Slide 1: Second Quarter 2020 Earnings Conference Call
2Q August 4, 2020 Second Quarter 2020 Earnings CONFERENCE CALL Louis Pinkham Rob Rehard Chief Executive Officer Vice President Chief Financial Officer
Slide 2: 2Q 2020 Cautionary Statement
2Q 2020 CAUTIONARY STATEMENT The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: rates, inflation rates, interest rates, recession, government policies, including policy changes affecting With the exception of historical facts, the statements cont
Slide 3: 2Q 2020 Non-GAAP Financial Measures
2Q 2020 NON-GAAP FINANCIAL MEASURES We prepare financial statements in accordance with accounting principles generally accepted percentage of adjusted net income attributable to Regal Beloit Corporation, adjusted income in the United States of America (“GAAP”). We also periodically disclose certain
Slide 4: Agenda
2Q 2020 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 2Q 2020 Results & 3Q Framework ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 4
Slide 5: CEO Commentary and Overview
2Q 2020 CEO COMMENTARY AND OVERVIEW • Sales Down 24.7% on an Organic Basis ($ in millions, except per share data) 2Q 2019 2Q 2020 • Significant Headwinds From COVID-19 • 80/20 Pruning Initiatives Reduced Sales by ~190bps Adjusted Net Sales* $855.5 $634.1 • Margins Supported by Reorganization and Cos
Slide 6: Agenda
2Q 2020 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 2Q 2020 Results & 3Q Framework ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 6
Slide 7: Commercial Systems
2Q 2020 COMMERCIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 23.6% ($ Millions) from Operations* ($ Millions) • Market Performance – N.A. General Industrial Markets – N.A. Commercial HVAC $233.7 – Europe Air Moving – 80/20 Account Pruning (~1.5%) + Pool $175.9 + China S
Slide 8: Industrial Systems
2Q 2020 INDUSTRIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 19.8% ($ Millions) from Operations* ($ Millions) • Market Performance – General Industrial – Non-Res Construction – Oil & Gas – 80/20 Account Pruning (~1.8%) $155.5 + Data Centers $120.6 Adjusted Operating Mar
Slide 9: Climate Solutions
2Q 2020 CLIMATE SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 31.4% ($ Millions) from Operations* ($ Millions) • Market Performance – N.A. HVAC De-Stock (C-19) – Hospitality – FER Pre-Build Compare – 80/20 Account Pruning (~3.0%) $46.1 + Sequential Monthly HVAC Order Tren
Slide 10: Power Transmission Solutions
2Q 2020 POWER TRANSMISSION SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 21.1% ($ Millions) from Operations* ($ Millions) • Market Performance – N.A. General Industrial – Upstream Oil & Gas $204.0 – Alternative Energy lumpiness – 80/20 Account Pruning (~1.0%) + Midstream
Slide 11: Key Financial Metrics & Cost Savings Summary
2Q 2020 KEY FINANCIAL METRICS & COST SAVINGS SUMMARY Capital Expenditures Balance Sheet as June 27, 2020 • $9.5 Million in 2Q 2020 • Total Debt of $1,125.7 Million • $50.0 Million Expected in FY 2020 • Net Debt of $693.5 Million • Down $66.9 Million from 1Q 2020 Effective Tax Rate (ETR) • Net Debt/A
Slide 12: Third Quarter Framework
2Q 2020 THIRD QUARTER FRAMEWORK FY 2020 Guidance Remains Suspended Third Quarter Framework • Net Sales Decline 8 - 12% Y/Y • PTS at High End of Range, Commercial at Low End • Deleverage at 12 - 18% Other FY 2020 Modeling Assumptions • Net Interest Expense of ~$40 Million • Capital Expenditures of ~$
Slide 13: Agenda
2Q 2020 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 2Q 2020 Results & 3Q Framework ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2020 Regal Beloit Corporation 13
Slide 14: 2Q Appendix
2Q Appendix
Slide 15: Adjusted Diluted Earnings Per Share
2Q 2020 APPENDIX ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Six Months Ended Jun 27, Jun 29, Jun 27, Jun 29, 2020 2019 2020 2019 GAAP Diluted Earnings Per Share $ 0.69 $ 1.55 $ 1.81 $ 3.54 Restructuring and Related Costs 0.21 0.07 0.31 0.11 Loss (Gain) on Businesses Divested and Assets t
Slide 16: Adjusted Income From Operations
