regal beloit corporation...aug 07, 2013 · this presentation contains “forward-looking...
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Regal Beloit Corporation
August 7, 2013
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 canForward looking statements represent our management s judgment regarding future events. In many cases, you canidentify forward-looking statements by terminology such as “may,” “will,” “plan,” “expect,” “anticipate,” “estimate,”“believe,” or “continue” or the negative of these terms or other similar words. Actual results and events could differmaterially and adversely from those contained in the forward-looking statements due to a number of factors, including:uncertainties regarding our ability to execute our restructuring plans within expected costs and timing; actions taken byour competitors and our ability to effectively compete in the increasingly competitive global electric motor, powergeneration and mechanical motion control industries; our ability to develop new products based on technologicalinnovation and the marketplace acceptance of new and existing products; fluctuations in commodity prices and rawmaterial costs; our dependence on significant customers; issues and costs arising from the integration of acquiredcompanies and businesses, including the timing and impact of purchase accounting adjustments; unanticipated costsor expenses we may incur related to product warranty issues; our dependence on key suppliers and the potentialeffects of supply disruptions; infringement of our intellectual property by third parties challenges to our intellectualeffects of supply disruptions; infringement of our intellectual property by third parties, challenges to our intellectualproperty, and claims of infringement by us of third party technologies; increases in our overall debt levels as a result ofacquisitions or otherwise and our ability to repay principal and interest on our outstanding debt; product liability andother litigation, or the failure of our products to perform as anticipated, particularly in high volume applications;economic changes in global markets where we do business, such as reduced demand for the products we sell,currency exchange rates, inflation rates, interest rates, recession, foreign government policies and other externalcurrency exchange rates, inflation rates, interest rates, recession, foreign government policies and other externalfactors that we cannot control; unanticipated liabilities of acquired businesses; cyclical downturns affecting the globalmarket for capital goods; difficulties associated with managing foreign operations; and other risks and uncertaintiesincluding but not limited to those described in Item 1A-Risk Factors of the Company’s Annual Report on Form 10-K(A)filed on March 26, 2013 and from time to time in our reports filed with U.S. Securities and Exchange Commission. Allsubsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf areexpressly qualified in their entirety by the applicable cautionary statements. The forward-looking statements includedin this presentation are made only as of their respective dates, and we undertake no obligation to update thesestatements to reflect subsequent events or circumstances.
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Non-GAAP Financial Measures
We prepare financial statements in accordance with accounting principlesgenerally accepted in the United States (GAAP). We also disclose adjusteddil t d i h (EPS) dj t d fit dj t d fitdiluted earnings per share (EPS), adjusted gross profit, adjusted gross profit asa percentage of net sales, adjusted income from operations, free cash flow andfree cash flow as a percentage of net income attributable to Regal-BeloitCorporation (collectively, “non-GAAP financial measures”). We use thesep ( y, )measures in our internal performance reporting and for reports to the Board ofDirectors. We also periodically disclose certain of these measures in ourquarterly earnings releases, on investor conference calls, and in investorpresentations and similar events We believe that these non GAAP financialpresentations and similar events. We believe that these non-GAAP financialmeasures are useful measures for providing investors with additional insight intoour operating performance. This additional information is not meant to beconsidered in isolation or as a substitute for our results of operations preparedand presented in accordance with GAAP. These non-GAAP financial measuresexclude the effects of certain items that are not comparable from one period tothe next. Free cash flow is defined as net cash provided by operating activitiesless additions to property plant and equipmentless additions to property, plant and equipment.
