regal beloit corporation investor relations...

Regal Beloit Corporation

Investor Relations Presentation

November 4, 2013

Mark J. Gliebe President Chief Executive Officer

Chuck Hinrichs Vice President Chief Financial Officer

John Perino Vice President Investor Relations

Jonathan Schlemmer Chief Operating Officer

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 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 differ materially 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 by our competitors and our ability to effectively compete in the increasingly competitive global electric motor, power generation and mechanical motion control industries; our ability to develop new products based on technological innovation and the marketplace acceptance of new and existing products; fluctuations in commodity prices and raw material costs; our dependence on significant customers; issues and costs arising from the integration of acquired companies and businesses, including the timing and impact of purchase accounting adjustments; unanticipated costs or expenses we may incur related to product warranty issues; our dependence on key suppliers and the potential effects of supply disruptions; infringement of our intellectual property by third parties, challenges to our intellectual property, and claims of infringement by us of third party technologies; increases in our overall debt levels as a result of acquisitions or otherwise and our ability to repay principal and interest on our outstanding debt; product liability and other 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 external factors that we cannot control; unanticipated liabilities of acquired businesses; cyclical downturns affecting the global market for capital goods; difficulties associated with managing foreign operations; and other risks and uncertainties including 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. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. The forward-looking statements included in this presentation are made only as of their respective dates, and we undertake no obligation to update these statements to reflect subsequent events or circumstances.

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Non-GAAP Financial Measures

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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 from operations, free cash flow and free cash flow as a percentage of net income attributable to Regal Beloit Corporation (collectively, “non-GAAP financial measures”). We use these measures in our internal performance reporting and for reports to the Board of Directors. We also periodically disclose certain of these measures in our quarterly earnings releases, on investor conference calls, and in investor presentations and similar events. We believe that these non-GAAP financial measures are useful measures for providing investors with additional insight into our operating performance. This additional information is not meant to be considered in isolation or as a substitute for our results of operations prepared and presented in accordance with GAAP. Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment adjusted for grants received for capital expenditures.

Overview

Getting to Know Regal

Best in Class Industrial Performance

Growth Catalysts

Financial Performance

Building a Premier Global Enterprise

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Overview



Growth Catalysts



p 5

OEM

Dist.

End User

Small MotorsLarge

Motors

Generators

MechanicalDrives Other

Blowers

Company Overview

Revenues $3.2B

Management Experienced, Credible,

Stable

2011, 2012, YTD 2013 Free Cash Flow Exceeds

Net Income

Founded 1955 Beloit, WI

Dividends Raised 8 out

of last 9 years

Revenue Growth 7-Year CAGR

14.2%

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Sales by Product/Platform Sales by End Market

Sales by Geography Sales by Channel

Asia

Europe RoW Canada

USA

Residential Industrial

Commercial

Necessary and Innovative Products

Electric Motors

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Power Transmission Electronic Controls

Power Generation

Diverse Applications

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Global Foot Print

p 9

Able to Meet Customer Demands Anywhere In the World Aligning with Faster Growing Economies

Overview



Growth Catalysts



p 10

Financial Performance Profile

2007 – 2012 Sales CAGR

Performance Consistent With Best In Class Industrials

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11.9% 10.6% 9.3% 7.5% 7.3%1.7%

0.0%

10.0%

20.0%

RBC DHR AME IEX ROP EMR

137.5% 134.8% 133.3% 120.0% 116.0% 108.1%

0.0%

200.0%

ROP RBC IEX AME DHR EMR

_____________________ Source: Capital IQ and Bloomberg Notes: 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.

2007 – 2012 Free Cash Flow / NI

Regal Compass Operating System

Near Term Income Statement

Quality Cost

Delivery

Cap Ex

Cash Cycle

New Products

Long Term Growth

Lean Six Sigma Tools Leadership Tools

Talent Management Long Range Plans

Compliance/Safety

Risk Management

Customer Care

Integrations

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Overview



Growth Catalysts



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$0

$100

$200

$300

$400

$500

$600

$700

2005 2006 2007 2008 2009 2010 2011 2012

Energy Efficiency Mega-Trend

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Energy Efficient Product Sales*

Regional SEER Update EISA Expansion Future HVAC Efficiency

Standards Under Review Proposed Furnace Fan

Efficiency Legislation

Anticipated Effective 2017 Expands NEMA Requirements to

Additional Motor Sizes Expect DOE to Publish Official

Requirement June 2014 * Management Estimate

New Products

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New Product Introductions

22

50 60

10 20 30 40 50 60

2008 2011 2012

Large Frame IEC Motor HERA-MAX Gear Motor

Aluminum Wound HVAC Motor

Variable Speed Pool Motor

Develop New Products with Focus on Energy Efficiency

Successful Acquirer and Integrator

Rigorous Evaluation and Integration Process Drives Return On Investment

Aligning Footprint with Faster Growing End Markets and Economies

Acquisition Pipeline Continues to Be Active

2010

2011

HARGIL DYNAMICS

PTY. LTD.

