Slide 1: Regal Beloit Corporation Second Quarter 2013 Earnings Conference Call
Regal Beloit Corporation Second Quarter 2013 Earnings Conference Call July 31, 2013 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Chuck Hinrichs John Perino Vice President Vice President Chief Financial Officer Investor Relations
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 disclose adjusted diluted earnings per share (EPS), adjusted gross profit, adjusted gross profit as a percentage of net sales, adjusted income
Slide 4: Agenda
Agenda Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Operations Update Jon Schlemmer Summary Mark Gliebe Q&A All p4
Slide 5: Opening Comments – 2nd Quarter
Opening Comments – 2nd Quarter Top Line Sales Performance as Expected – C&I Sales Improved Sequentially – North American Residential HVAC Consistent with Expectations – Strength in Non-HVAC Residential Sales Gross Margin Held Despite Top Line Pressure – Completed EPC Synergy Program as Planned –
Slide 6: Opening Comments – 3rd Quarter Outlook
Opening Comments – 3rd Quarter Outlook End Market Strength in Residential HVAC – Expect Normal Seasonality – Customer Dynamics Offsetting HVAC – Continued Strength in Residential Non-HVAC Slight Improvement in C&I Markets Modest Growth in China C&I Appears to Have Stabilized and Residential
Slide 7: 2nd Quarter 2013 Financial Highlights
2nd Quarter 2013 Financial Highlights ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended June 29, 2013 June 30, 2012 GAAP Diluted Earnings Per Share $ 1.13 $ 1.49 Restructuring Costs 0.02 0.01 Retroactive Tax Credit (0.02) - Adjusted Diluted Earnings Per Share $ 1.13 $ 1.50 Restructuring Char
Slide 8: 2nd Quarter 2013 Financial Highlights
2nd Quarter 2013 Financial Highlights Sales Declined 4.9% from Prior Year – In Line with Expectations – Material Price Formulas Impacted Total Net Sales – Currency Exchange Rates Impacted Total Net Sales (0.7%) and International Sales (2.3%) Gross Profit – $3.6 Million Negative Impact of Venezue
Slide 9: 2nd Quarter 2013 Financial Highlights
2nd Quarter 2013 Financial Highlights Operating Expenses – $2.9 Million Acquisition Diligence Costs – $1.4 Million Net Bad Debt Expense – $0.4 Million Restructuring Charges – $0.2 Million from Acquired Business Free Cash Flow* 127% of Net Income * Non-GAAP Financial Measurement, See Appendix for
Slide 10: 2nd Quarter 2013 Financial Highlights
2nd Quarter 2013 Financial Highlights Capital Expenditures Effective Tax Rate (ETR) $26.6 Million 26.3% ETR in 2Q 2013, Adjusted $100 Million for FY 2013 for China Tax Incentive 26.5% ETR in 3Q 2013 & 4Q 2013 Free Cash Flow Balance Sheet at June 29, 2013 $65 Million FCF* Total Debt of $7
Slide 11: 3rd Quarter 2013 Guidance
3rd Quarter 2013 Guidance GAAP EPS Guidance of $1.08 to $1.16 Adjusted EPS Guidance of $1.10 to $1.18 – After Adding Back $0.02 of Restructuring Charges End Market Strength in Residential HVAC – Expect Normal Seasonality – Customer Dynamics Offsetting – Continued Strength in Residential Non-HV
Slide 12: 2nd Quarter 2013 Operations Update
2nd Quarter 2013 Operations Update North America C&I Stabilized – Down 3.8% Excluding Impact of the Divested Motor Business – Mixed Performance in the End Markets – Reduced Government Spending and Capital Investments Mechanical Sales Decline Driven by Oil & Gas N.A. Residential HVAC Down 6.8%
Slide 13: Accelerating New Products
Accelerating New Products New Product Launches Customer Recognizing Regal as an Innovative Company 21% Regal Receives 2013 Dealer Design Gold Award p 13
Slide 14: Innovative Solutions for the HVAC Aftermarket
Award Winning Evergreen® EM Innovative Solutions for the HVAC Aftermarket p 14
Slide 15: Gas Premix Platform Expansion
Gas Premix Platform Expansion System Solution – Motor, Control and Air Mover New Application for Regal Boiler NOx Emission Expanded Product Line Requirements Driving Growth Smart Compact Design, Quiet Operation, High Efficiency Position to Pursue European Boiler Market Residential to Comme
Slide 16: Commercial Energy Efficient Retrofits
Commercial Energy Efficient Retrofits 2005 – North America Commercial Refrigeration 2011 – Commercial HVAC 2013 – International p 16
Slide 17: Synergies and Simplification
Synergies and Simplification Ramping Up Manufacturing Simplification Plans – Announced Closure of Springfield, Missouri Motor Facility – Drive Efficiencies in Both Cost and Lead Times Savings Spread Over 2014 and 2015 Total Annualized Savings Expected to Exceed $15M p 17
Slide 18: 64% Reduction in Part Count
Design Simplification Bearings ~ 44 12 Rotor Cores ~ 638 400 Shafts ~ 2076 350 Stator Assemblies ~ 913 400 Main Frames ~ 1141 470 Capacitors ~ 28 8 End Frames ~ 331 200 64% Reduction in Part Count p 18
Slide 19: Regal Continues to Execute on All Operating Fronts
Summary Top Line Sales Performance as Expected Gross Margin Held Despite Top Line Pressure Strong Free Cash Flow Execution on Synergy and Simplification Continue to Launch Innovative New Products Pursuing Acquisitions and Pipeline is Active Regal Continues to Execute on All Operating Fro
Slide 20: Questions and Answers
REGAL Questions and Answers
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended Six Months Ended Jun 29, Jun 30, Jun 29, Jun 30, 2013 2012 2013 2012 GAAP Diluted Earnings Per Share $ 1.13 $ 1.49 $ 2.22 $ 2.65 Purchase Accounting Costs — — — 0.01 Restructuring Costs 0.02 0.01 0.03 0.01 Gain
Slide 22: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations EBITDA Reconciliation Dollars in Millions 3Q 2012 4Q 2012 1Q 2013 2Q 2013 LTM Net Income $54.3 $29.9 $49.5 $51.1 $184.8 Plus: Minority Interest 0.9 1.0 1.2 2.5 5.6 Plus: Taxes 17.9 5.7 15.3 17.9 56.8 Plus: Interest Expense 10.6 10.9 10.6 10.7 42.8 Less: Interest Inc