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Chuck HinrichsVice PresidentChief Financial Officer
Robert CherryVice PresidentInvestor Relations
Mark GliebeChairmanChief Executive Officer
Jon SchlemmerChief Operating Officer
Regal Beloit CorporationInvestor Relations Presentation
August 2016
Safe Harbor Statement
2
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; increases in our overall debt levels as a result of the acquisition of the Power Transmission Solutions (“PTS”) business from Emerson Electric Co., or otherwise and our ability to repay principal and interest on our outstanding debt; actions taken by our competitors and our ability to effectively compete in the increasingly competitive globalelectric 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 andbusinesses such as PTS, including the timing and impact of purchase accounting adjustments; prolonged declines in oil and gas upstream capital spending; 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; 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; effects on earnings of any significant impairment of goodwill or intangible assets; 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 filed on March 2, 2016 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. Theforward-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.
Non-GAAP Financial Measures
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 presentations and similar events that may be considered “non-GAAP” financial measures. We believe that these non-GAAP financial measures are useful measures for providing investors with additional information regarding our results of operations and for helping investors understand and compare our operating results across accounting periods and compared to our peers. In addition, since our management often uses these non-GAAP financial measures to manage and evaluate our business, make operating decisions, and forecast our future results, we believe disclosing these measures helps investors evaluate our business in the same manner as management. 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.
In this presentation, we disclose the following non-GAAP financial measures, and we reconcile these measures in the Appendix to the most directly comparable GAAP financial measures: adjusted diluted earnings per share (both historical and projected), adjusted operating profit, adjusted operating profit margin, free cash flow, and free cash flow as a percentage of net income attributable to Regal Beloit Corporation.
In addition to these non-GAAP measures, we also use the term “organic sales” to refer to GAAP sales from existing operations excluding sales from acquired businesses recorded prior to the first anniversary of the acquisition less the amount of sales attributable to any divested businesses (“acquisition sales”), and the impact of foreign currency translation. The impact of foreign currency translation is determined by translating the respective period’s sales (excludingacquisition sales) using the same currency exchange rates that were in effect during the prior year periods. We use the term “organic sales growth” to refer to the increase in our sales between periods that is attributable to organic sales. We use the term “acquisition growth” to refer to the increase in our sales between periods that is attributable to acquisition sales.
Regal is…
A Recognized Leader in High Efficiency Motor Solutions− Well positioned for global energy efficiency trend
A Portfolio of Established and Highly Respected Industrial Brands− Large installed base drives recurring revenue
A Successful Acquirer and Integrator− PTS integration on track and synergies ahead of schedule
Ahead of Industry Curve on Simplification Initiative− Adj. operating profit* improvement plan delivered 150 bps in 2015
A Strong Free Cash Flow Generator− Five-year average free cash flow 129% of adjusted net income*
A Stable Business with 55 Straight Years of Dividends to Shareholders− Dividend increased 11 of the last 12 years
* Non-GAAP Financial Measurement, See Appendix for Reconciliation4
Regal Overview
Founded in 1955 with Headquarters inBeloit, Wisconsin
2015 Sales of $3.5B
5-Year Sales CAGR of 9.4%
Experienced, Credible and Stable Management Team
* Non-GAAP Financial Measurement, See Appendix for Reconciliation
Sales by SegmentSales by Product/Platform
Sales by Geography Production by Geography
Commercial & Industrial Systems
Power Transmission
Solutions
Climate Solutions
Mexico
Mexico
USA & Canada
USA & Canada
Europe
AsiaAsia
EuropeROW
30%22%
48%
Small Motors
Large Motors
Gearing
Bearings
BlowersGenerators
DrivesCouplings
Other
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Business Segments and Brands
Power Transmission
Solutions
ClimateSolutions
®
Resi. & Light
Comm. HVAC
Aftermarket
Comm. Ref.