Consistent and Successful Acquirer p 16

2012

2013

Successful Acquirer and Integrator

Strategic Goals

Technology and Energy Efficiency

Expand Geographic Footprint

Margin Improvement

Acquisitions Driving Growth p 17

Financial Goals

EPS Accretive in First Year

Cash Flow Positive in First Year

Clear Path to Exceed ROIC Hurdle Rate within Three Years

Evaluating Acquisition Opportunities that Meet our Strategic and Financial Requirements

Simplification Initiative

Reduction Targets ERPs Factories Warehouses Design Platforms Entities Suppliers Brands

2011 3 2 0 2 10 50 2

Next 3 Years ~ 6 ~ 6 ~ 10 ~ 8 ~ 30 ~ 500 ~ 10

Improve Margins, Easier to do Business

2012 3 4 6 2 20

120 2

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Investing in Emerging Markets

Hermetic Motors - Taicang Generators - Shanghai

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Visual Management Lean Production

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

Growth Catalyst Summary

Energy Efficiency Trends Introducing New Products Consistent and Successful Acquirer Simplification Initiative Investing in Emerging Markets

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Overview



Growth Catalysts



p 21

Sales and EPS Growth

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$5.00

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

EPS Sales

Strong Track Record of Growth

$ T

hous

ands

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2011 and 2012 are adjusted EPS. See Non-GAAP reconciliation in Appendix

2005 2006 2007 2008 2009 2010 2011 2012 2004

0%

10%

20%

30%

40%

50%

60%

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 Q3

Tota

l Deb

t / T

otal

Cap

ital

Balance Sheet Strength

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Current Debt/Cap at 27% LTM Debt / EBITDA at 1.9x

Strong Free Cash Flow to Reduce Debt

2013

.

Consistent Cash Flow and Growth Investment

0%

50%

100%

150%

200%

250%

300%

$0

$50

$100

$150

$200

$250

$300

$350

$400

2005 2006 2007 2008 2009 2010 2011 2012

Free Cash Flow Capex FCF% of Net Income

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 Leader in Key Markets – “Best in Class” Performance – Innovative Product Leadership – Operating System Driving Results

Growth Drivers – New Products with Focus on Energy Efficiency – Well Positioned in Emerging Markets – Successful and Disciplined Acquirer

Executing on Operating Profit Improvement Plan – EPC Synergies – Simplification Initiative

Consistent Financial Performance – Seven Year Sales Growth ≈ 14% – Consistently Strong Free Cash Flow – Strong Balance Sheet

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Thank You

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Mark J Gliebe President Chief Executive Officer

Chuck Hinrichs Vice President Chief Financial Officer

John Perino Vice President Investor Relations

Jonathan Schlemmer Chief Operating Officer

Appendix Non-GAAP Reconciliations

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Fiscal Year

2012 GAAP Diluted Earnings Per Share $ 1.16 $ 1.49 $ 1.29 $ 0.70 $ 4.64 Purchase Accounting Costs 0.01 — — — 0.01 Restructuring Costs — 0.01 0.08 0.06 0.15 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 $ 3.79 Acquisition and Purchase Accounting Costs 0.12 0.06 0.28 0.26 0.73 Warranty Expense Item — 0.44 — (0.23 ) 0.19 Restructuring Costs — — — 0.10 0.10 Gain on Divestiture — — (0.10 ) — (0.10 ) 2011 Adjusted Diluted Earnings Per Share $ 1.11 $ 1.38 $ 1.31 0.93 $ 4.71

ADJUSTED DILUTED EARNINGS PER SHARE

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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 Restructuring Costs 0.02 0.08 0.05 0.09 Gain on Disposal of Real Estate — — — (0.02 ) Purchase Accounting Costs — — — 0.01 Tax Benefit Recorded Attributable to Prior Year — (0.05 ) (0.04 ) (0.05 ) Adjusted Diluted Earnings Per Share $ 1.18 $ 1.32 $ 3.39 $ 3.97

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EBITDA Reconciliation

(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


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: Interest Income -0.4 -0.7 -1.1 -1.3 -3.5 Plus: Depreciation 19.7 20.5 20.7 20.8 81.7 Plus: Amortization 11.3 11.1 11.1 10.9 44.4 EBITDA $78.1 $107.5 $112.9 $110.5 $409.0

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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


Dollars in Millions

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