Regal Rexnord Corporation · NYSE:RRX
Regal Rexnord — Regal Beloit — Investor Day (December 2011)
100 slides from Regal Rexnord's investor day presentation, Dec 6, 2011
Slide 1: —=—=S=REGAL
Yi —=—=S=REGAL . BELOIT |
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 staternents by ter
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 operati
Slide 4: —=—=S=REGAL
Yi —=—=S=REGAL . BELOIT |
Slide 5: Leadership Introductions
Leadership Introductions
Slide 6: Leadership Introductions
Leadership Introductions
Slide 7: Regal Beloit Corporation Overview
Regal Beloit Corporation Overview Founded 1955 SalesbyProductiPlatform || ProductionbyRegion Beloit, WI wves Oth Dimes Ofer Mexico Revenues (PF) Mechanical $3B + Generators Blowers Employees ~25,800 Lage Four CEOs Molors Saleen Revenue Growth Transformation 7-Year CAGR 24.4% "= AMid Cap Diversified
Slide 8: Necessary and Innovative Products
Necessary and Innovative Products Electric | Electric | Custom Electric Power Generators _ Drives Transmission
Slide 9: Well Balanced, Well Diversified, Well Performing Model
Well Balanced, Well Diversified, Well Performing Model Revenues by Geography | Revenues by Product Applications RoWCanada Europe Asia Cyclicality” | | 5-Year EPS CAGR ® 29.2% 29.1% 28.7% 228% 17.7% 17.7% 2010 AME ROP RBC DHR- EX EMR (1) Managemen estimates (2) CaDRrepesems cmv ama gous cate re 2008
Slide 10: Performance Consistent with Respected Peer Group
Performance Consistent with Respected Peer Group 400% 350% 300% 250% 200% 150% 100% Total 7-YR Cumulative Shareholder Return 50% +142.0% Regal Beloit Corporation +115.2% Peer Group! 12.5% S&P 500 0% 9/30/04 FECAL 3/1/06 T3107 12/30/08 (1 esr cup consi ex ponton, me mc, Caer operon, per ties, ns, aR
Slide 11: Third Quarter Financial Highlights
Third Quarter Financial Highlights Revenue ($M) Adjusted Diluted EPS +25% Adjusted Operating Free Cash Flow ($M) H7% GoreGrowth Profit Margin +64% +3% +30 bps rT 3Q 3010 302011 302010 3Q2011 3Q 2010 3Q2011 3Q 2010 302011 Strong Third Quarter Performance —=FEGAL 10
Slide 12: 2011 Highlights
2011 Highlights = Expected Record Sales of $2.8+B = Expected Record Adjusted Operating Profit of $290+M = Expected Record Adjusted Diluted EPS of $4.31 - $4.37 = Price Capture Outpaced Inflation = Closed the EPC Acquisition - The Largestin Company’s History = Launched 50 New Products = Restructured
Slide 13: Agenda
Agenda Registration, Breakfast & Product Show Case Introductions & Opening Comments RBCIEPC Integration EPC Acquisition HVACR & Air Moving Commercial & Industrial Motors & Generators Break Financial Presentation Operations & Wrap Up Q&A Lunch With Management —=REGAL wen All Mark Gliebe Scott Brown S
Slide 14: EPC Integration
a S==REGAL | . BELOIT Senior Vice President Ml J PC Integration
Slide 15: Integration KPIs
Integration KPls Customer Retention Zero Lost Business Talent Retention Zero Loss of Key Talent Synergies Run Rate ($M) Year 1-$10 Year 2 - $20 Year 3 - $30 Year 4 - $35 —=REGAL wen 4
Slide 16: Customer Retention
Customer Retention Introduced Customer Care | in Initiative to EPC bu Care ‘Our future depends on the success of our customers. We will establish closer relationships with our customers, actively listen to their feedback and respond with a sense of urgency. Executive Meetings with 30 Largest Custome
Slide 17: Talent Retention
Talent Retention Day 1 Welcome Celebrations EPC HQs, Tipp City, Ohio Special Welcome Celebrations = Quickly Clarified Organizations Seamless Payroll, Benefits Transfer Loe '.
