Regal Rexnord Corporation · NYSE:RRX

Regal Rexnord — Regal Beloit — Investor Presentation (February 2018)

32 slides from Regal Rexnord's investor presentation, February 2018

  1. Slide 1: Regal Beloit Corporation Investor Relations Presentation

    Regal Beloit Corporation Investor Relations Presentation February 2018 Mark Gliebe Chuck Hinrichs Chairman Vice President Chief Executive Officer Chief Financial Officer Jon Schlemmer Robert Cherry Chief Operating Officer Vice President Business Development & Investor Relations ©2018 Regal Beloit Co

  2. Slide 2: Safe Harbor Statement

    Safe Harbor Statement ©2018 Regal Beloit Corporation 2

  3. Slide 3: Non-GAAP Financial Measures

    Non-GAAP Financial Measures ©2018 Regal Beloit Corporation 3

  4. Slide 4: Regal is…

    Regal is…  A Leader in High Efficiency Motor & Power Transmission Systems − Well-positioned for global energy efficiency trend  A Strong Free Cash Flow Generator − Five-year average free cash flow 133% of adjusted net income*  Positioned to Drive Organic Growth through Innovation − Disruptive pro

  5. Slide 5: Regal Overview

    Regal Overview Sales by Product Sales by Segment Other Control Solutions Power Founded in 1955 with Climate Transmission Couplings Solutions Headquarters in Generators Solutions 23% 23% Beloit, Wisconsin Blowers Small Small 30% 29% Motors Motors Bearings 48% 47% 2017 Sales of $3.4B Gearing Large Mot

  6. Slide 6: Segment End Markets, Products and Brands

    Segment End Markets, Products and Brands Commercial & Industrial Systems Climate Solutions Power Transmission Solutions ® ©2018 Regal Beloit Corporation 6

  7. Slide 7: Financial Snapshot

    Financial Snapshot Net Sales Adjusted Diluted EPS* (billions) $5.33 $3.5 $3.4 $4.87 $3.3 $3.2 $4.44 $4.31 2014 2015 2016 2017 2014 2015 2016 2017 Free Cash Flow* Dividends Paid Per Share (millions) $377 $1.00 $0.90 $0.94 $0.84 $292 $215 $227 2014 2015 2016 2017 2014 2015 2016 2017 * Non-GAAP Financi

  8. Slide 8: Consistently Generating Cash

    Consistently Generating Cash (millions) $500 200% 175% $400 150% 125% $300 100% $200 75% 50% $100 25% $- 0% 2013 2014 2015 2016 2017 Free Cash Flow* % of Adj. Net Income* Free Cash Flow % of Adj. Net Income 5-Year Average of 133% * Non-GAAP Financial Measurement, See Appendix for Reconciliation ©201

  9. Slide 9: Returning Cash to Shareholders

    Returning Cash to Shareholders Dividends Paid Per Share $1.00 $0.94 $0.90 $0.84 $0.78 $0.74 $0.70 $0.66 $0.64 $0.62 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Dividend Increase of 8% Announced May 1, 2017 ©2018 Regal Beloit Corporation 9

  10. Slide 10: Capital Allocation Priorities

    Capital Allocation Priorities Balance Sheet Targets  Debt/EBITDA* Ratio: 1.5 – 3.5  Capital Expenditures: 2.5% – 3.0% of Sales  Cash Dividends: 20% – 24% Payout Ratio Acquisitions Share Repurchase Targeted Transactions to Strengthen the Opportunistically Repurchase Shares while Core and Drive Sha

  11. Slide 11: Enterprise Strategy

    Enterprise Strategy CORE CAPABILITIES FOUNDATIONAL PERFORMANCE Top Quartile Unique Culture Cash Generation KEY ELEMENTS Strong • Focus on Core Improving Operators • Innovate to Grow Margins • Simplification Innovative Customer Favored Drives Long Term Growth and Improved Returns ©2018 Regal Beloit C

  12. Slide 12: Enterprise Strategy – Performance Targets

    Enterprise Strategy – Performance Targets Organic Sales Adj. Operating ROIC* Free Cash Flow Growth* Margins* to Net Income* 2% – 4% CAGR 200 – 250 bps 300 – 400 bps 100% – 125% By 2019 Strategy Drives Sustainable Improvements in Financial Performance * Non-GAAP Financial Measurement, See Appendix fo

  13. Slide 13: Focus on the Core

    Focus on the Core  Acquisition First  Organic First to  Serial Acquirer  Targeted Acquisitions  Focus On Core Businesses Where We Can Differentiate with Technology  Increase the Focus on the Distribution Channel to Drive Growth  Selectively Prune Businesses Where We Do Not Have a Clear Advant

  14. Slide 14: Innovate to Grow

    Innovate to Grow Disruptive Energy Efficiency Internet of Things Technology Commercial Refrigeration HP Range Year Markets  Efficient motors use electronics  Effective March of 2017 < 1.0 2011 Furnaces  Every motor can be a sensor  Requires ECM type motor Boilers  Every motor can communicate Ap

  15. Slide 15: Energy Efficiency Requirements Increasing

    Energy Efficiency Requirements Increasing Comm. Ref. Commercial Fan Energy Equipment HVAC Rating (FER) 2017 2018 2019 2020 IE3 Efficiency Walk in Coolers Industrial Motors & Freezers Multi-Year Trend Favors High Efficiency Suppliers ©2018 Regal Beloit Corporation 15

  16. Slide 16: Furnace Fan Regulation Impact

    Furnace Fan Regulation Impact Industry Units by Motor Type (million units) 3.1 2.9  Fan Energy Rating (FER)  New National Furnace Standard High Eff  Electrical Efficiency Requirement Standard  High Efficiency Motor Mandate  7/1/19 Effective Date 2016 2020 Significant Industry Mix Shift by 2020

