Regal Rexnord Corporation · NYSE:RRX
Regal Rexnord — Regal Beloit — Q1 2020 Earnings Presentation
29 slides from Regal Rexnord's earnings presentation, May 5, 2020
Slide 1: First Quarter 2020 Earnings Conference Call
1Q May 5, 2020 First Quarter 2020 Earnings CONFERENCE CALL Louis Pinkham Rob Rehard Chief Executive Officer Vice President Chief Financial Officer
Slide 2: Cautionary Statement
1Q 2020 CAUTIONARY STATEMENT The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: government policies, including policy changes affecting taxation, trade, tariffs, immigration, customs, border With the exception of historical facts, the statements
Slide 3: Non-GAAP Financial Measures
1Q 2020 NON-GAAP FINANCIAL MEASURES We prepare financial statements in accordance with accounting principles generally accepted percentage of adjusted net income attributable to Regal Beloit Corporation, adjusted income in the United States (“GAAP”). We also periodically disclose certain financial m
Slide 4: Agenda
1Q 2020 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 1Q 2020 Results & 2020 Scenario Planning ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 4
Slide 5: Overview
1Q 2020 OVERVIEW • CEO Perspective on COVID-19 ($ in millions, except per share data) 1Q 2019 1Q 2020 • Sales Down 9.8% on an Organic Basis Adjusted Net Sales* $820.3 $734.2 • Significant Headwinds From Weather and COVID-19 Adjusted Income from • 80/20 Pruning Initiatives Reduced Sales by ~180bps $8
Slide 6: Agenda
1Q 2020 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 1Q 2020 Results & 2020 Scenario Planning ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 6
Slide 7: Commercial Systems
1Q 2020 COMMERCIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 12.5% ($ Millions) from Operations* ($ Millions) • Market Performance – Pool Pump – Commercial HVAC $229.8 – Europe Air Moving – 80/20 Account Pruning (~1.1%) $199.4 – COVID-19 Broad-Based Headwinds Adjusted O
Slide 8: Industrial Systems
1Q 2020 INDUSTRIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 4.5% ($ Millions) from Operations* ($ Millions) • Market Performance – Power Generation – NA Industrial – COVID-19 Impacts $1.0 – 80/20 Account Pruning (~3%) + Data Centers $138.1 $129.6 Adjusted Operating Mar
Slide 9: Climate Solutions
1Q 2020 CLIMATE SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 14.8% ($ Millions) from Operations* ($ Millions) • Market Performance – NA HVAC Mild Winter (HDD Down ~20%) $247.8 – FER Pre-Buy Inventory – COVID-19, Europe $210.1 – 80/20 Account Pruning (~2.5%) $38.9 Adjuste
Slide 10: Power Transmission Solutions
1Q 2020 POWER TRANSMISSION SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 4.2% ($ Millions) from Operations* ($ Millions) • Market Performance – Upstream & Midstream Oil & Gas – COVID-19 Impacts $204.6 – 80/20 Account Pruning (~1%) $195.1 + Renewable Energy Adjusted Operat
Slide 11: Key Financial Metrics
1Q 2020 KEY FINANCIAL METRICS Capital Expenditures Balance Sheet as March 28, 2020 • $10.9 Million in 1Q 2020 • Total Debt of $1,364.9 Million • $50.0 Million Expected in FY 2020 • Net Debt of $760.4 Million • Down $45.7 Million from 4Q 2019 Restructuring & Related Costs • Net Debt/Adj. EBITDA* of 1
Slide 12: Full Year 2020 Guidance Update
1Q 2020 FULL YEAR 2020 GUIDANCE UPDATE Withdrawing FY 2020 Revenue and EPS Guidance Given Low Visibility During COVID-19 Pandemic Scenario Analysis: Target Deleverage Rates Under Scenarios For Revenue Decline* Q2 Scenario Assumptions Sales Decline From PY 20% 35% • Revenue Declines Are Consistent Ac
Slide 13: Liquidity and Capital Allocation
1Q 2020 LIQUIDITY AND CAPITAL ALLOCATION ($ in Millions) 1.6x • Flexible and Conservative Capital Structure $760 • Net Debt to Adj. EBITDA Well Within Comfort Zone of 1.5-2.0 Net • With an Abundance of Caution, Drew Down Full Revolver in $466 Leverage (*) March/April. • Cash & Cash Equivalents of ~$
Slide 14: Agenda
1Q 2020 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 1Q 2020 Results & 2020 Outlook ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 14
Slide 15: 1Q Appendix
1Q Appendix
Slide 16: Adjusted Diluted Earnings Per Share
1Q 2020 APPENDIX ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Mar 28, Mar 30, 2020 2019 GAAP Diluted Earnings Per Share $ 1.12 $ 1.99 Restructuring and Related Costs 0.10 0.04 Loss (Gain) on Businesses Divested and Assets to be Exited 0.03 (0.59) Net Loss (Income) from Businesses Divested/