p 3
Overview
Getting to Know Regal Getting to Know Regal
Best in Class Industrial Performance
Growth Catalysts
Financial Performance
Building a Premier Global Enterprise
p 4
Overview
Getting to Know Regal Getting to Know Regal
Best in Class Industrial Performance
Growth Catalysts
Financial Performance
Building a Premier Global Enterprise
p 5
Company Overview
Drives Other
Founded 1955Beloit, WI
Sales by Product/Platform Percentage of Sales
Small MotorsLarge
GeneratorsMechanical
Blowers
Revenues$3.2B
Revenue Growth7 Y CAGR
39%34%
ResidentialIndustrial
MotorsLarge Motors
Total Shareholder Returns 7-Year TSR
7-Year CAGR 14.2% 27%
Commercial
111%
DividendsRaised 8 out
of last 9 years
Sales by Geography Cyclicality
EuropeRoW Canada
Late
ManagementExperienced, Credible,
Stable
y
Asia
p
USAEarly 37%
Mid
Late 16%
p 6
47%
Necessary and Innovative Products
Electric Motors Power Generation
Power TransmissionElectric Controls
p 7
Diverse Applications
p 8
Global Foot Print
Abl t M t C t D d A h I th W ld
p 9
Able to Meet Customer Demands Anywhere In the WorldAligning with Faster Growing Economies
One Regal
Unifies Employees with a Simple, Bold, Dynamic Corporate Brand
Presents One Face to the Customer, with Strong Global Product Brands
p 10
Overview
Getting to Know Regal Getting to Know Regal
Best in Class Industrial Performance
Growth Catalysts
Financial Performance
Building a Premier Global Enterprise
p 11
Total Shareholder ReturnsSeven Year Historyy
n
200%
136.4%Best in Class Industrials1
(AME, DHR, EMR, ROP, IEX)
hare
hold
er R
etur
n
100%
150%
R C
umul
ativ
e Sh
50%67.6% Regal Beloit
28.9% S&P 500
Tota
l 7-Y
R
(50%)
0%
Performance Consistent With Best in Class Industrials
(50%)6/28/06 8/28/07 10/27/08 12/27/09 2/26/11 4/27/12 6/28/13
Performance Consistent With Best in Class Industrials_____________________(1) Best In Class Industrials includes Ametek, Inc., Danaher Corporation, Emerson Electric Co., IDEX Corporation, and Roper Industries, Inc.
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Financial Performance Profile
2007 – 2012 Sales CAGR
11 9% 10 6%20.0% 11.9% 10.6% 9.3% 7.5% 7.3%
1.7%0.0%
10.0%
RBC DHR AME IEX ROP EMR
2007 – 2012 Free Cash Flow / NI
137.5% 134.8% 133.3% 120.0% 116.0% 108.1%
0.0%
200.0%
ROP RBC IEX AME DHR EMR
Performance Consistent With Best In Class Industrials
ROP RBC IEX AME DHR EMR
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_____________________Source: Capital IQ and BloombergNotes: CAGR represents cumulative annual growth rate for the 2007 – 2012 calendar periods.Free cash flow as a percentage of net income is defined as cash flow from operations less capital expenditures divided by net income. Represents the median percentage for the 2007 – 2012 calendar periods.
Regal Compass Operating System
Lean Six Sigma Tools Leadership Tools
Quality Cost
Delivery
Talent Management Long Range Plans
Compliance/Safetyy
Cap Ex
Cash Cycle
N P d t
p y
Risk Management
Customer Care
Integrations New Products Integrations
Near Term Income Statement
Long Term Growth
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Overview
Getting to Know Regal Getting to Know Regal
Best in Class Industrial Performance
Growth Catalysts
Financial Performance
Building a Premier Global Enterprise
p 15
Energy Efficiency Mega-Trend
$700
Energy Efficient Product Sales*
$300
$400
$500
$600
$0
$100
$200
$300
$02005 2006 2007 2008 2009 2010 2011 2012
Regional SEER Update US Small Motor Standard UpdateF t Effi i St d d A ti i t d Eff ti 2015 Future Efficiency Standards Under Review
Anticipated Effective 2015 Expands NEMA Requirements to
Estimated 20% of N.A. of C&I Sales
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Expect DOE to Publish Official Requirement Spring 2013
* Management Estimate
New Products
New Product Introductions
5060
5060
2220304050 Aluminum Wound
HVAC MotorVariable Speed
Pool Motor
1020
2008 2011 2012
Large Frame IEC MotorHERA-MAXGear Motor
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Gear Motor
Develop New Products with Focus on Energy Efficiency
Successful Acquirer and Integrator
Acquisition Strategy2013
Technology and Energy Efficiency Expand Geographic Footprint Margin Improvement
2012
Rigorous Evaluation and Integration Process Drives
2011
HARGIL PTY.LTD
gReturn On Investment
A i iti Pi li C ti
2010
DYNAMICSLTD.
