Slide 1: Third Quarter 2018 Earnings Conference Call
Regal Beloit Corporation Third Quarter 2018 Earnings Conference Call November 5, 2018 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Rob Rehard Robert Cherry Vice President Vice President Chief Financial Officer Business Development & Investor Relations ©2018
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, CEO 3Q Results & 2018 Outlook Rob Rehard, CFO Operations Update Jon Schlemmer, COO Summary Mark Gliebe, CEO Q&A All 4
Slide 5: Opening Comments – 3rd Quarter Results
Opening Comments – 3rd Quarter Results Organic Sales Up 5.2% – Commercial & Industrial Systems Up 6.1% – Climate Solutions Up 1.4% – Power Transmission Solutions Up 8.1% Adjusted Operating Margin* Up 60 bps from Prior Year – Benefitted from Volume, Incremental Price, and Productivity – Constrain
Slide 6: Opening Comments – Looking Forward
Opening Comments – Looking Forward Encouraging Start to 4Q – Orders Up Versus Prior Year in Most End Markets – Expecting Price/Cost At Least Neutral Expecting to Continue to Offset the Tariff Impacts Expecting Mid-Single Digit Organic Sales Growth in 2018 – Continued Growth in Residential & Li
Slide 7: 3rd Quarter 2018 Financial Results
3rd Quarter 2018 Financial Results 3Q 2018 Net Sales of $925.4 Million, Up 8.0% – Acquisitions, Net of Divestitures Contributed 4.1% – Business to be Exited (0.4%) – Foreign Currency Impact of (0.9%) – Organic Sales Up 5.2% Adjusted Operating Margin* of 11.6% – Up 60 bps from 3Q 2017 – Volume Gr
Slide 8: 3rd Quarter 2018 Financial Results
3rd Quarter 2018 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE * Three Months Ended Sep 29, Sep 30, 2018 2017 GAAP Diluted Earnings Per Share $ 1.17 $ 1.39 Restructuring and Related Costs 0.03 0.03 Purchase Accounting and Transaction Costs 0.01 — Provisional Benefit of the New US Tax Legisla
Slide 9: 3rd Quarter 2018 Key Financial Metrics
3rd Quarter 2018 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) $18.7 Million in 3Q 2018 20.2% Adj. ETR* in 3Q 2018 $80.0 Million Expected in FY 2018 ~21.0% Expected Adj. ETR in FY 2018 Restructuring and Related Costs $2.3 Million in 3Q 2018 $8.0 Million Expected in
Slide 10: 2018 Full Year Guidance
2018 Full Year Guidance Mid-Single Digit Organic Sales Growth in 2018 Improvement in 2018 Adjusted Operating Margin FY 2018 GAAP Diluted EPS Guidance of $5.11 to $5.21 FY 2018 Adjusted Diluted EPS* Guidance of $5.85 to $5.95 − Impairment & Exit Related Costs of $34.9 Million or $0.61 per Sha
Slide 11: U.S. Tariff Impacts
U.S. Tariff Impacts Section 232 and 301 Tariffs $200B List of Section 301 Tariffs Mexico Industrial Motor Facility Went Into Effect in September ~10% of Regal’s U.S. Business Directly Impacted by the 301 Tariffs Manufacturing Transfers Currently Transferring Production to Regal Facilities Outs
Slide 12: Simplification and Automation
Simplification and Automation Simplification $8 Million of Restructuring Expense in 2018 Stator Winding More Opportunity in 2019 and Beyond Automation Positive Impact on Margins Expect to Invest $10 - $12 Million in 2019 Small Blower Assembly Excellent Progress on Simplification and Automati
Slide 13: 3Q 2018 Commercial & Industrial Systems
3Q 2018 Commercial & Industrial Systems Sales Adj. Income from Sales Operations* Organic Sales Up 6.1% ($ millions) Sales Performance $37 – Demand Up in Distribution, Power Gen, $462 $408 $30 Oil & Gas, and Commercial HVAC – Distribution Strength in General Industrial and Pool Aftermarket – Weak