Slide 17: Adjusted Income (Loss) from Operations
1Q 2020 APPENDIX Three Months Ended Power Commercial Transmission ADJUSTED INCOME (LOSS) FROM OPERATIONS Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Mar 28, Mar 30, Mar 28, Mar 30, Mar 28, Mar 30, Mar 28, Mar 30, Mar 28, Mar 30, 2020 2019 2020 2019 2020 2
Slide 18: Adjusted Net Sales
1Q 2020 APPENDIX Three Months Ended Commercial Power Transmission ADJUSTED NET SALES Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Mar 28, Mar 30, Mar 28, Mar 30, Mar 28, Mar 30, Mar 28, Mar 30, Mar 28, Mar 30, 2020 2019 2020 2019 2020 2019 2020 2019 2020 2
Slide 19: Adjusted Effective Tax Rate
1Q 2020 APPENDIX ADJUSTED EFFECTIVE TAX RATE Three Months Ended (Dollars in Millions) Mar 28, Mar 30, 2020 2019 Income before Taxes $ 60.6 $ 108.0 Provision for Income Taxes 13.9 21.2 Effective Tax Rate 22.9% 19.6% Income before Taxes $ 60.6 $ 108.0 Loss (Gain) on Businesses Divested and Assets to b
Slide 20: Free Cash Flow
1Q 2020 APPENDIX Three Months FREE CASH FLOW Ended (Dollars in Millions) Mar 28, Mar 30, 2020 2019 Net Cash Provided by Operating Activities $ 102.7 $ 18.3 Additions to Property Plant and Equipment (10.9) (20.2) Free Cash Flow $ 91.8 $ (1.9) GAAP Net Income Attributable to Regal Beloit Corporation $
Slide 21: Organic Sales Growth
1Q 2020 APPENDIX ORGANIC SALES GROWTH Three Months Ended (Dollars in Millions) Power Commercial Industrial Climate Transmission Systems Systems Solutions Solutions Total Regal Net Sales Three Months Ended Mar 28, 2020 $ 199.4 $ 129.6 $ 210.1 $ 195.1 $ 734.2 Impact from Foreign Currency Exchange Rate
Slide 22: Total Gross Debt/Adjusted EBITDA
1Q 2020 APPENDIX TOTAL GROSS DEBT/ADJUSTED EBITDA (Dollars in Millions) TOTAL GROSS DEBT/EBITDA LTM Mar 28, (Dollars in Millions) 2020 LTM Mar 28, Net Income $ 202.5 2020 Plus: Taxes 53.9 Net Income $ 202.5 Plus: Interest Expense 51.0 Plus: Taxes Less: Interest Income (5.6) 53.9 Plus: Depreciation a
Slide 23: Total Net Debt/Adjusted EBITDA
1Q 2020 APPENDIX TOTAL NET DEBT/ADJUSTED EBITDA (Dollars in Millions) TOTAL NET DEBT/EBITDA LTM Mar 28, (Dollars in Millions) 2020 LTM Mar 28, Net Income $ 202.5 2020 Plus: Taxes 53.9 Net Income Plus: Interest Expense 51.0 $ 202.5 Less: Interest Income (5.6) Plus: Taxes 53.9 Plus: Depreciation and A
Slide 24: Operating Leverage - Total Regal
1Q 2020 APPENDIX OPERATING LEVERAGE-TOTAL REGAL Three Months Ended (Dollars in Millions) Mar 28, Mar 30, 2020 2019 Change GAAP Income from Operations $ 70.0 $ 120.6 $ (50.6) Adjusted Income from Operations $ 79.2 $ 89.5 $ (10.3) Net Sales $ 734.2 $ 853.8 $ (119.6) Adjusted Net Sales $ 734.2 $ 820.3
Slide 25: Operating Leverage - Commercial Systems and Climate Solutions
1Q 2020 APPENDIX OPERATING LEVERAGE-COMMERCIAL SYSTEMS Three Months Ended (Dollars in Millions) Mar 28, Mar 30, 2020 2019 Change GAAP Income from Operations $ 12.5 $ 57.8 $ (45.3) Adjusted Income from Operations $ 15.5 $ 23.2 $ (7.7) Net Sales $ 199.4 $ 242.2 $ (42.8) Adjusted Net Sales $ 199.4 $ 22
Slide 26: Fiscal 2019 First Quarter Schedule for Ongoing Business
1Q 2020 APPENDIX The following tables outline by quarter and full year the 2019 net sales and income from operations, and the full year adjusted diluted earnings per share, illustrating the impact of businesses divested and to be exited. Power Commercial Industrial Climate Transmission Systems Syste
Slide 27: Fiscal 2019 Third Quarter Schedule for Ongoing Business
1Q 2020 APPENDIX The following tables outline by quarter and full year the 2019 net sales and income from operations, and the full year adjusted diluted earnings per share, illustrating the impact of businesses divested and to be exited. Power Commercial Industrial Climate Transmission Systems Syste
Slide 28: Fiscal 2019 Twelve Months Schedule for Ongoing Business
1Q 2020 APPENDIX The following tables outline by quarter and full year the 2019 net sales and income from operations, and the full year adjusted diluted earnings per share, illustrating the impact of businesses divested and to be exited. Power Commercial Industrial Climate Transmission Systems Syste
Slide 29: Shipping Days
1Q 2020 APPENDIX Shipping 1Q 2Q 3Q 4Q FY Days 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 2019 63 63 63 61 250 2020 63 63 63 64 253 ▪ Regal operates on a 52/53 week fiscal year ending on the Saturday closest to December 31 ▪ Fiscal Years 2