Slide 18: Talent Retention
Talent Retention RBC COMPASS Operating System Sharing Business Plans/Models Abatement Plans For Cultural Risks Kickoff Of Integration Plans =SREGAL Leadership Orientation - Beloit WI Aug 23-25 2011 v7
Slide 19: Synergies
Synergies | Annual Run Rate $M $35 $30 $20 310 2011 2012 2013 2014 REGAL Sourcing Robust Deck > 70 Opportunities Negotiations Progressing Well Logistics Secured Significant Rate Savings Leveraging RBC Fleet Developing Routing Consolidations Manufacturing Consolidating Rooftops Project Teams Launched
Slide 20: EPC Leadership Talent
EPC Leadership Talent ——=FREGAL 19
Slide 21: | BELOIT
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Slide 22: Agenda
Agenda EPC Overview and Background = EPC Strategy - Fix then Grow = Energy Efficiency Progress — New Products = Strategic Fit with RBC = Summary —=FEGAL 21
Slide 23: Long History of Leadership in Electric Motors
Long History of Leadership in Electric Motors 1950 1960 General History 1) 1946: Started as Whirl-A-Way Motors 2) 1950: Purchased by A. 0. Smith 3) 2010: Regal Beloit Announces Acquisition REGAL 2000 1980 1990 Acquisition History ) 1986: Westinghouse Small Motors © 1997: UPPCO Motors © 1998: GE Herm
Slide 24: A Leading Global Electric Motors Business
A Leading Global Electric Motors Business | Revenues by Product Type | Product Types Sub Fractional | 10% Hermetic 20% Hermetic Motors Fractional Integral Motors 5% sub Integral Fractional Horsepower Motors Motors REGAL 3
Slide 25: EPC Products Service a Diverse Application Base
EPC Products Service a Diverse Application Base Commercial Residential Fatributi General Pum Distribution HVAC&R HVACR e Industry GRAINGER. BUILT ron res nes ovo oxr oon V/// MOTION’ INDUSTRIES ‘espn Indus in Mion mPOOLCORP o i= & Ss 2 a a < Cy a (fone 24
Slide 26: EPC Global Footprint Positions for Expansion
EPC Global Footprint Positions for Expansion Juarez, Mexico Monterrey, Mexico Acuna, Mexico REGAL »\ Singapore
Slide 27: EPC Fix and Grow Strategy
EPC Fix and Grow Strategy 2006 Strategic Direction 1. Manufacturing Will be Shifted to Low Cost Regions 2. Pricing Disciplines Will be Improved 3. Energy Efficient Products Will be Designed and Launched Manufacturing Footprint Pricing Discipline Energy Efficient Products * Closed 11 US Factories + I
Slide 28: Globalization of EPC
Globalization of EPC GlobalSystems: QAD ERP andAEGIS Engineering System Operations Consolidation: 11 High Cost Plants Closed Since 2003 2Pole Manufacturing: Duplicate Capacity in China And Mexico Juarez Procurement: Global Procurement Office China Engineering Labs: Design, Test and Materials Capabil
Slide 29: China Operations
China Operations | Yueyang | Changzhou | * Builtin 2009 + Acquiredin 2002 + New Plant Under Construction + Commercial Hermetic Motors + Fractional & Sub-fractional Motors * Produces Commercial Hermetic Motors + EPC China Headquarters + Materials Lab & Hermetic Test Lab + Produce over 25,000 Motors P
Slide 30: Mexico Operations
Mexico Operations | Monterrey + Three Plants + Nine Plants + Two Plants + Fractional HVAC & Sub-fractional + FractionalandIntegralProduct + Hermetic Rotors & Stators Product + AIC and D/C Product + ECM Production Facility Combined with RBC Footprint, Provides Opportunity for Further Rationalization
Slide 31: Energy Efficiency Programs
