Slide 1: Third Quarter 2019 Earnings Conference Call
3Q NOVEMBER 4, 2019 Third Quarter 2019 Earnings CONFERENCE CALL Louis Pinkham Rob Rehard Rob Cherry Chief Executive Officer Vice President Vice President Chief Financial Officer Business Development & Investor Relations
Slide 2: 3Q 2019 Cautionary Statement
3Q 2019 CAUTIONARY STATEMENT The following is a cautionary statement made under the Private Securities Litigation Reform Act rates, recession, government policies, including policy changes affecting taxation, trade, tariffs, of 1995: With the exception of historical facts, the statements contained i
Slide 3: 3Q 2019 Non-GAAP Financial Measures
3Q 2019 NON-GAAP FINANCIAL MEASURES We prepare financial statements in accordance with accounting principles generally accepted flow as a percentage of adjusted net income attributable to Regal Beloit Corporation, adjusted in the United States (“GAAP”). We also periodically disclose certain financia
Slide 4: Agenda
3Q 2019 AGENDA Opening Comments & Overview Overview LOUIS PINKHAM, CEO 3Q 2019 Results & 2019 Outlook ROB REHARD, CFO Questions & Answers ALL Closing Remarks LOUIS PINKHAM, CEO ©2019 Regal Beloit Corporation, Proprietary and Confidential 4
Slide 5: Overview
3Q 2019 OVERVIEW • U.S. Industrial Slowdown, China Weakness, Trade Uncertainty • Heavily Distribution-Focused Sales Impacted by Inventory De-Stocking ($ in millions, except per share data) 3Q 2019 3Q 2018 • Total Company Adj. Operating Margin Delevered* at 20.7%, Well Below Normal Rate Adjusted Net
Slide 6: Commercial & Industrial Systems
3Q 2019 COMMERCIAL & INDUSTRIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 12.7% ($ Millions) from Operations* ($ Millions) • Market Performance – NA Pool Pump – Commercial HVAC $415.6 – China – Industrial Distribution $358.6 – Account Pruning (80/20) Adjusted Operating
Slide 7: Climate Solutions
3Q 2019 CLIMATE SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 4.8% ($ Millions) from Operations* ($ Millions) • Market Performance – FER Pre-buy – NA Residential HVAC – Commercial Refrigeration – Account Pruning (80/20) $242.1 $230.0 – Material Price Formula + Asia Pacifi
Slide 8: Power Transmission Solutions
3Q 2019 POWER TRANSMISSION SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Down 9.3% ($ Millions) from Operations* ($ Millions) • Market Performance – Industrial Distribution De-Stocking – Upstream Oil & Gas – Agriculture $202.9 – Beverage $182.8 + Renewable Energy Adjusted Oper
Slide 9: Key Financial Metrics
3Q 2019 KEY FINANCIAL METRICS Capital Expenditures Balance Sheet as September 28, 2019 • $21.1 Million in 3Q 2019 • Total Debt of $1,201 Million • $90.0 Million Expected in FY 2019 • Net Debt of $908 Million • Net Debt/Adj. EBITDA* of 1.9 Restructuring & Related Costs Free Cash Flow* • $7.3 Million
Slide 10: Full Year 2019 Guidance
3Q 2019 FULL YEAR 2019 GUIDANCE FY 2019 Expected Sales Performance • Organic Growth Down Mid-Single Digit • U.S. Industrial Slowdown • Global Trade Uncertainties • Excess Channel Inventories • Economic Slowdown in Asia FY 2019 GAAP Diluted EPS Guidance Lowered to $5.85 to $5.95 FY 2019 Adjusted Dilu
Slide 11: 3Q Questions & Answers
3Q Questions & Answers Louis Pinkham Rob Rehard Rob Cherry Chief Executive Officer Vice President Vice President Chief Financial Officer Business Development & Investor Relations
Slide 12: Adjusted Diluted Earnings Per Share
3Q 2019 APPENDIX ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Nine Months Ended Sep 28, Sep 29, Sep 28, Sep 29, 2019 2018 2019 2018 GAAP Diluted Earnings Per Share $ 1.19 $ 1.17 $ 4.75 $ 3.98 Restructuring and Related Costs 0.14 0.03 0.24 0.09 Purchase Accounting and Transaction Costs — 0.
