Regal Rexnord Corporation · NYSE:RRX
Regal Rexnord — Regal Beloit — Q4 2015 Earnings Presentation
30 slides from Regal Rexnord's earnings presentation, Feb 9, 2016
Slide 1: Regal Beloit Corporation Fourth Quarter 2015 Earnings Conference Call
Regal Beloit Corporation Fourth Quarter 2015 Earnings Conference Call February 9, 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
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
Agenda Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Segment Update Jon Schlemmer Summary Mark Gliebe Q&A All p4
Slide 5: Opening Comments 4th Quarter Results
Opening Comments 4th Quarter 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) ($1
Slide 6: Opening Comments 4th Quarter Results
Opening Comments 4th Quarter Results > Commercial & Industrial Systems – Organic Sales Down 14% − Five Fewer Shipping Days − Steep Reduction in Oil & Gas and Weak Demand in China − Adjusted Operating Margin* Up 480 Basis Points > Climate Solutions – Organic Sales Down 16.5% − Five Fewer Shipping Day
Slide 7: PTS Integration Essentially Complete
Opening Comments 4th Quarter Results PTS Integration Essentially Complete > Consolidated the Canadian Sites in 4Q 2015 > ERP Integrated by 3Q 2016 > Delivered $12 Million of Synergies Against the Target of $7 Million > Expect to Achieve $30 Million Synergy Target Over a Three-Year Period Combined Re
Slide 8: Looking Forward
Looking Forward > 2016 Outlook − Expecting Difficult End Markets − Comparisons to Improve in 2nd Half of 2016 > Key Management Focus − Continued Margin Improvement − Sales Growth Despite Difficult End Markets − Improve Working Capital Management Simplification Initiative Positions Regal to Perform i
Slide 9: 4th Quarter 2015 Financial Results
4th Quarter 2015 Financial Results > Sales of $773.5 Million, Essentially Flat – Net Acquisition Growth of 16.4% – Foreign Currency Translation of (2.7%) – Organic Sales (14%) – Approx. Half Resulting from 5 Fewer Shipping Days > Adjusted Operating Profit Margin* of 10.3%, Up 250 Basis Points from P
Slide 10: 4th Quarter 2015 Financial Results
4th Quarter 2015 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Jan 2, Jan 3, 2016 2015 GAAP Diluted Earnings Per Share $ (0.43) $ (2.61) Goodwill Impairment 1 1.30 2.60 Other Impairments, Net - 0.67 Venezuela Asset Write Down 0.29 - Purchase Accounting and Transaction Cost
Slide 11: 4th Quarter 2015 Key Financial Metrics
4th Quarter 2015 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) > $27 Million in 4Q 2015 > 24.6% ETR in FY 2015 > $92 Million in FY 2015 > Expect 25% ETR for FY 2016 > $85 Million Expected in FY 2016 Balance Sheet at Jan 2, 2016 Free Cash Flow* > Total Debt of $1,722 Million > $
Slide 12: Free Cash Flow Trend
Free Cash Flow Trend Free Cash Flow* % of Adj. Net Income* $350 140% $300 120% $250 100% $200 80% $150 60% $100 40% $50 20% $- 0% 2011 2012 2013 2014 2015 Five Consecutive Years of FCF Above 100% of Adj. Net Income p 12 * Non-GAAP Financial Measurement, See Appendix for Reconciliation
Slide 13: 2016 Full Year Guidance
2016 Full Year Guidance > 2016 Sales Impacted by Continuation of Weak End Market Demand > F/X Estimated to Be a 1%-2% Headwind on 2016 Sales > Guidance Does Not Include Debt Refinancing in 2016 > 2016 Restructuring Expenses Estimated at $10 Million > Full Year 2016 GAAP EPS Guidance of $4.66 to $5.0
Slide 14: Margin Improvement Progress
Margin Improvement Progress Adj. Operating Profit Margin* Key Drivers to 4Q Performance 11.9% > $10 Million Prior Year A/R Reserve 11.5% 10.7% 10.9% > $9 Million LIFO, Simplification, Process 10.3% 9.4%9.8% 9.7% 9.4% Improvements and Cost Controls 7.8% Simplification & PTS Synergy Update > Accelerat
Slide 15: 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 16: SyMAX-i Delivering Energy Efficiency Solutions for Building Applications
SyMAX-i AHR Expo in Orlando > Motor/Drive System > ~20% More Energy Efficient > Used in Commercial HVAC and Commercial Refrigeration Applications Delivering Energy Efficiency Solutions for Building Applications p 16
Slide 17: 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 18: DEC Star Delivering Energy Efficiency Solutions to Meet Tougher Regulations
DEC Star AHR Expo in Orlando Standard > Smaller, Lighter, Quieter > 14% Better Efficiency > Lower Total Systems Cost Delivering Energy Efficiency Solutions to Meet Tougher Regulations p 18
Slide 19: 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 20: PTS Customer Service – Florence KY
PTS Customer Service – Florence KY > Trained in 3Q 2015 > Went Live 4Q 2015 > Focused on PT Distribution Reinvesting in Our Power Transmission Segment to Grow! p 20
Slide 21: 4th Quarter Summary
4th Quarter Summary 4th Quarter Results > Sales Essentially Flat > Adjusted Operating Profit Margin* Up 250 Basis Points > PTS Integration Practically Complete – Synergies Exceeded Year 1 Target > Free Cash Flow* 169% of Adjusted Net Income, Paid Down $77 Million Debt p 21 * Non-GAAP Financial Measu
Slide 22: 2015 Full Year Summary
2015 Full Year Summary Full Year 2015 Results (millions) Sales Adj. Op Profit* Free Cash Flow* $3,510 $382 $289 $3,257 $307 $215 2014 2015 2014 2015 2014 2015 Strong Execution on Key Objectives p 22 * Non-GAAP Financial Measurement, See Appendix for Reconciliation
Slide 23: 2015 Full Year Summary
2015 Full Year Summary > Delivered on Two Key Goals − Adjusted Op Margin up 150 Basis Points − PTS Integration Essentially Complete > Simplification Accomplishments − Consolidated Six More Factories − Executed Another Engineering Platform Consolidation − Exited Five More Warehouses − Converted Five
Slide 24: Questions and Answers
REGAL Questions and Answers
Slide 25: 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 26: 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 26
Slide 27: 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 28: 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 29: 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 30: 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 30