Energy Efficiency Programs Started Work on Energy Efficiency Platform In 2006 Hired 10 Electronics Engineers in the US and China (Now Have 28) Initial Focus on Variable Speed, Energy Efficient Pool Motors = Motors Now Designed At 3 of 4 Key Pool Pump OEMs Also Designed Products for HVAC, Hermetic an
Slide 32: Energy Efficiency
Energy Efficiency Trends in Swimming Pool and Spa Motors California Florida Arizona January 1, 2010 December 31, 2011 January 1, 2012 Requires Multi-speed Motors and Controls On Pumps > 1 HP Requires Multi-speed Motors and Controls On Pumps > 1 HP Legislates Energy Efficiency Standards for Pool and
Slide 33: New Energy Efficient Products
New Energy Efficient Products x - = V-green® Variable Speed ECM Pool Motor Gre --Green = Targets In-ground Pools V-Greer " Features sor) > Approximately 20% More Efficient vs. Standard Motor >» Drop in Replacement > Power Factor Correction > State-of-the Art User Interface > Optional Off-board Mount
Slide 34: Selling Synergy Example: Irrigation
Selling Synergy Example: Irrigation Traction Motor Currently Supplied by EPC Customer Sourcing and Assembling Gear Box for Drive Shaft Durst Sourcing Gearbox and Motors Potential Synergy: Combine EPC Motors and Durst Gearbox for Complete Value Added System 3B
Slide 35: Key Benefits of Fit with RBC
Key Benefits of Fit with RBC Operating Cycle Rigor = Smooth Transition Into RBC = Execution Discipline Leadership Meeting ae Talent Review Policy Deployment Long Range Plan COMPASS Operating pa Compliance & Citizenship Customer & Review Employee Feedback Lean Six Sigma = Improve Quality & Productivi
Slide 36: Direct Customer Feedback Shaping Integration
Direct Customer Feedback Shaping Integration | Select Results from Customer Survey * Over 400 EPC Customers Responded wEPC RBC = Distribution Customers Pleased With EPC Model and Encouraging RBC to Retain the Approach Distribution = OEM Customers Encouraging EPC to Utilize RBC Best Practices = Integ
Slide 37: EPC Integration Making Both Businesses Stronger
EPC Integration Making Both Businesses Stronger = HVACR Distribution Consolidated Under EPC Leadership » Consolidating Three Businesses into One and Retaining the EPC Model » Driving One Face to the Customer >» Broadening Product Platform to Attain Cross Selling Synergies = HVACR OEM Businesses Cons
Slide 38: Key Thoughts on EPC Acquisition
Key Thoughts on EPC Acquisition = Business Performance Improving Going Into Acquisition = Further Improvements In Sight = New Energy Efficient Products Making A Difference = Integration With RBC Going Well = Positioned To Grow As Part Of Regal Beloit a
Slide 39: | BELOIT
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Slide 40: Key Messages
Key Messages ™ Getting to Know Regal Beloit HVACR North American Business Overview Diverse Applications and Product Offering Global Manufacturing Innovative Products 39
Slide 41: Broad Diversity of HVACR Applications
Broad Diversity of HVACR Applications | Space Conditioning
Slide 42: High Efficiency HVACR Product Portfolio
High Efficiency HVACR Product Portfolio | Combustion | Comfort Cooling Comfort and Cooling Ap REGAL Our Customers a4
Slide 43: Strong Diversity of HVACR Product Segments
Strong Diversity of HVACR Product Segments Revenues by End Use | Refrigeration Commercial Residential ——=FREGAL Residential: = Strong Long Term Player = Investing in Entry Level and Performance Leadership = Positioned Well for Rebound Commercial: = Driving High Efficiency Product Growth = Leveraging
Slide 44: Significant Global Manufacturing Footprint