Slide 14: 3Q 2018 Climate Solutions
3Q 2018 Climate Solutions Sales Adj. Income from Adj. Net Sales** Operations* Organic Sales Up 1.4% ($ millions) Sales Performance $39 $41 $243 $244 – NA Resi HVAC Up Low to Mid-Single Digit – Large HVAC Customer Impacted by Weather – Commercial Refrigeration Up – Demand Down in Asia, Europe, an
Slide 15: 3Q 2018 Power Transmission Solutions
3Q 2018 Power Transmission Solutions Adj. Income from Sales Sales Operations* Organic Sales Up 8.1% ($ millions) $208 $28 Sales Performance $193 – Strength in Oil & Gas, Distribution, Material $23 Handling, and Commercial HVAC – Headwinds in Renewable Energy and Ag Price Up from Prior Year Adj
Slide 16: 3rd Quarter 2018 Summary & Outlook
3rd Quarter 2018 Summary & Outlook Organic Sales Up 5.2% in 3Q Entering 4Q, Orders Up in Most End Markets Price/Cost Slightly Positive Expect to Offset Tariff Impacts Adjusted Operating Margin* Up 60 bps in 3Q Expect Adjusted Operating Margin to be Up Meaningfully for 2018 Adjusted Dil
Slide 17: Questions and Answers
Questions and Answers REGAL V7
Slide 18: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Nine Months Ended Sep 29, Sep 30, Sep 29, Sep 30, 2018 2017 2018 2017 GAAP Diluted Earnings Per Share $ 1.17 $ 1.39 $ 3.98 $ 3.59 Restructuring and Related Costs 0.03 0.03 0.09 0.20 Purchase Accounting and Trans
Slide 19: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Commercial & Power Transmission ADJUSTED INCOME FROM OPERATIONS Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Sep 29, Sep 30, Sep 29, Sep 30, Sep 29, Sep 30, Sep 29, Sep 30, 2018 2017 2018 2017 2018 2017 2018 201
Slide 20: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Commercial & Industrial Power Transmission ADJUSTED NET SALES Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Sep 29, Sep 30, Sep 29, Sep 30, Sep 29, Sep 30, Sep 29, Sep 30, 2018 2017 2018 2017 2018 2017 2018 2017 Net Sales $
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED EFFECTIVE TAX RATE Three Months Ended Nine Months Ended Sep 29, Sep 30, Sep 29, Sep 30, 2018 2017 2018 2017 Income before Taxes $ 56.3 $ 81.2 $ 216.9 $ 211.9 Provision for Income Taxes 3.6 17.6 37.6 46.4 Effective Tax Rate 6.4% 21.7% 17.3% 21.9% Income befo
Slide 22: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations FREE CASH FLOW Three Months Ended Nine Months Ended (Dollars in Millions) Sep 29, Sep 30, Sep 29, Sep 30, 2018 2017 2018 2017 Net Cash Provided by Operating Activities $ 106.0 $ 86.1 $ 250.3 $ 235.0 Additions to Property Plant and Equipment (18.7) (15.3) (59.2) (49.
Slide 23: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ORGANIC SALES GROWTH Three Months Ended (Dollars in Millions) Commercial & Power Industrial Climate Transmission Systems Solutions Solutions Total Regal Net Sales Three Months Ended Sep 29, 2018 $ 462.3 $ 255.4 $ 207.7 $ 925.4 Net Sales from Business Acquired (34.7)
Slide 24: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations TOTAL GROSS DEBT/ADJUSTED EBITDA TOTAL NET DEBT/ADJUSTED EBITDA (Dollars in Millions) (Dollars in Millions) LTM Sep 29, LTM Sep 29, 2018 2018 Net Income Attributable to Regal Beloit Corporation $ 227.1 Net Income Attributable to Regal Beloit Corporation $ 227.1 Plus
Slide 25: 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