Slide 1: First Quarter 2016 Earnings Conference Call
Regal Beloit Corporation First Quarter 2016 Earnings Conference Call May 10, 2016 Mark Gliebe Chairman and Chief Executive Officer Jon Schlemmer Chief Operating Officer Chuck Hinrichs Vice President Chief Financial Officer Robert Cherry 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 p 3 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 presen
Slide 4: Agenda
Agenda Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Segment Update Jon Schlemmer Summary Mark Gliebe Q&A All p 4
Slide 5: Opening Comments: 1st Quarter Sales
Opening Comments 1st Quarter Results 1st Quarter Sales Headwinds > Oil & Gas and Power Generation End Markets > North America/China Industrial End Markets > Middle East HVAC and North American Resi HVAC and Water Heater Markets > Contractual Two-Way Material Price Formulas p 5 $912 $818 $36 ($12) Pr
Slide 6: Opening Comments: 1st Quarter Adjusted Operating Profit
$89 $71 ($37) ($2) Prior Year Volume Cost Savings Price/Material Acquisition FX Current Year Opening Comments 1st Quarter Results 1st Quarter Adjusted Operating Profit* > Volume Driving Op Profit Reduction > Oil & Gas and Power Gen Businesses ~40% of Op Profit Volume Decline > Simplification/Cost Sa
Slide 7: Simplification, Portfolio Update and Cash
> Accelerated Simplification and Cost Savings Plans Numerous Simplification Programs Underway Aggressively Right-sizing our Oil & Gas Businesses Reducing SG&A Costs > Portfolio Update Agreed to Sell Non-Core Mastergear Business with $22 Million in Sales Exited $20 Million in Sales of Low M
Slide 8: 2016 Outlook
> 2016 Outlook – Sales Modest Improvement in Global Industrial Demand Easier Comparisons in the Second Half Especially in Oil & Gas More Typical Heating Season in the Second Half > Second Half – Operating Margin Simplification and Synergies Improved Mix in Climate Solutions Segment > Reduc
Slide 9: 1st Quarter 2016 Financial Results
> Sales of $818 Million, Down 10.3% – Net Acquisition Growth of 3.9% – Foreign Currency Translation of (1.3%) – Organic Sales of (12.9%) > Adjusted Operating Profit Margin* of 8.6%, Down 120 Basis Points from Prior Year > Lower Sales Volume Pressured Margins > Contribution of Simplification Initiati
Slide 10: Adjusted Diluted Earnings Per Share
1st Quarter 2016 Financial Results p 10 * Non-GAAP Financial Measurement, See Appendix for Reconciliation ADJUSTED DILUTED EARNINGS PER SHARE* Apr 2, 2016 Apr 4, 2015 Diluted Earnings Per Share 0.93$ 0.81$ Purchase Accounting and Transaction Costs - 0.36 Restructuring and Related Costs 0.02 0.02 Ven
Slide 11: Acquisitions and Dispositions
Acquisitions and Dispositions p 11 Acquisition > Remaining 45% of shares of European JV (Elco) > Paid $19 million > Sells energy efficient motor and blower systems into commercial refrigeration market > Closed January 2016 > JV results already consolidated > $0.03 increase to 2016 EPS (included in p
Slide 12: 1st Quarter 2016 Key Financial Metrics
Capital Expenditures > $15 Million in 1Q 2016 > $85 Million Expected in FY 2016 Effective Tax Rate (ETR) Balance Sheet at April 2, 2016 > Total Debt of $1,675 Million > Net Debt of $1,426 Million > 1Q 2016 Debt Reduction of $17 Million > Reduced Total Debt by $230 Million Since the PTS Acquisition 1
Slide 13: 2016 Full Year Guidance
2016 Full Year Guidance > 2H Expected to be Stronger than 1H > FX Estimated to Be a 1%-2% Headwind on 2016 Sales > 2016 Restructuring and Related Expenses Estimated at $14 Million > Full Year 2016 GAAP EPS Guidance of $4.38 to $4.78 > Full Year 2016 Adjusted EPS* Guidance of $4.40 to $4.80 Additio