Significant Global Manufacturing Footprint Production by Region | = Balanced Long Term Investment in Multi-pole Capability » Local Speed Combined WithLCR Cost >» Customer Confidence With Supply Assurance » Achieving 95%+ On Time Deliveries = Ideally Positioned to Support Major Customer Moves to Low
Slide 45: Regional Standards Drive Energy Efficient Motors
Regional Standards Drive Energy Efficient Motors Fumace-90% AFUE AIG-13 SEER = Establishes 3 Regions = Increases Minimum Efficiency Requirements > Furnaces - May 1, 2013 > AIC, Heat Pumps- January 1, 2015 Fummace -20% AFUE AUG -14 SEER with EER Ratings = Expect Favorable Mix as a Result of the Legis
Slide 46: US Residential HVAC Industry Trends
US Residential HVAC Industry Trends Finis AC IHP Shipments Furnace Shipments 10,000 8,000 - 6,000 4,000 - 2,000 2 a af 03040506070809101112131415 030405 06070809 101112131415 = Stimulus and R22 Phase Out Provided Favorability in’09, "10 = Currently Transitioning Through Industry Reset = Dry Ship Mix
Slide 47: Improving Customer Care Performance
Improving Customer Care Performance Delivery Performance Promise Kept 95% ail, 2007 +2008 +2009 2010 2011 Delivery Performance Delivered Quality Parts per Million 2007 2008 + 2009 2010 2011 Customer Focused Net Promoter Score wtlll 2007 «2008 =2009 2010 2011 REGAL = Supply Assurance, Cycle Time Redu
Slide 48: Using Innovation for Performance and Cost Leadership
Using Innovation for Performance and Cost Leadership Performance Leadership = Leading Industry Reliability Through Blakbox™ Investment in Advanced Material Development Launching New Integrated Airflow Systems Industry Leading Airkom™ Communicating Protocol Creating Products for Large Scale Property
Slide 49: Industry Leading Water Heater Blowers
Industry Leading Water Heater Blowers Exceeds Energy Star Phase II Enables 90 Gallon Performance in 30 Gallon Size Provides 50% Heating Recovery Improvement Consumers Benefit From a 2.5 Year Payback 4 Million Available Gravity Vented Units REGAL 8
Slide 50: Commercial Refrigeration Display Case & Bottle Cooler
Commercial Refrigeration Display Case & Bottle Cooler Opportunities: = New Display Case Efficiency Requirements in 2012 = Hydrocarbon Refrigerants Trend = 45,000 Stores With Low Efficiency Motors Solution: = High Efficiency Drop in Retrofit ECM Motor = Spark Proof IP 65 Construction = $36/ Year Savi
Slide 51: Hotel & Commercial HVAC Retrofit
Hotel & Commercial HVAC Retrofit FECAL Provides 2.5 Year Customer Payback Airflow Control Improves Occupant Comfort: > Significantly Lower Noise Operation >» Programmability Provides Dehumidification Easy Contractor Drop-in Replacement Construction Large Scale Retrofit Opportunity * Average25 year p
Slide 52: Residential HVAC Retrofit
Residential HVAC Retrofit Higher Efficiency > Average $268 Savings Per Year > 1 Year Replacement, 2.5 Retrofit Payback Improved Comfort >» Significantly Lower Noise >» Even Temperatures Throughout the Home > Improves Filtration Efficiency Easy Drop-in Installation RBC Designed Simple Contractor Sell
Slide 53: HVACR Summary
HVACR Summary = Strong History of Performance Adjusting Model for Current Trends = Responding to Customer Needs Strategy of Innovation and Cost Great Demand for High Efficiency Products 62
Slide 54: —=—=S=REGAL
Yi —=—=S=REGAL . BELOIT
Slide 55: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators Key Messages = Global Growth Strategy = Diverse Applications and Product Offering = Multi-pole Manufacturing = Innovative and Energy Efficient Products 5a