2Q 2020 APPENDIX Three Months Ended Power Commercial Transmission ADJUSTED INCOME FROM OPERATIONS Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Jun 27, Jun 29, Jun 27, Jun 29, Jun 27, Jun 29, Jun 27, Jun 29, Jun 27, Jun 29, 2020 2019 2020 2019 2020 2019 202
Slide 17: Adjusted Net Sales
2Q 2020 APPENDIX Three Months Ended Commercial Power Transmission ADJUSTED NET SALES Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Jun 27, Jun 29, Jun 27, Jun 29, Jun 27, Jun 29, Jun 27, Jun 29, Jun 27, Jun 29, 2020 2019 2020 2019 2020 2019 2020 2019 2020 2
Slide 18: Adjusted Effective Tax Rate
2Q 2020 APPENDIX ADJUSTED EFFECTIVE TAX RATE Three Months Ended Six Months Ended (Dollars in Millions) Jun 27, Jun 29, Jun 27, Jun 29, 2020 2019 2020 2019 Income before Taxes $ 37.8 $ 83.8 $ 98.4 $ 191.8 Provision for Income Taxes 8.5 16.4 22.4 37.6 Effective Tax Rate 22.5% 19.6% 22.8% 19.6% Income
Slide 19: Free Cash Flow
2Q 2020 APPENDIX Three Months Six Months FREE CASH FLOW Ended Ended (Dollars in Millions) Jun 27, Jun 29, Jun 27, Jun 29, 2020 2019 2020 2019 Net Cash Provided by Operating Activities $ 86.9 $ 112.3 $ 189.6 $ 130.6 Additions to Property Plant and Equipment (9.5) (36.0) (20.4) (56.2) Free Cash Flow $
Slide 20: Organic Sales Growth
2Q 2020 APPENDIX ORGANIC SALES GROWTH Three Months Ended (Dollars in Millions) Power Commercial Industrial Climate Transmission Systems Systems Solutions Solutions Total Regal Net Sales Three Months Ended Jun 27, 2020 $ 175.9 $ 120.6 $ 178.2 $ 159.4 $ 634.1 Impact from Foreign Currency Exchange Rate
Slide 21: Total Gross Debt/EBITDA
2Q 2020 APPENDIX TOTAL GROSS DEBT/EBITDA TOTAL GROSS DEBT/ADJUSTED EBITDA (Dollars in Millions) (Dollars in Millions) LTM Jun 27, LTM Jun 27, 2020 2020 Net Income $ 164.4 Net Income $ 164.4 Plus: Taxes 46.0 Plus: Taxes 46.0 Plus: Interest Expense 48.2 Plus: Interest Expense Less: Interest Income (5.
Slide 22: Total Net Debt/EBITDA
2Q 2020 APPENDIX TOTAL NET DEBT/EBITDA TOTAL NET DEBT/ADJUSTED EBITDA (Dollars in Millions) (Dollars in Millions) LTM Jun 27, LTM Jun 27, 2020 2020 Net Income $ 164.4 Net Income $ 164.4 Plus: Taxes 46.0 Plus: Taxes 46.0 Plus: Interest Expense 48.2 Plus: Interest Expense 48.2 Less: Interest Income (5
Slide 23: Operating Leverage-Total Regal
2Q 2020 APPENDIX OPERATING LEVERAGE-TOTAL REGAL Three Months Ended Six Months Ended (Dollars in Millions) Jun 27, Jun 29, Jun 27, Jun 29, 2020 2019 Change 2020 2019 Change GAAP Income from Operations $ 45.9 $ 96.0 $ (50.1) $ 115.9 $ 216.6 $ (100.7) Adjusted Income from Operations $ 59.5 $ 93.8 $ (34
Slide 24: Operating Leverage-Commercial Systems
2Q 2020 APPENDIX OPERATING LEVERAGE-COMMERCIAL SYSTEMS Three Months Ended Six Months Ended (Dollars in Millions) Jun 27, Jun 29, Jun 27, Jun 29, 2020 2019 Change 2020 2019 Change GAAP Income from Operations $ 6.2 $ 20.8 $ (14.6) $ 18.7 $ 78.6 $ (59.9) Adjusted Income from Operations $ 10.5 $ 22.2 $
Slide 25: Fiscal 2019 First Quarter Schedule for Ongoing Business
2Q 2020 APPENDIX The following tables outline by quarter and full year the 2019 net sales and income from operations, and the full year adjusted diluted earnings per share, illustrating the impact of businesses divested and to be exited. Power Commercial Industrial Climate Transmission Systems Syste
Slide 26: Fiscal 2019 Third Quarter Schedule for Ongoing Business
2Q 2020 APPENDIX The following tables outline by quarter and full year the 2019 net sales and income from operations, and the full year adjusted diluted earnings per share, illustrating the impact of businesses divested and to be exited. Power Commercial Industrial Climate Transmission Systems Syste
Slide 27: Fiscal 2019 Twelve Months Ended for Ongoing Business
2Q 2020 APPENDIX The following tables outline by quarter and full year the 2019 net sales and income from operations, and the full year adjusted diluted earnings per share, illustrating the impact of businesses divested and to be exited. Power Commercial Industrial Climate Transmission Systems Syste
Slide 28: Shipping Days
2Q 2020 APPENDIX Shipping 1Q 2Q 3Q 4Q FY Days 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 2019 63 63 63 61 250 2020 63 63 63 64 253 ▪ Regal operates on a 52/53 week fiscal year ending on the Saturday closest to December 31 ▪ Fiscal Years 2