Slide 14: Commercial & Industrial Systems
$456 $378 ($9) ($69) Prior Year FX Organic Current Year O&G / Power Industrial MPF / Price Resi Pool Data Centers Commercial & Industrial Systems p 14 * Non-GAAP Financial Measurement, See Appendix for Reconciliation (millions) Oil & Gas Drove ~75% of Operating Margin Decline ($30) ($30) ($5) 1Q Sal
Slide 15: Climate Solutions
$280 $240 ($3) ($37) Prior Year FX Organic Current Year Middle East Mkt NA HVAC/Water Mkt MPF / Price Climate Solutions p 15 (millions) Simplification Helped Offset Margin Impact of Volume Decline 1Q Sales Versus Prior Year Adj. Operating Margin* 10.8% > Down 80 Basis Points from Prior Year > Simpli
Slide 16: Power Transmission Solutions
Adj. Operating Margin* 11.5% > Up 10 Basis Points from Prior Year > Op Profit Benefited ~90 Basis Points from Finalization of Purchase Accounting > Mix, Synergy and Cost Saving Benefits Helped Offset the Volume Decline Power Transmission Solutions p 16 (millions) Synergies Helped Offset the Volume D
Slide 17: Simplification & Synergy Initiatives
2015 Actions > 6 Manufacturing Facilities Exited > 5 Warehouses Eliminated > 5 ERP Systems Converted > 4th of 5 Design Platforms Consolidated Staffing Restructuring Expenses* p 17 * Restructuring and Related Costs Simplification & Synergy Initiatives Jan '15 Mar '16 $13 $9 $14 2014 2015 2016e Benefi
Slide 18: 1st Quarter Summary
1st Quarter Summary > Sales Impacted by: Oil & Gas and Power Generation Markets North American and China Industrial Markets > Margin Decline Mainly Driven by Oil & Gas and Power Generation > Weaker Volume Impact on Margin Partially Offset by Simplification > In Execution Mode on Simplification a
Slide 19: Questions and Answers
Questions and Answers p 19
Slide 20: Non-GAAP Reconciliations: Adjusted Diluted EPS
p 20 Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Apr 2, 2016 Apr 4, 2015 Diluted Earnings Per Share 0.93$ 0.81$ Purchase Accounting and Transaction Costs —$ 0.36$ Restructuring and Related Costs 0.02$ 0.02$ Venezuelan Currency Devaluation —$ 0.02$ Adjusted Diluted Earnings
Slide 21: Non-GAAP Reconciliations: Adjusted Annual Guidance
p 21 Appendix Non-GAAP Reconciliations RECONCILIATION OF 2016 ADJUSTED ANNUAL GUIDANCE Minimum Maximum 2016 EPS Annual Guidance 4.38$ 4.78$ Restructuring and Related Costs 0.20 0.20 Gain on Sale of Business (0.18) (0.18) 2016 Adjusted EPS Annual Guidance 4.40$ 4.80$
Slide 22: Non-GAAP Reconciliations: Adjusted Operating Income
p 22 Appendix Non-GAAP Reconciliations ADJUSTED OPERATING INCOME Apr 2, 2016 Apr 4, 2015 Apr 2, 2016 Apr 4, 2015 Apr 2, 2016 Apr 4, 2015 Apr 2, 2016 Apr 4, 2015 Income from Operations 21.7 33.3 24.6 33.4 23.0 (3.1) 69.3 63.6 Purchase Accounting and Transaction Costs — — — — — 22.7 — 22.7 Restructuri
Slide 23: Non-GAAP Reconciliations: Free Cash Flow
p 23 Appendix Non-GAAP Reconciliations FREE CASH FLOW RECONCILIATION Apr 2, 2016 Apr 4, 2015 Net Cash rovided by Operating Activities 58.2 17.5$ Additions to Property Plant and Equipment (14.9) (21.2) Free Cash Flow 43.3$ (3.7)$ Free Cash Flow as a Percentage of Net Income Attributable to Regal Belo
Slide 24: Non-GAAP Reconciliations: Organic Growth
p 24 Appendix Non-GAAP Reconciliations ORGANIC GROWTH Three Months Ended Apr 2, 2016 Net Sales 818.2$ Net Sales from Businesses Acquired (35.9) Impact from Foreign Currency Exchange Rates 11.9 Adjusted Net Sales 794.2$ Net Sales Three Months Ended April 4, 2015 911.7$ Organic Growth % (12.9)%
Slide 25: Regal Shipping Days
Appendix Regal Shipping Days p 25 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