Slide 1: Fourth Quarter 2014 Earnings Conference Call
Regal Beloit Corporation Fourth Quarter 2014 Earnings Conference Call February 17, 2015 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Chuck Hinrichs John Perino Vice President Vice President 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 that may be considered “non- GAAP” financial measures. We believe that these non-GAAP financ
Slide 4: Agenda
Agenda Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Operations Update Jon Schlemmer Summary Mark Gliebe Q&A All p4
Slide 5: Opening Comments – 4th Quarter Results
Opening Comments – 4th Quarter Results > Actions to Reduce Risk in Venezuela Clouded Solid Operational Quarter − $0.82 Adjusted EPS includes $0.11 benefit for LIFO and other inventory reserves and ($0.22) charge for Venezuela accounts receivable > Revenues up 7%, Including 3% Organic Growth − 13% in
Slide 6: PTS “Day One” Celebrations
PTS “Day One” Celebrations p6
Slide 7: PTS Integration
PTS Integration Goals ˃ Deliver on Financial Pro Forma, Including Synergies ˃ No Customer Interruptions ˃ Leverage Strong Talent Tony Pajk Power Transmission Solutions Starting a Successful Integration to “One Regal” p7
Slide 8: Capital Allocation Priorities
Capital Allocation Priorities Strong Balance Sheet Target Debt/EBITDA Ratio: 1.5 – 3.5 Capital Expenditures Target: 2.5% - 3.0% of Sales Dividends Target: 18% – 22% Payout Ratio Acquisitions Share Repurchase Target Accretive Bolt-on and Utilize Remaining Share Repurchase Transformative Transactions
Slide 9: 2015 Outlook
2015 Outlook > Shifted from Quarterly Guidance to Annual Guidance > Focus for 2015 − Deliver on Margin Improvement Plans − Execute on Integration of PTS > Near Term North American Market Conditions Robust > Projected Headwinds − SEER 13 Pre-Build − Oil & Gas End Markets − Strengthening US Dollar / C
Slide 10: 4th Quarter Financial Results
4th Quarter Financial Results > Sales of $776 Million, Up 7% from Prior Year – Organic Growth of 3% – Acquisition Growth of 5% – Foreign Currency Translation Decline of 1% > Adjusted Operating Profit Margin* of 7.8% > Unusual Items in 4Q 2014 – Negatively Impacted by $0.22 per Share ($10 Million) Ch
Slide 11: 4th Quarter 2014 Financial Results
4th Quarter 2014 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Jan 3, Dec 28, 2015 2013 GAAP Diluted Earnings Per Share $ (2.61) $ (0.74) Goodwill Impairment 2.56 1.55 Other Impairments, Net 0.71 0.10 Venezuelan Currency Devaluation 0.15 — Income from Grants Received for R
Slide 12: Key 2014 Financial Metrics
Key 2014 Financial Metrics Capital Expenditures Effective Tax Rate (ETR) > $23 Million in 4Q 2014 (0.8%) ETR in 4Q 2014 reflecting the > $84 Million in FY 2014 non-deductible impairment expense Balance Sheet at Jan. 3, 2015 Free Cash Flow* > Total Debt of $634 Million > $215 Million in FY 2014 > Net
Slide 13: 2015 Guidance
2015 Guidance > GAAP EPS Guidance of $4.91 to $5.31 > Adjusted EPS Guidance of $5.45 to $5.85 − $0.21 of Restructuring Charges − $0.33 of PTS Purchase Accounting Adjustments and Closing Costs > Key Assumptions − 26% Effective Tax Rate (ETR) − $105 Million Capital Expenditures − PTS • Financing • Int
Slide 14: Operating Margin Improvement
Operating Margin Improvement > Progress on Footprint Simplification Legacy Regal − US, Mexico, Germany and Australia 11% - 12% Restructuring Completed in 2H 2014 − Springfield Restructuring Completed this Month 9.4% − Kentucky Restructuring Program on Track to be Completed Before Year End − C&I Syst
Slide 15: Power Transmission Solutions
