Slide 1: Third Quarter 2013 Earnings Conference Call
Regal Beloit Corporation Third Quarter 2013 Earnings Conference Call October 29, 2013 Mark Gliebe Chairman and Chief Executive Officer Jon Schlemmer Chief Operating Officer Chuck Hinrichs Vice President Chief Financial Officer John Perino Vice President 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 disclose adjusted diluted earnings per share (EPS), adjusted gross profit, adjusted gross profit as a percentage of net sales, adjusted income
Slide 4: Agenda
Agenda p 4 Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Operations Update Jon Schlemmer Summary Mark Gliebe Q&A All
Slide 5: Opening Comments – 3rd Quarter
Opening Comments – 3rd Quarter Operating Performance within Guidance and Earnings at Top End of Guidance – North American C&I Motors Down Slightly – Power Generation Growth – China Better than Expected, Australia and India Challenged – North American Residential HVAC Declined 3.6% – Mechanical Imp
Slide 6: Opening Comments – 4th Quarter Outlook
Typical Residential HVAC Seasonality – Customer Dynamics Continue – Strength in Non-HVAC Residential North American C&I Motors Sales Flat to Slightly Down Strength in Power Generation Modest Growth in China C&I Markets Stabilized and Residential Tailwind into 2014 p 6 Opening Comments – 4th Qu
Slide 7: 3rd Quarter 2013 Financial Results
3rd Quarter 2013 Financial Results p 7 * Non-GAAP Financial Measurement, See Appendix for Reconciliation ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended Nine Months Ended Sep 28, 2013 Sep 29, 2012 Sep 28, 2013 Sep 29, 2012 GAAP Diluted Earnings Per Share $ 1.16 $ 1.29 $ 3.38 $ 3.94 Restructu
Slide 8: 3rd Quarter 2013 Financial Results
3rd Quarter 2013 Financial Results Sales of $768 Million, Down 1.5% from Prior Year –Currency Exchange Rates Reduced Total Net Sales by 1.1% and International Sales by 3.4% –Two Way Material Price Formulas Gross Margin of 25.6% –Impacted by Foreign Currency and Price Pressures – Includes $0.9 Mi
Slide 9: Financial Results
Capital Expenditures $18.2 Million ~ $90 Million for FY 2013 Effective Tax Rate (ETR) 21.6% ETR in 3Q 2013 reflecting discrete item ~18% ETR in 4Q 2013 after discrete benefit ~ 27% ETR for 1H 2014 Free Cash Flow $65 Million FCF* 123% of Net Income YTD 2013 FCF* 114% of Net Income Bal
Slide 10: 4th Quarter 2013 Guidance
4th Quarter 2013 Guidance GAAP EPS Guidance of $0.77 to $0.85 Adjusted EPS Guidance of $0.82 to $0.90 –After Adding Back $0.05 of Restructuring Charges Includes Lower ETR of 18% EPS Guidance Shows Solid Improvement p 10
Slide 11: End Market Update
Residential HVAC Sales Down 3.6% – Organizational Changes to Drive Organic Growth and Acceptance of New Technologies – Non-HVAC Residential Up 4% International Sales Increased 2.7% with Currency Headwind of 3.4% – High Single Digit Sales Growth in China – Organic Growth in Latin America – Challen
Slide 12: End Market Update
Mechanical Revenues Down – Weakness in Oil and Gas – Declining Australia Demand – Improvements in Power Transmission Orders C&I Motors Order Trends Stabilized – Down Less than 1% Excluding Impact of the Divested Motor Business – Expect Similar Performance in 4th Quarter p 12 End Market Update
Slide 13: Power Generation Growth
Power Generation Growth p 13 Regal Switchgear Installed Inside the Data Center Stand-By Power Units Using Regal Generators Installed Outside the Data Center
Slide 14: Accelerating New Products
Accelerating New Products p 14 21% New Product Launches 14 New Products Launched in Q3 Energy Efficient Products Represent 21.5% of Total Sales 50 60 51 2011 2012 YTD 2013
Slide 15: V-Green Energy Efficient Pool Motors
V-Green Energy Efficient Pool Motors p 15 V-Green 270 Launched 2011 Large Pools V-Green 165 Launched 2013 Small Residential Pools
Slide 16: Actual V-Green Motor Installation
Actual V-Green Motor Installation p 16 85% Reduction in Energy, Saving Over $300 a Month!
Slide 17: Simplification Update
Continuing Manufacturing Simplification Plans – Announced Closure of Springfield, Missouri Motor Facility – Drive Efficiencies in Both Cost and Lead Times Savings Spread Over 2014 and 2015 Total Annualized Savings Expected to be $15M p 17 $1.2 $2.7 $5.5 $3.5 3Q13 A 4Q13 1H14 2H14 Estimated Res
Slide 18: Closing Comments
Operating Performance in Line with Guidance With Tax Benefit, Results at High End of Guidance Gross Margin Progress Year to Date Strong Free Cash Flow at 114% Simplification on Track with More to Come New Products Contributing Healthy Acquisition Pipeline p 18 Closing Comments
Slide 19: Questions and Answers
REGAL Questions and Answers
Slide 20: Appendix Non-GAAP Reconciliations
p 20 Appendix Non-GAAP Reconciliations Dollars in Millions ADJUSTED DILUTED EARNINGS PER SHARE* Sep 28, 2013 Sep 29, 2012 Sep 28, 2013 Sep 29, 2012 GAAP Diluted Earnings Per Share 1.16$ 1.29$ 3.38$ 3.94$ Purchase Accounting Costs — — — 0.01 Restructuring Costs 0.02 0.08 0.05 0.09 Gain on Disposal of
Slide 21: Appendix Non-GAAP Reconciliations: EBITDA Reconciliation
Appendix Non-GAAP Reconciliations p 21 EBITDA Reconciliation Dollars in Millions 4Q 2012 1Q 2013 2Q 2013 3Q 2013 LTM Net Income $29.9 $49.5 $51.1 $52.6 $183.1 Plus: Minority Interest 1.0 1.2 2.5 1.9 6.6 Plus: Taxes 5.7 15.3 17.9 15.0 53.9 Plus: Interest Expense 10.9 10.6 10.7 10.6 42.8 Less: Interes