General Industry
Water Heating
Material Handling
Oil & Gas
Beverage
Metals
General Industry
HVACOther
Commercial & Industrial
SystemsDistribution
Oil & Gas
Comm. HVAC
Pump
General Industry
Power Generation
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Financial Snapshot
$3.1
$3.3
$3.5
2013 2014 2015
Net Sales
* Non-GAAP Financial Measurement, See Appendix for Reconciliation
$4.36 $4.31$5.33
2013 2014 2015
$224 $215
$289
2013 2014 2015
$0.78
$0.84
$0.90
2013 2014 2015
Adjusted Diluted EPS*
Dividends Per ShareFree Cash Flow*
(billions)
(millions)
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Residential, Commercial & Industrial Motor Systems
Motors Consume ~45% of Global Electricity Production
Residential Applications Commercial Building Applications
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Efficiency Regulations for:- IE3 Efficiency Level Required for Sizes75 kW – 375 kW
2016
2021
2018
2017 Energy Regulations for:
- Furnace Fans
2022 Efficiency Regulations for:
- Electric Motor Regulations
Efficiency Regulations for:- Commercial CAC/HP
Efficiency Regulations for:- Estimate for Amendment 14- Commercial Refrigeration- Small Motor- Large AC/HP- Commercial Water Heater
2019
Efficiency Regulations for:- Estimated Effective Date- Commercial Refrigeration
Future Efficiency Regulations for:- Large Pumps- Pool Pumps, Fountain Pumps- Special Motors and VFD- Commercial Compressors
Efficiency Regulations for:- Air Conditioner, EER Increase
Efficiency Regulations for:- Est. IE3 Efficiency
Efficiency Regulations for:- IE3 Efficiency Level Required for Sizes 75kW - 375kW
2020
Efficiency Regulations for:- Commercial Refrigeration Equipment- Walk-in Freezers & Coolers
Energy Regulations for:- Furnaces
Energy Regulations for:- C&I Pumps
Energy Regulations for:- C&I Fans & Blowers- Small Motors
Efficiency Requirements Increasing
Source: Management Estimates for Effective Implementation Dates
Multi-Year Trend Favors High Efficiency Suppliers
9
Residential Applications Regulatory Driven
DEC Star®
Energy Efficient Air Mover with Axial Motor Replaces ECM Motors and Standard Efficiency Blowers Regal Offering Expanded from Just Motor to Entire Blower Assembly Smaller, Lighter, Quieter 14% Better Efficiency
High Efficiency Product Innovation
Standard
10
®
Commercial Applications Economically Driven
High Efficiency Product Innovation
Integrated Axial ECM Platform for Larger Power Applications
Regal Offering Expanded from Just Motor to Compact Motor with Integrated Drive
Reduced System Size and Weight
Increased System Efficiency and Serviceability
Standard Air Handling Axial Air Handling
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Category Brands Est. Installed Base Key Products
$1,740MCam Follower Mounted Bearing
$1,250MShaft Reducer Worm Gearing
$1,000MDisc Couplings Gear Coupling
$525MChain Guide Conveyor Chain
$125MV-Belt Drive TorqGard™
PTS Established Brand Portfolio
Large Installed Base Drives Like-for-Like Replacement Revenue
CO
MPO
NEN
TSC
ON
VEYI
NG
CO
UPL
ING
SG
EAR
ING
BEAR
ING
S
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Integration of Regal's Largest and Most Complex Acquisition now Essentially Complete
Delivered $12 Million of Year One Synergies Versus Target of $7 Million
Forecasting $30 Million in Total Synergies Over a Three-Year Period Versus Original Four-Year Plan
PTS Integration On Track
Another Successful Regal Acquisition Integration
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Optimum Design Features
Best Manufacturing Processes
Standardized Components
Consolidated Supply Chain