Slide 56: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators Product Portfolio | PowerGeneration | Power Transmission | | Power Conversion | an Broad Portfolio of Custom and General Purpose Products ss
Slide 57: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators Applications Power Generation Power Transmission
Slide 58: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators | 2006 Revenues by Geography | 2011 Revenues by Geography CHINA CHINA RoW 4 USA USA —=REGAL 57
Slide 59: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators Motor Sales By Size | Bop. Large ——=FREGAL 5B
Slide 60: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators | NEMA vs IEC | IEC NEMA ——=FREGAL 59
Slide 61: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators | High Efficiency Integral Motor Sales Europe lE3 ™s \ Canada NEMA Premium 5.0% US NEMA Premium 0.0% = T T T T T T T T 2007-2008 )= 2009 2010. 2011S 2012S 2013) 2014 Energy Efficiency Legislation Providing Tailwind for Growth REGAL 2015 60
Slide 62: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators Manufacturing | Production by Region = InAsia for Asia = Use Asia to Serve Higher Cost Regions = Multi-pole Manufacturing Strategy 7 Cost Base and Supply Chi a
Slide 63: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators Multi-pole Operations Wausau, WI Wuxi, China | Broa. ole Strategy for Best Cost and Del Eibergen, NL 62
Slide 64: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators C &1 Global Locations Facilities: 7 Facilities: 5 Facilities: 6 Facilities: 3 = Facilities: 1 Facilities: 8 Facilities: 5 AZ 3 —d Facilities: 3 Facilities: 14 Facilities: 2 an Growing Global Presence — Positioned Wellin Faster Growing Regions 63
Slide 65: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators | New Products | C&l New Product Introductions 1 9 = Energy Star Integral Motors for India = Commercial Launch in 2010 2008 2011E = 2011 Sales - $6M D> oa. Strong Pipeline of New Products in New and Adjacent Applications 6a
Slide 66: New Products for Growth - Marine Generator
New Products for Growth - Marine Generator —S, MARATHON ELECTRIC = Improved Efficiency Ce = Lower Maintenance Cost = More Precise Control = REGAL | Generator 85
Slide 67: New Products for Growth - HERA-MAX Drive System
New Products for Growth - HERA-MAX Drive™ System @)marathon: electric = 40% Energy Savings = Half the Size, Half the Weight = Interchangeable with Most Leading Brands REGAL 66
Slide 68: New Products for Growth - Marine Motor Applications
New Products for Growth — Marine Motor Applications Jacking Systems 7
Slide 69: Commercial & Industrial Motors and Generators
Commercial & Industrial Motors and Generators Summary Positioned for Global Growth Diverse Applications and Product Offering Multi-pole Manufacturing Innovative Products oe Well Positioned for Long Term Global Growth 68
Slide 70: S==REGAL |
a S==REGAL | . BELOIT
Slide 71: Financial Presentation Agenda
Financial Presentation Agenda = Strong Growth Record of Sales and Profitability = Favorable Comparisons to Peer Group = Focus on Free Cash Flow " Effective Use of the Balance Sheet to Drive Growth " Quarterly Sales Breakdown 70
Slide 72: Strong Growth Record of Sales and Profitability
Strong Growth Record of Sales and Profitability Annual Sales (in millions) ~$2.8 Bition 2005 2006 2007 2008 2009 2010 2011E Sales Growth Driven by Org rowth and Acq REGAL ral
