Slide 1: Investor Relations Presentation
Regal Beloit Corporation Investor Relations Presentation March 2016 Mark Gliebe Jon Schlemmer Chuck Hinrichs Rob Cherry Chairman Chief Operating Officer Vice President Vice President Chief Executive Officer 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 periodically disclose certain financial measures in our quarterly earnings releases, on investor conference calls, and in investor presentati
Slide 4: Regal is...
Regal is… > A Recognized Leader in High Efficiency Motor Solutions – Well positioned for global energy efficiency trend > A Portfolio of Established and Highly Respected Industrial Brands – Large installed base drives recurring revenue > A Successful Acquirer and Integrator – PTS integration on trac
Slide 5: Regal Overview
Regal Overview Founded in 1955 with Headquarters in Beloit, Wisconsin 22% 30% 2015 Sales of $3.5B 48% 5-Year Sales CAGR of 9.4% 5-Year Avg. Free Cash Flow 129% of Adj. Net Income* Experienced, Credible and Stable Management Team * Non-GAAP Financial Measurement, See Appendix for Reconciliation p5
Slide 6: Business Segments and Brands
Business Segments and Brands General Industry Comm. Resi. & Climate Ref. Light Comm. Solutions Water Heating HVAC Aftermarket Oil & Gas Distribution Power Commercial Generation & Industrial Comm. Systems HVACR General Industry Pump HVAC Other Material Power Hand. General Transmission Industry Soluti
Slide 7: Financial Snapshot
Financial Snapshot Net Sales Adjusted Diluted EPS* (billions) $3.5 $5.33 $4.36 $4.31 $3.3 $3.1 2013 2014 2015 2013 2014 2015 Free Cash Flow* Dividends Per Share (millions) $289 $0.90 $224 $215 $0.84 $0.78 2013 2014 2015 2013 2014 2015 * Non-GAAP Financial Measurement, See Appendix for Reconciliation
Slide 8: 2015 Full Year Summary
2015 Full Year Summary Adj. Operating Profit Margin* > Delivered on Two Key Goals Adjusted Op Margin up 150 bps 11.9% 11.5% 10.9% PTS Integration Nearly Complete 10.7% 10.3% 9.4%9.8% 9.7% 9.4% > Drove Simplification 7.8% Consolidated Six Factories Engineering Platform Consolidation Convert
Slide 9: Residential, Commercial & Industrial Motor Systems
Residential, Commercial & Industrial Motor Systems Residential Applications Commercial Building Applications Motors Consume ~45% of Global Electricity Production p9
Slide 10: Efficiency Requirements Increasing
Efficiency Requirements Increasing Future Efficiency Regulations for: Efficiency Regulations for: - Large Pumps - Estimate for Amendment 14 - Pool Pumps, Fountain Pumps Efficiency Regulations for: - Commercial Refrigeration - Special Motors and VFD - IE3 Efficiency Level Required - Small Motor
Slide 11: High Efficiency Products in Position
High Efficiency Products in Position Standard DEC Star > Energy Efficient Air Mover Replaces ECM Motors and Standard Efficiency Blowers > Regal Offering Expanded from Just Motor to Entire Blower Assembly > Smaller, Lighter, Quieter > 14% Better Efficiency Standard Axial IHP Axial IHP > Integrated Ax
Slide 12: PTS Established Brand Portfolio
PTS Established Brand Portfolio Category Brands Est. Installed Base Key Products $1,740M BEARINGS Cam Follower Mounted Bearing $1,250M GEARING Shaft Reducer Worm Gearing $1,000M COUPLINGS Disc Couplings Gear Coupling $525M CONVEYING Chain Guide Conveyor Chain $125M COMPONENTS V-Belt Drive TorqGard™
Slide 13: PTS Integration On Track
PTS Integration On Track > Integration of Regal's Largest and Most Complex Acquisition now Essentially Complete > Delivered $12 Million of Year One Synergies Versus Target of $7 Million > Forecasting $30 Million in Total Synergies Over a Three-Year Period Versus Original Four-Year Plan Another Succe
Slide 14: Simplification in Full Stride
Simplification in Full Stride Objectives Standard Platform Example > Focused Footprint > Standard Design Platforms AO Smith Design > Consolidated Supply Chain > Common ERP System > Focused Brands FASCO Destination Design Platform > Fewer Entities Over 5,000 Component SKU’s Eliminated To Date p 14
Slide 15: Simplifying Our Footprint
Simplifying Our Footprint Rooftop Square Feet* (000s) 10,000 9,000 8,000 7,000 2011 2012 2013 2014 2015 2016 Rooftop Consolidation Drives Margin Improvement p 15 * Does not include 2015 PTS acquisition
Slide 16: Consistently Generating Cash
Consistently Generating Cash Free Cash Flow* % of Adj. Net Income* (millions) $350 140% $300 120% $250 100% $200 80% $150 60% $100 40% $50 20% $- 0% 2011 2012 2013 2014 2015 FCF / Adj. Net Income Five-Year Average of 129% p 16 * Non-GAAP Financial Measurement, See Appendix for Reconciliation
Slide 17: Managing Debt to Drive Growth
