Slide 1: Regal Beloit Corporation Second Quarter 2017 Earnings Conference Call
Regal Beloit Corporation Second Quarter 2017 Earnings Conference Call August 8, 2017 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Chuck Hinrichs Robert Cherry Vice President Vice President Chief Financial Officer Business Development & Investor Relations ©20
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 Financial Update Chuck Hinrichs Operations Update Jon Schlemmer Summary Mark Gliebe Q&A All 4
Slide 5: Opening Comments – 2nd Quarter Results
Opening Comments – 2nd Quarter Results Adjusted Diluted EPS* Up 13.2% from Prior Year Organic Sales Growth* Up 4.8% – Climate Up 6.5% – C&I Up 4.3% – PTS Up 3.5% Adjusted Operating Margin* Up 70 bps – Volume Leverage – Rightsizing of Oil & Gas Businesses – Benefits from Simplification and SG&A
Slide 6: Opening Comments – Looking Forward
Opening Comments – Looking Forward Entering 3Q, Orders Up Versus Prior Year in All Three Segments Expecting Low Single Digit Organic Sales Growth in 2017 – Broad-based End Market Growth in North America and Asia – Middle East and Oil & Gas Comparisons Improve in 2H 2017 – Residential and Commerc
Slide 7: 2nd Quarter 2017 Financial Results
2nd Quarter 2017 Financial Results Sales of $869.2 Million, Up 3.6% – Organic Sales* Up 4.8% – Foreign Currency Translation of (0.7%) – Business Divestiture of (0.5%) Adjusted Operating Margin* of 10.4% Compared to 9.7% in the Prior Year – Higher Sales in All Segments – Benefits from Rightsizing
Slide 8: 2nd Quarter 2017 Financial Results
2nd Quarter 2017 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Jul 1, Jul 2, 2017 2016 GAAP Diluted Earnings Per Share $ 1.18 $ 1.26 Restructuring and Related Costs 0.12 0.02 Gain on Disposal of Businesses - (0.14) Gain on Sale of Assets (0.01) - Adjusted Diluted Earnings
Slide 9: 2nd Quarter 2017 Key Financial Metrics
2nd Quarter 2017 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) $16.7 Million in 2Q 2017 21.6% ETR in 2Q 2017 ~$75 Million Expected in FY 2017 – 22.5% Excluding Restructuring Expecting FY 2017 D&A of ~$145 Million Expecting FY 2017 ETR of ~22% Restructuring $7.7 Mill
Slide 10: 2017 Full Year Guidance
2017 Full Year Guidance Assumptions Low Single Digit Growth in FY 2017 Organic Sales Expecting Modest Improvement in Adjusted Operating Margin in 2H 2017 Guidance Raised FY 2017 GAAP Diluted EPS Guidance to $4.51 to $4.81 Raised FY 2017 Adjusted Diluted EPS* Guidance to $4.70 to $5.00 – Rest
Slide 11: 2Q 2017 Commercial & Industrial Systems
2Q 2017 Commercial & Industrial Systems Sales Adj. Income from Sales Operations* Organic Sales* Up 4.3% ($ millions) 5th Consecutive Quarter of Improvement $407 $395 $27 Sales Performance $26 – Asia Up – Strength in Oil & Gas and Power Gen – Commercial HVAC Up – Distribution Down Slightly – Pr
Slide 12: 2Q 2017 Climate Solutions
2Q 2017 Climate Solutions Sales Adj. Income from Sales Operations* Organic Sales* Up 6.5% ($ millions) 6th Consecutive Quarter of Improvement $41 $255 $271 Sales Performance $37 – NA Resi HVAC Up Low Teens – HVAC Aftermarket Flat – Commercial Refrigeration Down – Price Up Slightly, Improving T
Slide 13: 2Q 2017 Power Transmission Solutions
2Q 2017 Power Transmission Solutions Sales Adj. Income from Sales Operations* Organic Sales* Up 3.5% ($ millions) 4th Consecutive Quarter of Improvement $191 $189 $22 Sales Performance $19 – Renewable Energy, Oil & Gas and Commercial HVAC Up – Distribution Flat Expecting Positive 2H 2017 Org
Slide 14: Investor Day Updates
Investor Day Updates Commercial Excellence Innovation New Sales Positions Filled Added Sales Leadership Talent in Key Roles Implemented New Compensation Plan Digital Customer Experience (DCX) Invested in a Product Information Management Tool (PIM) UlteMAX™ Great Progress on 360-Spin Produc
Slide 15: 2nd Quarter Summary Comments
2nd Quarter Summary Comments Adjusted Diluted EPS* Up 13.2% Organic Sales Growth Up 4.8% Orders Up in All Three Segments Adjusted Operating Margin* Up 70 bps Free Cash Flow* 154% of Net Income Reduced Debt by $70 Million Repurchased $21 Million of Common Stock Total Debt/Adj. EBITDA*
Slide 16: Questions and Answers
Questions and Answers REGAL 16
Slide 17: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Six Months Ended Jul 1, Jul 2, Jul 1, Jul 2, 2017 2016 2017 2016 GAAP Diluted Earnings Per Share $ 1.18 $ 1.26 $ 2.20 $ 2.19 Restructuring and Related Costs 0.12 0.02 0.17 0.04 Gain on Disposal of Businesses - (
Slide 18: 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 1, Jul 2, Jul 1, Jul 2, Jul 1, Jul 2, Jul 1, Jul 2, 2017 2016 2017 2016 2017 2016 2017 2016 GAAP Income
Slide 19: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations FREE CASH FLOW RECONCILIATION Three Months Ended Six Months Ended (Dollars in Millions) Jul 1, Jul 2, Jul 1, Jul 2, 2017 2016 2017 2016 Net Cash Provided by Operating Activities $ 98.4 $ 117.5 $ 148.9 $ 176.1 Additions to Property Plant and Equipment (16.7) (16.8) (
Slide 20: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ORGANIC SALES GROWTH Three Months Ended July 1, 2017 (Dollars in Millions) Commercial & Industrial Power Transmission Systems Climate Solutions Solutions Total Regal Net Sales $ 407.4 $ 270.5 $ 191.3 $ 869.2 Net Sales from Business Divested - - 3.8 3.8 Impact from F
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED EBITDA AND TOTAL DEBT/ADJUSTED EBITDA RECONCILIATION (Dollars in Millions) LTM Jul 1, 2017 Net Income Attributable to Regal Beloit Corporation $ 204.5 Plus: Minority Interest 5.6 Plus: Taxes 53.8 Plus: Interest Expense 58.0 Less: Interest Income (4.2) Plus:
Slide 22: 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