Slide 13: Adjusted Income From Operations
3Q 2019 APPENDIX Three Months Ended Power Commercial & Transmission ADJUSTED INCOME FROM OPERATIONS Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Sep 28, Sep 29, Sep 28, Sep 29, Sep 28, Sep 29, Sep 28, Sep 29, 2019 2018 2019 2018 2019 2018 2019 2018 GAAP Income fro
Slide 14: Adjusted Net Sales
3Q 2019 APPENDIX Three Months Ended Commercial & Power Transmission ADJUSTED NET SALES Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Sep 28, Sep 29, Sep 28, Sep 29, Sep 28, Sep 29, Sep 28, Sep 29, 2019 2018 2019 2018 2019 2018 2019 2018 Net Sales $ 358.6 $ 462.3 $
Slide 15: Adjusted Effective Tax Rate
3Q 2019 APPENDIX ADJUSTED EFFECTIVE TAX RATE Three Months Ended Nine Months Ended Sep 28, Sep 29, Sep 28, Sep 29, 2019 2018 2019 2018 Income before Taxes $ 60.7 $ 56.3 $ 252.5 $ 216.9 Provision for Income Taxes 9.9 3.6 47.5 37.6 Effective Tax Rate 16.3% 6.4% 18.8% 17.3% Income before Taxes $ 60.7 $
Slide 16: Free Cash Flow
3Q 2019 APPENDIX Three Months Nine Months FREE CASH FLOW Ended Ended (Dollars in Millions) Sep 28, Sep 29, Sep 28, Sep 29, 2019 2018 2019 2018 Net Cash Provided by Operating Activities $ 140.6 $ 106.0 $ 271.2 $ 250.3 Additions to Property Plant and Equipment (21.1) (18.7) (77.3) (59.2) Free Cash Flo
Slide 17: Organic Sales Growth
3Q 2019 APPENDIX ORGANIC SALES GROWTH Three Months Ended (Dollars in Millions) Commercial & Power Industrial Climate Transmission Systems Solutions Solutions Total Regal Net Sales Three Months Ended Sep 28, 2019 $ 358.6 $ 230.9 $ 182.8 $ 772.3 Net Sales from Business Divested/to be Exited - (0.9) -
Slide 18: Total Net Debt/Adjusted EBITDA and Operating Leverage
3Q 2019 APPENDIX TOTAL NET DEBT/ADJUSTED EBITDA OPERATING LEVERAGE Three Months Ended (Dollars in Millions) (Dollars in Millions) Sep 28, Sep 29, LTM Sep 28, 2019 2018 Change 2019 GAAP Income from Operations $ 72.8 $ 69.4 $ 3.4 Net Income Adjusted Income from Operations $ 81.3 $ 99.8 $ (18.5) $ 261.
Slide 19: Schedule for Ongoing Business (2018 Q1/Q2)
3Q 2019 APPENDIX The following tables outline the first and second quarter 2018 net sales and income from operations illustrating the impact of businesses divested and to be exited, which can be used to compare to Regal's 2019 guidance and actual performance. Commercial & Power Industrial Climate Tr
Slide 20: Schedule for Ongoing Business (2018 Q3/Q4)
3Q 2019 APPENDIX The following tables outline the third and fourth quarter 2018 net sales and income from operations illustrating the impact of businesses divested and to be exited, which can be used to compare to Regal's 2019 guidance and actual performance. Commercial & Power Industrial Climate Tr
Slide 21: Schedule for Ongoing Business (2018 Full Year)
3Q 2019 APPENDIX The following tables outline the full year 2018 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, which can be used to compare to Regal's 2019 guidance and actual performance.
Slide 22: Shipping Days
3Q 2019 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