  17. Slide 17: Four Paths To Meet FER Regulation

    Four Paths To Meet FER Regulation 100% Heat Exchanger 93% Gas Modulation 82% Blower Housing 70% Blower Motor % of Volume ©2018 Regal Beloit Corporation 17

  18. Slide 18: Full Range of FER Solutions

    Full Range of FER Solutions DEC Star® Blower Highest Efficiency Customer Benefits Solution  Full Range of Solutions  Highest Motor Efficiency ECM 3.0+ with Proven Reliability High Efficiency Motor  Premium Solution for Most Difficult Applications Ensite™ ECM Motor Regal Benefits  Full Customer E

  19. Slide 19: Disruptive Technology – DEC Star Blower

    Disruptive Technology – DEC Star® Blower Standard Blower DEC Star® Blower Innovative Benefits  First to Market  Substantial Improvement  New Technology in the Motor, in Energy Efficiency Drive, Blower Construction  Less Noise and Blower Wheel  Less Weight  17 Patents Issued & Pending  Uniform

  20. Slide 20: Scaling Axial Technology

    Scaling Axial Technology Axial Axial DEC Star® Blower UlteMAX™ Draft Inducer Gas Pre-Mix HVAC Solution Motor & Control 2011 2013 2015 2017 Growth Opportunities in Both Existing and New Markets for Regal ©2018 Regal Beloit Corporation 20

  21. Slide 21: Disruptive Technology – UlteMAX Motor

    Disruptive Technology – UlteMAX™ Motor Customer Benefits Standard UlteMAX™ Industrial Motor Motor & Control  Compact Form Factor  50% – 75% Lower Weight  Higher Efficiency Regal Benefits  Significant Customer Interest  First Sales in 2017  Est. $70 Million Incremental Sales by 2023 Differentia

  22. Slide 22: UlteMAX Motor – Industrial Applications

    UlteMAX™ Motor – Industrial Applications Standard Air Handling Axial Air Handling Innovative Benefits to Customers  First to Market  Substantial Improvement in  Revolutionary Form Factor Energy Efficiency  New Technology in the Motor, Drive  50% - 75% Less Weight and Size  8 Patents Issued and

  23. Slide 23: Simplification

    Simplification Completed thru 2016 Planned for 2017-2019 75% of Sales on One ERP ERPs 90% of Sales on One ERP 1,845,000 sq ft Reduced Another 1,100,000 sq ft 15% Reduction Manufacturing Footprint Cumulative 25% Reduction 4 Major Design Platforms 1 Additional Design Platform Consolidated Design Platf

  24. Slide 24: Leveraging Simplification

    Leveraging Simplification Rooftop Consolidation Automation 1,845K Enables sq ft consolidated ERP Consolidation Digital Customer Experience 75% Enables revenue on one system Platform Consolidation Innovation  Energy Efficiency 4 Enables  Disruptive Technology  Internet of Things design platforms e

  25. Slide 25: Key Takeaways

    Key Takeaways Regal is…  A Leader in High Efficiency Motor & Power Transmission Systems  A Strong Free Cash Flow Generator  Positioned to Drive Organic Growth through Innovation  Delivering Results from Ongoing Simplification Initiative We Create a Better Tomorrow by Efficiently Converting Power

  26. Slide 26: Thank You

    Thank You Mark Gliebe Chuck Hinrichs Chairman Vice President Chief Executive Officer Chief Financial Officer Jon Schlemmer Robert Cherry Chief Operating Officer Vice President Business Development & Investor Relations ©2018 Regal Beloit Corporation

  27. Slide 27: Appendix Non-GAAP Reconciliations

    Appendix Non-GAAP Reconciliations (Dollars in Millions) Twelve Months Ended FREE CASH FLOW Dec 28, 2013 Jan 3, 2015 Jan 2, 2016 Dec 31, 2016 Dec 30, 2017 Net Cash Provided by Operating Activities $ 305.0 $ 298.2 $ 384.3 $ 442.3 $ 291.9 Additions to Property Plant and Equipment (82.7) (83.6) (92.2) (

  28. Slide 28: Appendix Non-GAAP Reconciliations

    Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Twelve Months Ended Dec 30, Dec 31, 2017 2016 GAAP Diluted Earnings Per Share $ 4.74 $ 4.52 Restructuring and Related Costs 0.22 0.10 Gain on Disposal of Businesses - (0.14) Gain on Sale of Assets (0.07) (0.04) Provisional Benefit

  29. Slide 29: 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

  30. Slide 30: Appendix Non-GAAP Reconciliations

    Appendix Non-GAAP Reconciliations Twelve Months Ended ORGANIC SALES GROWTH December 30, 2017 (Dollars in Millions) Commercial & Industrial Power Transmission Systems Climate Solutions Solutions Total Regal Net Sales $ 1,604.3 $ 990.6 $ 765.4 $ 3,360.3 Net Sales from Business Divested - - 9.0 9.0 Imp

  31. Slide 31: Appendix Non-GAAP Reconciliations

    Appendix Non-GAAP Reconciliations RETURN ON INVESTED CAPITAL (ROIC) Twelve Months Ended (Dollars in Millions) Dec 30, Dec 31, 2017 2016 Cash and Cash Equivalents $ (139.6) $ (284.5) Current Maturities of Debt 101.2 $ 100.6 Long-Term Debt 1,039.9 1,310.9 Total Net Debt $ 1,001.5 $ 1,127.0 Total Regal

  32. Slide 32: 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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