Slide 1: Third Quarter 2016 Earnings Conference Call
Regal Beloit Corporation Third Quarter 2016 Earnings Conference Call November 7, 2016 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Chuck Hinrichs Robert Cherry Vice President Vice President Chief Financial Officer Investor Relations ©2016 Regal Beloit Corpor
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 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 Segment Update Jon Schlemmer Summary Mark Gliebe Q&A All 4
Slide 5: Opening Comments 3rd Quarter Results
Opening Comments 3rd Quarter Results 3Q Sales Versus Prior Year (millions) $882 ($5) ($5) ($63) $810 ($49) Global Industrial ($12) Price / MPF ($9) Middle East $7 NA HVAC Prior Year FX Acquisition Organic Current Year Results Generally in Line with Expectations 5
Slide 6: Opening Comments 3rd Quarter Results
Opening Comments 3rd Quarter Results 3rd Quarter Adjusted Operating Profit Margin* 11.1% – Sequential Improvement from 2Q 2016 – Prior Year Included a 50 Basis Points Benefit from GSP Tariff Refund – Strong Margin Performance Despite Sales Headwinds Strong Free Cash Flow and Debt Reduction – Del
Slide 7: 3rd Quarter 2016 Financial Results
3rd Quarter 2016 Financial Results Sales of $809.6 Million, Down 8.2% – Foreign Currency Translation of (0.6%) – Business Divestiture (0.5%) – Organic Sales* of (7.1%) Adjusted Operating Profit Margin* of 11.1%, Down 40 Basis Points from Prior Year – Lower Sales Volume and Inventory Reduction Pr
Slide 8: 3rd Quarter 2016 Financial Results
3rd Quarter 2016 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE * Three Months Ended Nine Months Ended Oct 1, Oct 3, Oct 1, Oct 3, 2016 2015 2016 2015 Diluted Earnings Per Share $ 1.32 $ 1.41 $ 3.51 $ 3.61 Restructuring and Related Costs 0.02 0.02 0.06 0.07 Gain on Sale of Assets (0.03) — (0.
Slide 9: 3rd Quarter 2016 Key Financial Metrics
3rd Quarter 2016 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) $14 Million in 3Q 2016, $46 Million YTD 20% ETR in 3Q 2016 $65 Million Expected in FY 2016 − Benefitted from $2.2 Million Restructuring Finalization of the 2015 Tax Return $1 Million in 3Q 2016, $4 Million Y
Slide 10: 2016 Full Year Guidance
2016 Full Year Guidance 4th Quarter Organic Sales Growth Rate to Improve Sequentially – Expected to be Flat to Slightly Down as Compared to Prior Year 4th Quarter Adjusted Operating Profit Margin Rate Expected to be Down Slightly − No LIFO Impact Included in 4th Quarter Guidance − Prior Year 4th
Slide 11: Commercial & Industrial Systems
Commercial & Industrial Systems (millions) 3Q Sales Versus Prior Year Key Thoughts $427 ($4) ($34) $389 Adj. Operating Margin* 9.0% Down 30 bps from Prior Year but ($19) NA & China Ind Up 250 bps vs 2Q 2016 ($14) O&G / Power ($6) Price / MPF Realizing Benefits of Simplification and the Right- Re
Slide 12: Climate Solutions
Climate Solutions (millions) 3Q Sales Versus Prior Year Key Thoughts $264 Adj. Operating Margin* 16.9% ($1) ($13) $251 Up 140 bps from Prior Year and Up 250 bps vs 2Q 2016 ($9) Middle East Mkt ($7) Price / MPF HVAC Volume, Simplification, ($4) Comm Ref / Gen Ind and Mix Offset the Margin Impact
Slide 13: Power Transmission Solutions
Power Transmission Solutions (millions) 3Q Sales Versus Prior Year Key Thoughts Adj. Operating Margin* 7.1% $191 Down 370 bps from Prior Year ($0.2) ($5) ($16) $170 Margin Impacted by Lower ($11) Distribution Volume ($5) Oil & Gas Distributor Destocking Ren Energy Subsided in 3Q Ag and Metals
Slide 14: Customer Feedback
Customer Feedback 2016 Customer Survey 3Q Recognition Nearly 4,000 Responses Achieved Highest Net Promoter Score OEM Award Distributor Awards 2015 2016 Quality Responsive Innovation Value Positive Survey Comments High Quality Products Regal is a Great Company Great Brands/Strength of Brand
Slide 15: Free Cash Flow Performance
Free Cash Flow Performance Free Cash Flow* % of Adj. Net Income* (millions) $400 200% 175% $300 150% 125% $200 100% 75% $100 50% 25% $- 0% 2011 2012 2013 2014 2015 2016e** Consistently Delivering Strong FCF – 129% Annual Average * Non-GAAP Financial Measurement, See Appendix for Reconciliation. ** B
Slide 16: Summary
Summary 3rd Quarter Sales In Line with Expectations – Global Industrial Market Weakness – Strong NA Residential HVAC, Offset by Middle East and MPF Resilient Margins Delivered 234% Free Cash Flow* to Net Income and Reduced Debt by $105 Million Encouraging Performance Feedback from Customers
Slide 17: Questions and Answers
Questions and Answers ©2016 Regal Beloit Corporation, Proprietary and Confidential
Slide 18: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Nine Months Ended Oct 1, Oct 3, Oct 1, Oct 3, 2016 2015 2016 2015 Diluted Earnings Per Share $ 1.32 $ 1.41 $ 3.51 $ 3.61 Restructuring and Related Costs 0.02 0.02 0.06 0.07 Gain on Sale of Assets (0.03) - (0.03)
Slide 19: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Commercial & Industrial Power Transmission ADJUSTED OPERATING INCOME Systems Climate Solutions Solutions Total Regal Oct 1, Oct 3, Oct 1, Oct 3, Oct 1, Oct 3, Oct 1, Oct 3, 2016 2015 2016 2015 2016 2015 2016 2015 Income from Operations $ 36.2 $ 38
Slide 20: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations FREE CASH FLOW RECONCILIATION Three Months Ended Nine Months Ended Oct 1, Oct 3, Oct 1, Oct 3, 2016 2015 2016 2015 Net Cash Provided by Operating Activities $ 154.1 $ 131.5 $ 328.4 $ 267.2 Additions to Property Plant and Equipment (14.4) (20.7) (46.1) (65.4) Free Ca
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED NET INCOME Fiscal Years Dollars in Millions 2011 2012 2013 2014 2015 2016 (E) GAAP Net Income Attributable to Regal Beloit Corporation $ 152.3 $ 195.6 $ 120.0 $ 31.0 $ 143.3 $ 203.0 Goodwill and Asset Impairments and Other, Net - - 81.0 159.5 92.7 - Tax Eff
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 Regal operates on a 52/53 week fiscal year ending on the Saturday closest to December 31 Fiscal Years 2015 and 2016 have 52 weeks Fiscal Year 2014 had 53 weeks 22