Reform Impact on 4th Quarter 2017 Results $1.0 Million Net Benefit from Provisional Estimates – Transition Tax Expense on non-U.S. Earnings, Payable over 8 Years – Withholding Tax Expense on Future non-U.S. Dividends – Benefit from Revaluation of Deferred Tax Liabilities Impact
Slide 12: 2018 Full Year Guidance
2018 Full Year Guidance Low to Mid-Single Digit Organic Sales* Growth in 2018 Improvement in 2018 Adjusted Operating Margin FY 2018 GAAP Diluted EPS Guidance of $5.19 to $5.59 FY 2018 Adjusted Diluted EPS* Guidance of $5.35 to $5.75 − Restructuring and Related Costs of $10.0 Million or $0.16
Slide 13: 4Q 2017 Commercial & Industrial Systems
4Q 2017 Commercial & Industrial Systems Adj. Income from Sales Sales Operations* ($ millions) Organic Sales* Up 8.7% $408 Sales Performance $369 – Demand Up in Commercial HVAC, Pool Pump, $25 Oil & Gas and Distribution $22 – Power Gen Strength in Data Centers – Strong Demand in China – Price Up
Slide 14: Commercial & Industrial 2018 Improvement Plan
Commercial & Industrial 2018 Improvement Plan Simplification Programs – Majority of FY 2017 Restructuring Focused on C&I – Mostly Completed in 2H 2017 – Expecting $6-$7 Million Cost Benefit in 2018 Pricing – Price Increase Implemented in 4Q 2017 – Continued Positive Impact of Two-Way Material Pr
Slide 15: 4Q 2017 Climate Solutions
4Q 2017 Climate Solutions Adj. Income from Sales Sales Operations* ($ millions) Organic Sales* Flat Sales Performance $215 $216 – NA Resi HVAC OEM Flat vs. Strong Prior Year $31 – HVAC Distribution Down, but Improving $28 FY 2017 Organic Sales* Up 3.1% Adj. Operating Margin* 14.3% of Sales 4
Slide 16: AHR Expo 2018
AHR Expo 2018 New Product Innovations for FER* Disruptive Axial Motor Technology – New Efficiency Regulation Effective July 2019 – DEC Star® Blower for Residential Furnaces – Regal Offering Solutions to Customers – UlteMAX® Motor for Commercial HVAC – Pre-Mix Blowers for Commercial Boilers IoT
Slide 17: 4Q 2017 Power Transmission Solutions
4Q 2017 Power Transmission Solutions Adj. Income from Sales Sales Operations* ($ millions) Organic Sales* Up 11.9% $197 $24 Sales Performance $23 $174 – Strength in Oil & Gas, Renewable Energy, Distribution, Aerospace and Marine Adj. Operating Margin* 12.2% of Sales Down 110 bps from Prior Y
Slide 18: 4th Quarter and FY 2017 Summary
4th Quarter and FY 2017 Summary 4th Quarter 2017 Organic Sales* Up 6.9% Adjusted Operating Margin* Up 20 bps Adjusted Diluted EPS* Up 9.6% Full Year 2017 Organic Sales* Up 4.3% Adjusted Operating Margin* Up 40 bps Adjusted Diluted EPS* Up 9.7% 7th Consecutive Year, Free Cash Flow* > 10
Slide 19: 2018 Outlook
2018 Outlook 2017 Momentum Expected to Continue Orders Up in All Three Segments Entering 2018 Projecting Organic Sales* Up Low to Mid-Single Digits Third Consecutive Year of Margin Improvement 14% Increase in 2018 Adj. Diluted Earnings Per Share* Momentum Expected To Continue into 2018 * N
Slide 20: Questions and Answers
Questions and Answers REGAL 20
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Twelve Months Ended Dec 30, Dec 31, Dec 30, Dec 31, 2017 2016 2017 2016 GAAP Diluted Earnings Per Share $ 1.15 $ 1.01 $ 4.74 $ 4.52 Restructuring and Related Costs 0.02 0.04 0.22 0.10 Gain on Disposal of Busines
Slide 22: 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) Dec 30, Dec 31, Dec 30, Dec 31, Dec 30, Dec 31, Dec 30, Dec 31, 2017 2016 2017 2016 2017 2016 2017 2016 GAAP
Slide 23: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations FREE CASH FLOW Three Months Ended Twelve Months Ended (Dollars in Millions) Dec 30, Dec 31, Dec 30, Dec 31, 2017 2016 2017 2016 Net Cash Provided by Operating Activities $ 56.9 $ 111.9 $ 291.9 $ 442.3 Additions to Property Plant and Equipment (16.2) (19.1) (65.2) (6
Slide 24: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended ORGANIC SALES GROWTH December 30, 2017 (Dollars in Millions) Commercial & Industrial Power Transmission Systems Climate Solutions Solutions Total Regal Net Sales $ 407.7 $ 216.4 $ 196.6 $ 820.7 Impact from Foreign Currency Exchange Rates (6.4) (1.
Slide 25: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations TOTAL DEBT/ADJUSTED EBITDA (Dollars in Millions) LTM Dec 30, 2017 Net Income Attributable to Regal Beloit Corporation $ 213.0 Plus: Minority Interest 5.1 Plus: Taxes 59.1 Plus: Interest Expense 56.1 Less: Interest Income (3.2) Plus: Depreciation and Amortization 137
Slide 26: 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