Managing Debt to Drive Growth Total Debt / Total Capital 60% Power Transmission 50% 40% 30% 20% 10% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 12-Year Record of Using Free Cash Flow to Reduce Debt p 17
Slide 18: Returning Cash to Shareholders
Returning Cash to Shareholders Dividends Per Share Paid $0.90 $0.84 $0.78 > 55 Consecutive Years $0.74 $0.70 of Cash Dividends $0.66 $0.64 $0.62 $0.58 > Dividend Increased 10 of the Last 11 Years > Opportunistic Share Repurchases 2007 2008 2009 2010 2011 2012 2013 2014 2015 Consistent Increase in Ca
Slide 19: Capital Allocation Priorities
Capital Allocation Priorities Balance Sheet Targets > Debt/EBITDA Ratio: 1.5 – 3.5 > Capital Expenditures: 2.5% – 3.0% of Sales > Cash Dividends: 18% – 22% Payout Ratio Acquisitions Share Repurchase Target Accretive Bolt-on and Utilize Remaining Share Repurchase Transformative Transactions to Drive
Slide 20: Key Takeaways
Key Takeaways Regal is… > A Recognized Leader in High Efficiency Motor Solutions > A Portfolio of Established and Highly Respected Industrial Brands > A Successful Acquirer and Integrator > Ahead of Industry Curve on Simplification Initiative > A Strong Free Cash Flow Generator > A Stable Business w
Slide 21: Thank You
Thank You Mark J Gliebe Chairman Chief Executive Officer Jon Schlemmer Chief Operating Officer Chuck Hinrichs Vice President Chief Financial Officer Rob Cherry Vice President Investor Relations p 21
Slide 22: 4th Quarter 2015 Results
4th Quarter 2015 Results pp22 22
Slide 23: 4th Quarter 2015 Results
4th Quarter 2015 Results 4th Quarter Highlights Increased Adjusted Operating Margin* to 10.3%, Up 250 Basis Points Over Prior Year Adjusted Earnings Per Share* Up 43% Free Cash Flow* 169% of Adjusted Net Income*, Paid Down Debt by $77 Million 4th Quarter 2015 Sales Bridge ($21) ($109) $127 5 F
Slide 24: Commercial & Industrial Systems
Commercial & Industrial Systems (millions) 4Q Sales Versus Prior Year Adj. Operating Margin** 9.5% $0.0 $451 ($17) ($63) > Up 480 Basis Points from Prior Year $371 ($31) 5 Less Days* > Operating Profit Improvement ($27) Oil & Gas $0.0 $10 Million Prior Year A/R China Reserve Power Gen Distribution
Slide 25: Climate Solutions
Climate Solutions (millions) 4Q Sales Versus Prior Year Adj. Operating Margin** 13.2% $0.0 $256 ($4) ($42) > Up 130 Basis Points from Prior Year $210 Benefits of Simplification ($18) 5 Less Days* LIFO Benefits Price $0.0/ MPF Cost Reduction Efforts SEER 13 Warm Weather Prior Year FX Organic Cu
Slide 26: Power Transmission Solutions
Power Transmission Solutions (millions) 4Q Sales Versus Prior Year End Markets - Total Segment $128 ($4) $193 Oil & Gas Food & Beverage $0 ($5) 5 Fewer Days* Ag Equipment Material Handling Distribution Renewable Energy Adj. Operating Margin** 8.7% $68 ($0) $0 > Downward Pressure from Volume $0 Decli
Slide 27: Non-GAAP Reconciliations
Non-GAAP Reconciliations pp27 27
Slide 28: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Twelve Months Ended Jan 2, Jan 3, Jan 2, Jan 3, 2016 2015 2016 2015 GAAP Diluted Earnings Per Share $ (0.43) $ (2.61) $ 3.18 $ 0.69 Goodwill Impairment 1 1.30 2.60 1.29 2.59 Other Impairments, Net - 0.67 - 0.66
Slide 29: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations RECONCILIATION OF 2016 ADJUSTED ANNUAL GUIDANCE Minimum Maximum 2016 EPS Annual Guidance $ 4.66 $ 5.06 Restructuring 0.14 0.14 2016 Adjusted EPS Annual Guidance $ 4.80 $ 5.20 p 29
Slide 30: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Commercial & Industrial Power Transmission ADJUSTED INCOME FROM OPERATIONS Systems Climate Solutions Solutions Total Regal Dollars in Millions Jan 2, Jan 3, Jan 2, Jan 3, Jan 2, Jan 3, Jan 2, Jan 3, 2016 2015 2016 2015 2016 2015 2016 2015 GAAP Inc
Slide 31: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Twelve Months Ended Dollars in Millions Jan 2, Jan 3, Jan 2, Jan 3, FREE CASH FLOW 2016 2015 2016 2015 GAAP Net Cash Provided by Operating Activities $ 113.9 $ 71.1 $ 381.1 $ 298.2 Additions to Property Plant and Equipment (26.8) (23.1) (92.2) (83
Slide 32: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED NET INCOME Fiscal Years Dollars in Millions 2011 2012 2013 2014 GAAP Net Income (Loss) Attributable to Regal $ 152.3 $ 195.6 $ 120.0 $ 31.0 Beloit Corporatioin Goodwill and Asset Impairments and Other, $ - $ - $ 81.0 $ 159.5 Net of Taxes Tax Effect from Goo
Slide 33: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Dollars in Millions Three Months Twelve Months ORGANIC GROWTH Ended Ended Jan 2, 2016 Net Sales $ 773.5 $ 3,509.7 Net Sales from Businesses Acquired (128.2) (552.5) Impact from Foreign Currency Exchange Rates 20.7 92.0 Net Sales from Businesses Divested 1.0 11.5 Adj
Slide 34: 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 p 34