Slide 73: Strong Growth Record of Sales and Profitability
Strong Growth Record of Sales and Profitability Favorable Operating Profit Trend | a © Op. Profit 3277 5$290" =e Op. Profit % of Sales 939 $238 Le $206 $160 11.4% 9 10.3% 10.6% ~10.3%* $$ on t t t t 2007 2008 2009 2010 2011 E* * 2011 Eis Estimated 2011 Adjusted Operating Profit. See non-GAAP reconci
Slide 74: Strong Growth Record of Sales and Profitability
Strong Growth Record of Sales and Profitability Earnings and Dividends per Share @Earnings Per Share =@Dividends per Share ~$4.34* . omg 7 $3.78 $3.84 Le= 4 $3.20 $3.40 1 $2.63 | $0.71 | 0.88 $0.59 0.68 $0.64 $0,67 | 51-Year Record of Quarterly Dividends 2006 2007 2008 2009 2010 2011E 2011 Eis Estim
Slide 75: Favorable Comparisons to Peer Group
Favorable Comparisons to Peer Group | Sales Growth % Tracks Peer Group “) =@RBC Sales % Growth =tePeer Group Sales 24.5% -18.7% (1) Peer Group Consists of 46 U.S. based Industrial Manufacturers. RBC’s Sales Growth is Balanced and Outperformed the Peer Group in 2010 74 SREGAL
Slide 76: Favorable Comparisons to Peer Group
Favorable Comparisons to Peer Group RBC Operating Profit % vs. Peer Group “) 12.4% 11.9% RBC -@Peer Group 2007 2008 2009 (1) Peer Group Consists of 46 U.S. based Industrial Manufacturers. 2010 oe RBC Operating Pro’ Follows Peer Group Trend 75
Slide 77: Focus on Free Cash Flow
Focus on Free Cash Flow | 7-Year Free Cash Flow Performance (Sin itor)‘ FreeCashFlow © CapEx 2005 2006 2007 2008 Note: Free cash flow equals net cash trom operations less capital expenditures. ar Average FCF REGAL 2009 2010 Net Income 11 2011E 76
Slide 78: Focus on Free Cash Flow
Focus on Free Cash Flow Working Capital as % of Net Sales | =<®RBC =tPeer Group 25.5% 25.3% 25.0% 24.5% 24.0% 15.5% 2007 2008 2009 2010 (1) Peer Group Consists of 46 U.S. based Industrial Manufacturers SREGAL Disciplined Capital Investments Reinvestment Rate =-™Cap. Exp. as a % of Sales 113.5% 98.4%
Slide 79: Effective Use of the Balance Sheet to Drive Growth
Effective Use of the Balance Sheet to Drive Growth 60% 50% mynon Be i (smith © G \ B 40% a & 3) B any 30% & B a 0% FASCO (ole! z oo ALSTOM — Gmoritincs e& 10% 0% QI G2 G8 G4 QI G2 G3 O4 GI G2 GB G4 QI G2 G3 G4 aI G2 G3 G4 QI G2 OB Gd'aI G2 G3 a4 aI a2 OB 2008 2005 2006 2007 2008 2009 2010 2011 30.20
Slide 80: Effective Use of the Balance Sheet to Drive Growth
Effective Use of the Balance Sheet to Drive Growth " Track Record of Consistent Growth and Execution = Real Momentum with 10 Recent Acquisitions = Energy Efficiency Innovation Tailwind = Continuing to Globalize and Simplify = Continuous Improvement Headset 79
Slide 81: Quarterly Sales Breakdown
Slide 82: Operations & Wrap Up
Slide 83: Strategy Update
Slide 84: Continuing the Long Term Growth Trajectory
Slide 85: Continuing the Long Term Growth Trajectory
Slide 86: Company Initiatives
Slide 87: Customer Care
Slide 88: Increasing Global Presence
Slide 89: Technology Leader
Slide 90: Sustainability Improving Our Performance
Slide 91: Driving Simplification
Slide 92: Lean Six Sigma and VCP
Slide 93: Successful Acquirer and Integrator
Slide 94: Driving For Mid Teens Op Profit
Slide 95: 2012 Outlook – Potential Headwinds
Slide 96: 2012 Outlook – Potential Tailwinds
Slide 97: Q & A
Slide 98: Thank you
Slide 99: APPENDIX – Non GAAP Measures
Slide 100: Appendix Reconciliation of Historic Free Cash Flow