Acquisition Pipeline Continues to Be Active
Consistent and Successful Acquirerp 18
Synergy Program Update
$38 $38 ($ in millions)
$35
Gross Synergy Run Rate - As Presented 8/23/2011($ in millions)
Gross Synergy Run Rate – Current View
$12
$25
$10
$20
$30
Yr 1 Yr 2 Yr 3 Yr 4Yr 1 Yr 2 Yr 3 Yr 4
Capital and Expense – As Presented 8/23/2011($ in millions)
$5 8
Capital and Expense – Current View$7.0($ in millions)
$5.8
$2.2 $2.2
$5.6
$0.0
Yr 1 Yr 2 Yr 3 Yr 4
$0.0 $0.0
Yr 1 Yr 2 Yr 3 Yr 4
19
Deliver More Savings Earlier
Simplification Initiative
Reduction Targets 2011 Next 3 Years2012Reduction TargetsERPs Factories
201132
Next 3 Years~ 6~ 6
201234
WarehousesDesign Platforms
02
~ 10~ 8
62
EntitiesSuppliersB d
10502
~ 30~ 500
10
20120
2Brands 2 ~ 10
Improve Margins Easier to do Business
2
Improve Margins, Easier to do Business
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Investing in Emerging Markets
Hermetic Motors - Taicang Generators - Shanghai
Visual Management Lean Production
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Growth Catalyst Summary
Energy Efficiency Trends Energy Efficiency Trends Introducing New Products Consistent and Successful AcquirerConsistent and Successful Acquirer Simplification Initiative Investing in Emerging Marketsg g g
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
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Overview
Getting to Know Regal Getting to Know Regal
Best in Class Industrial Performance
Growth Catalysts
Financial Performance
Building a Premier Global EnterpriseBuilding a Premier Global Enterprise
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Sales and EPS Growth
$4.50
$5.00
$3 000
$3,500
$3.00
$3.50
$4.00
$2,000
$2,500
$3,000
EPSSales
ds
$1.50
$2.00
$2.50
$1,000
$1,500
$2,000
$ T
hous
and
$0.00
$0.50
$1.00
$0
$500
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20122001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
St T k R d f G th
2011 and 2012 are adjusted EPS. See Non-GAAP reconciliation in Appendix
Strong Track Record of Growth
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Balance Sheet Strength
60%
40%
50%
pita
l
20%
30%
ebt /
Tot
al C
ap
10%
20%
Tota
l D
Current Debt/Cap at 27% LTM Debt / EBITDA at 1.9x
0%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2004 2005 2006 2007 2008 2009 2010 2011 2012
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Strong Free Cash Flow to Reduce Debt
Consistent Cash Flow and Growth Investment
300%$400
Free Cash Flow Capex FCF% of Net Income
200%
250%
$300
$350
150%
200%
$150
$200
$250
50%
100%
$50
$100
$150
.
0%$0 2005 2006 2007 2008 2009 2010 2011 2012
Cash Div($M) $14.7 $16.6 $18.1 $19.4 $21.6 $25.1 $26.8 $30.8
_____________________Note: Free Cash Flow, see Non-GAAP reconciliation in Appendix.
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Investment Thesis
Global Balanced Business Model– “Best in Class” PerformanceBest in Class Performance– Innovative Product Leadership– Operating System Driving Results
A l ti G th D i Accelerating Growth Drivers– Energy Efficiency and New Products– Consistent and Successful Acquirerq– Well Positioned in Emerging Markets– Driving Simplification
Consistent Financial Performance Consistent Financial Performance– Seven Year Sales Growth ≈ 14%– Seven Year TSR ≈ 123% – Consistently Strong Free Cash Flow
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Thank YouMark GliebeChairmanChief Executive Officer
Chuck Hinrichs
Jon SchlemmerChief Operating Officer
Chuck HinrichsVice PresidentChief Financial Officer
J h P iJohn PerinoVice President Investor Relations
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Appendix Non-GAAP Reconciliations
