Slide 1: Regal Beloit Corporation Second Quarter 2015 Earnings Conference Call
Regal Beloit Corporation Second Quarter 2015 Earnings Conference Call August 4, 2015 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Chuck Hinrichs John Perino Vice President Vice President Chief Financial Officer Financial Planning & Analysis and Investor Rela
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 that may be considered “non- GAAP” financial measures. We believe that these non-GAAP financ
Slide 4: Agenda
Agenda Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Segment Update Jon Schlemmer Mark Gliebe Summary Mark Gliebe Q&A All p4
Slide 5: Opening Comments – 2nd Quarter Results
Opening Comments – 2nd Quarter Results > 2nd Quarter Highlights − Sales Up 11% − Increased Adjusted Operating Margin* to 11.9%, Up 120 Basis Points Over Prior Year − Adjusted Earnings Per Share* Up 19% − Free Cash Flow* 151% of Net Income, Reduced Debt by $54 Million > Challenging Sales and Orders E
Slide 6: Opening Comments – 2nd Quarter Results
Opening Comments – 2nd Quarter Results > Climate Solutions – Organic Sales Down 4% − SEER 13 Pre-Build and Weaker Sales into Furnace Applications > Commercial &Industrial Systems – Organic Sales Down 7% − Steep Reduction in Oil & Gas and Weak Demand in China > Power Transmission Solutions – Acquisit
Slide 7: Opening Comments – 2nd Quarter Results
Opening Comments – 2nd Quarter Results PTS Integration Remains on Track > 26 Sites Substantially Complete by Early 4Q 2015 > ERP Integrated by 3Q 2016 > Synergies Expected to Exceed the Year 1 Target > Ongoing Positive Customer Feedback Responding to Customer Feedback Synergy Highlight - Solar Farm
Slide 8: Looking Forward
Looking Forward > Revenue Headwinds − Negative Impact from Currency in the 2nd Half, Comparisons Begin to Improve in Late 4Q − SEER 13 Pre-Build Creates Tough Comparisons in the 2nd Half − Expect the Weakness in China to Continue Through the Year − Oil & Gas Represents an Estimated $100 Million Head
Slide 9: 2nd Quarter 2015 Financial Results
2nd Quarter 2015 Financial Results > Sales of $942 Million, Up 11% from Prior Year – Net Acquisition Growth of 19% – Foreign Currency Translation Decline of 2.4% – Organic Sales Down 5.5% > Adjusted Operating Profit Margin* of 11.9%, Up 120 bps – Contribution of Simplification Benefits and Cost Cont
Slide 10: 2nd Quarter 2015 Financial Results
2nd Quarter 2015 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Jul 4, Jun 28, 2015 2014 Diluted Earnings Per Share $ 1.39 $ 1.24 Goodwill Impairment - 0.02 Purchase Accounting and Transaction Costs 0.11 0.01 Restructuring Costs 0.03 0.05 Gain on Disposal of Real Estate - (
Slide 11: 2Q 2015 Key Financial Metrics
2Q 2015 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) > $24 Million in 2Q 2015 > 26% ETR in 2Q 2015 > $45 Million in 1H 2015 > Expect 26% ETR for FY 2015 > $95 Million Expected in FY 2015 > Includes Synergy from PTS Acquisition Balance Sheet at July 4, 2015 Free Cash Flow* > To
Slide 12: 2015 Guidance
2015 Guidance > GAAP EPS Guidance of $4.76 to $4.96 > Adjusted EPS* Guidance of $5.40 to $5.60 − $0.47 of PTS Purchase Accounting Adjustments and Transaction Costs − $0.15 of Restructuring Charges − $0.02 Venezuela Devaluation in 1Q 2015 > Key Assumptions − Headwinds from Oil & Gas, SEER 13 Pre-Buil
Slide 13: 2015 Customer Survey Results
2015 Customer Survey Results Net Promoter Score Responsiveness 2011 2014 2015 2011 2014 2015 Innovation Value 2011 2014 2015 2011 2014 2015 Customer Satisfaction Improvements Driving Long Term Shareholder Value p 13
Slide 14: Margin Improvement Progress
Margin Improvement Progress Adj. Operating Profit Margin* Key Drivers 11.9% > Simplification Initiative 10.7% 10.9% 10.1% > SG&A and Cost Controls 9.4% 9.8% > PTS Accretion Looking Forward > Estimated $9 Million Restructuring Expense in the 2nd Half 2015 > Additional Simplification Programs Under Ev
Slide 15: Commercial & Industrial Systems
Commercial & Industrial Systems (millions) 2Q Sales Versus Prior Year Adj. Operating Margin* 9.9% > ~150 bps Headwind from Lower Oil & Gas and China > Significant Self Help Efforts ($21) Oil & Gas − Rightsizing the Oil & Gas ($ 6) China Businesses Power Gen − Completed Two Additional Distribution Ro
Slide 16: Climate Solutions
Climate Solutions (millions) 2Q Sales Versus Prior Year Adj. Operating Margin* 15.2% > Up 330 Basis Points from Prior Year ($8) > Simplification, SG&A and Cost SEER 13 Controls Delivering Savings ($4) Price Formulas Furnace > 4th Design Platform Simplification Program On Track to be NA Market Substa
Slide 17: Power Transmission Solutions
Power Transmission Solutions (millions) 2Q Sales Versus Prior Year End Markets - Total Segment Oil & Gas Renewable Energy Ag Equipment Food & Beverage Distribution Material Handling Adj. Operating Margin* 11.8% > Up 60 Basis Points from Prior Year > Simplification and PTS Acquisition Both Contributi
Slide 18: Summary Comments
Summary Comments > Sales Up 11% with Growth Coming from Acquisitions > Revenue Headwinds from Currency, SEER 13, Oil & Gas and China > Adjusted Operating Profit Margin* Up 120 Basis Points > Free Cash Flow* 151% of Net Income, Paid Down $54 Million Debt > Capital Allocation – Near Term Bias to Pay D
Slide 19: Questions and Answers
REGAL Questions and Answers
Slide 20: Appendix Adjusted Diluted EPS
Appendix Adjusted Diluted EPS ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Six Months Ended Jul 4, Jun 28, Jul 4, Jun 28, 2015 2014 2015 2014 Diluted Earnings Per Share $ 1.39 $ 1.24 $ 2.20 $ 2.20 Goodwill Impairment - 0.02 - 0.02 Purchase Accounting and Transaction Costs 0.11 0.01 0.47 0.
Slide 21: 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 Jul 4, Jun 28, Jul 4, Jun 28, Jul 4, Jun 28, Jul 4, Jun 28, 2015 2014 2015 2014 2015 2014 2015 2014 Income fro
Slide 22: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations FREE CASH FLOW RECONCILIATION Dollars in Millions Three Months Ended Six Months Ended Jul 4, Jun 28, Jul 4, Jun 28, 2015 2014 2015 2014 Net Cash Provided by Operating Activities $ 118.2 $ 99.5 $ 135.7 $ 145.3 Additions to Property Plant and Equipment (23.5) (20.6) (
Slide 23: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Six Months Organic Growth Ended Ended Dollars in Millions July 4, 2015 Net Sales $ 942.2 $ 1,853.9 Net Sales from Businesses Acquired (162.4) (295.6) Impact from Foreign Currency Exchange Rates 20.4 46.7 Incremental Sales from Joint Venture Sold 3.8 7.7