Power Transmission Solutions > Legacy PTS Sales up ~13% in 4Q 2014 Power Transmission − Strong Demand from a Variety of End Markets Solutions − Orders Soften for Upstream Oil & Gas Products C&I Systems Climate > Looking Forward Solutions − Oil & Gas and Currency Headwinds − Strength in North America
Slide 16: Commercial & Industrial Systems
Commercial & Industrial Systems > Sales up ~5% in 4Q 2014 Power Transmission > Organic Sales Slightly Down in the Quarter Solutions C&I − Mid-Single Digit Growth in North America Motors Systems Climate − Offset by Weakness in Oil & Gas, Europe, and Asia Solutions Pacific > Looking Forward − Strength
Slide 17: Climate Solutions
Climate Solutions > Sales up ~9% in 4Q 2014 with Growth in Power North America, India and the Middle East Transmission Solutions C&I > North America HVAC Strength Systems − SEER 13 Pre-Build Climate Solutions − Overall Market Strength − High Efficiency Product Mix > Looking Forward − Strong Start, P
Slide 18: Summary Comments
Summary Comments > Sales Up 7% with Growth in all Segments > 4Q 2014 Operational Results in Line with Expectations > Free Cash Flow Exceeded Adjusted Net Income > PTS Integration Underway > On Track with our Margin Improvement Targets > Full Year Guidance Reflects a ~25% to 35% Increase in Adjusted
Slide 19: Questions and Answers
REGAL Questions and Answers
Slide 20: Closing Comments
Closing Comments > 2014 Record Sales, Free Cash Flow Exceeded Adjusted Net Income, Doubled Normal Dividend Increase > 50 New Products > Significant Progress on Simplification > Positive Customer Feedback > Completed Two Acquisitions and Announcement of PTS > 2015 Focus – Achieve Our Margin Targets a
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended Twelve Months Ended Jan 3, Dec 28, Jan 3, Dec 28, 2015 2013 2015 2013 GAAP Diluted Earnings Per Share $ (2.61) $ (0.74) $ 0.69 $ 2.64 Goodwill Impairment1 2.56 1.55 2.55 1.55 Other Impairments, Net 0.71 0.10 0.
Slide 22: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Power Transmission Dollars in Millions C&I Segment Climate Segment Segment Jan 3, Dec 28, Jan 3, Dec 28, Jan 3, Dec 28, ADJUSTED INCOME FROM OPERATIONS 2015 2013 2015 2013 2015 2013 GAAP Income (Loss) from Operations (84.2) (36.7) 7.1 14.4 (33.5)
Slide 23: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Twelve Months Ended Commercial & Industrial Power Transmission Dollars in Millions Systems Climate Solutions Solutions Jan 3, Dec 28, Jan 3, Dec 28, Jan 3, Dec 28, ADJUSTED INCOME FROM OPERATIONS 2015 2013 2015 2013 2015 2013 GAAP Income (Loss) from Operations $ 33.
Slide 24: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Twelve Months Ended Dollars in Millions Jan 3, Dec 28, Jan 3, Dec 28, ADJUSTED NET INCOME 2015 2013 2015 2013 GAAP Net Income (Loss) Attributable to Regal Beloit Corporation $ (116.5) $ (33.2) $ 31.0 $ 120.0 Goodwill Impairment 116.9 76.3 117.9 76
Slide 25: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations EBITDA Reconciliation Dollars in Millions 1Q 2014 2Q 2014 3Q 2014 4Q 2014 FY 2014 Net Income $43.8 $56.2 $47.5 ($116.5) $31.0 Plus: Goodwill Impairment $116.9 116.9 Plus: Asset Impairment and Other Net, - 1.0 - 41.6 42.6 Plus: Minority Interest 1.2 1.9 1.3 0.7 5.1 P
Slide 26: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Twelve Months Months ORGANIC GROWTH Ended Ended Jan 3, 2015 Net Sales $ 775.6 $ 3,257.1 Net Sales from Businesses Acquired (38.6) (134.6) Impact from Foreign Currency Exchange Rates 8.6 19.0 Incremental Sales from Joint Venture Sold 3.5 5.0 Adjusted Net Sales