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year
ADJUSTED DILUTED EARNINGS PER SHARE
Quarter Quarter Quarter Quarter Year2012 GAAP Diluted Earnings Per Share $ 1.16 $ 1.49 $ 1.29 $ 0.70 $ 4.64Purchase Accounting Costs 0.01 — — — 0.01Restructuring Costs — 0.01 0.08 0.06 0.15Gain on Disposal of Real Estate (0 02) (0 02)Gain on Disposal of Real Estate (0.02) — — — (0.02)Prior Year Tax Benefit — — (0.05) — (0.05)2012 Adjusted Diluted Earnings Per Share $ 1.15 $ 1.50 $ 1.32 0.76 $ 4.73
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year
2011 GAAP Diluted Earnings Per Share $ 0.99 $ 0.88 $ 1.13 $ 0.80 $ 3.79Acquisition and Purchase Accounting Costs 0.12 0.06 0.28 0.26 0.73Warranty Expense Item — 0.44 — (0.23) 0.19Restructuring Costs — — — 0.10 0.10Gain on Divestiture (0 10) (0 10)
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Gain on Divestiture — — (0.10) — (0.10)2011 Adjusted Diluted Earnings Per Share $ 1.11 $ 1.38 $ 1.31 0.93 $ 4.71
Appendix Non-GAAP ReconciliationsADJUSTED DILUTED EARNINGS PER SHARE*
Jun 29, 2013
Jun 30, 2012
Jun 29, 2013
Jun 30, 2012
GAAP Diluted Earnings Per Share 1 13$ 1 49$ 2 22$ 2 65$
Three Months Ended Six Months Ended
GAAP Diluted Earnings Per Share 1.13$ 1.49$ 2.22$ 2.65$ Purchase Accounting Costs — — — 0.01Restructuring Costs 0.02 0.01 0.03 0.01Gain on Disposal of Real Estate — — — (0.02)Retroactive Tax Credit (0 02) (0 04)Retroactive Tax Credit (0.02) — (0.04) —Adjusted Diluted Earnings Per Share 1.13$ 1.50$ 2.21$ 2.65$
Appendix Non-GAAP Reconciliations
EBITDA Reconciliation
(Dollars in Millions) 1Q 2012 2 Q2012 3Q 2012 4Q 2012 FY 2012(Dollars in Millions) 1Q 2012 2 Q2012 3Q 2012 4Q 2012 FY 2012
Net Income $ 48.7 $ 62.7 $ 54.3 $ 29.9 $ 195.6
Plus: Minority Interest 1.2 1.6 0.9 1.0 4.7
Plus: Taxes 17.8 28.2 17.9 5.7 69.6
Plus: Interest Expense 11.8 11.2 10.6 10.9 44.5
Plus: Interest Income (0.4) (0.4) (0.4) (0.4) (1.6)
Plus: Depreciation 20.1 21.3 20.9 19.7 82.0
Plus: Amortization 10.8 10.9 11.0 11.3 44.0
EBITDA $ 110.0 $ 135.5 $ 115.2 $ 78.1 $ 438.8
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Appendix Non-GAAP Reconciliations
EBITDA Reconciliation
D ll i Milli 3Q 2012 4Q 2012 1Q 2013 2Q 2013 LTMDollars in Millions 3Q 2012 4Q 2012 1Q 2013 2Q 2013 LTM Net Income $54.3 $29.9 $49.5 $51.1 $184.8 Plus: Minority Interest 0.9 1.0 1.2 2.5 5.6 Plus: Taxes 17.9 5.7 15.3 17.9 56.8 Plus: Interest Expense 10.6 10.9 10.6 10.7 42.8 Less: Interest Income (0.4) ‐0.4 ‐0.7 ‐1.1 ‐2.6 Plus: Depreciation 20.9 19.7 20.5 20.7 81.8
Plus: Amortization 11 0 11 3 11 1 11 1 44 5 Plus: Amortization 11.0 11.3 11.1 11.1 44.5 EBITDA $115.2 $78.1 $107.5 $112.9 $413.7
Appendix Non-GAAP Reconciliations
Free Cash Flow Reconciliation
(Dollars in Millions) 2005 2006 2007 2008 2009 2010 2011 2012
Cash Flow from Operation $ 112.2 $ 93.5 $ 200.6 $ 154.2 $ 314.9 $ 175.4 $ 265.3 $ 351.7
Capital Expenditures (28.3) (52.5) (36.6) (52.2) (33.6) (45.0) (57.6) (91.0)
Grants Received for Capital Expenditures - - - - - - - 8.7
Free Cash Flow $ 83.9 $ 41.0 $ 164.0 $ 102.0 $ 281.3 $ 130.4 $ 207.7 $ 269.4
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Appendix Non-GAAP Reconciliations
Free Cash Flow*Jun 29 Jun 30 Jun 29 Jun 30Three Months Ended Six Months Ended
Jun 29, 2013
Jun 30, 2012
Jun 29, 2013
Jun 30, 2012
GAAP Net Cash Provided by Operating Activities 91.3$ 135.9$ 157.3$ 204.4$ Additions to Property Plant and Equipment (26.6) (25.0) (47.2) (44.8)Free Cash Flow 64 7$ 110 9$ 110 1$ 159 6$
Dollars in Millions
Free Cash Flow 64.7$ 110.9$ 110.1$ 159.6$ Free Cash Flow as a Percentage of Net Income Attributable to Regal Beloit 126.6 % 176.9 % 109.4 % 143.3 %