Enables Automation
Maintains Brand Differences
Simplification in Full Stride
Century Marathon
Next Generation Regal Platform
Marathon CAC
Current 56 Frame PlatformsAdvantages
Over 5,000 Component Parts Eliminated To Date
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7,000
8,000
9,000
10,000
2011 2012 2013 2014 2015 2016
Rooftop Consolidation Drives Margin Improvement
Simplifying Our Footprint
Rooftop Square Feet* (000s)
* Does not include 2015 PTS acquisition15
0%
30%
60%
90%
120%
150%
$-
$50
$100
$150
$200
$250
$300
$350
2011 2012 2013 2014 2015 2016e**
Free Cash Flow* % of Adj. Net Income*
Consistently Delivering Strong FCF – 129% Annual Average
* Non-GAAP Financial Measurement, See Appendix for Reconciliation
(millions)
Consistently Generating Cash
16** Based on Management Estimates
Managing Debt to Drive Growth
0%
10%
20%
30%
40%
50%
60%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
12-Year Record of Using Free Cash Flow to Reduce Debt
Power Transmission
Total Debt / Total Capital
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$0.58 $0.62 $0.64 $0.66
$0.70 $0.74
$0.78
$0.84
$0.90
2007 2008 2009 2010 2011 2012 2013 2014 2015
Consistent Increase in Cash Dividends to Shareholders
55 Consecutive Years of
Cash Dividends
Dividend Increased 11 of
the Last 12 Years
Opportunistic Share
Repurchases
Dividends Per Share Paid
Returning Cash to Shareholders
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Capital Allocation Priorities
Acquisitions
Target Accretive Bolt-on and Transformative Transactions to Drive
Growth and Shareholder Value
Share Repurchase
Utilize Remaining Share Repurchase Authorization while Remaining Flexible for
Large Acquisitions
Balance Sheet Targets
Disciplined Approach to Drive Long-Term Shareholder Value
Debt/EBITDA Ratio: 1.5 – 3.5
Capital Expenditures: 2.5% – 3.0% of Sales
Cash Dividends: 18% – 22% Payout Ratio
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Key Takeaways
Regal is…
A Recognized Leader in High Efficiency Motor Solutions
A Portfolio of Established and Highly Respected Industrial Brands
A Successful Acquirer and Integrator
Ahead of Industry Curve on Simplification Initiative
A Strong Free Cash Flow Generator
A Stable Business with 55 Straight Years of Dividends to Shareholders
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Thank You
Mark J GliebeChairmanChief Executive Officer
Jon SchlemmerChief Operating Officer
Chuck HinrichsVice PresidentChief Financial Officer
Robert CherryVice PresidentInvestor Relations
Chuck HinrichsVice PresidentChief Financial Officer
Robert CherryVice PresidentInvestor Relations
Mark GliebeChairmanChief Executive Officer
Jon SchlemmerChief Operating Officer
Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations
ADJUSTED DILUTED EARNINGS PER SHARE
Jan 2, 2016
Jan 3, 2015
Jan 2, 2016
Jan 3, 2015
GAAP Diluted Earnings Per Share (0.43)$ (2.61)$ 3.18$ 0.69$
Goodwill Impairment 1 1.30 2.60 1.29 2.59
Other Impairments, Net - 0.67 - 0.66
Venezuela Asset Write Down 0.29 - 0.28 -
Purchase Accounting and Transaction Costs - 0.09 0.47 0.14
Restructuring Costs 0.06 0.03 0.13 0.18
Venezuelan Currency Devaluation - 0.15 0.02 0.15
Gain on Disposal of Real Estate (0.05) (0.20) (0.04) (0.23)
Loss on Divestiture Bankruptcy - 0.09 - 0.09
Loss on Sale of Joint Venture - - - 0.04
Adjusted Diluted Earnings Per Share 1.17$ 0.82$ 5.33$ 4.31$
1. Goodwill impairment is subject to finalization.
Three Months Ended Twelve Months Ended
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ADJUSTED INCOME FROM OPERATIONS
Jan 2, 2016
Jan 3, 2015
Jan 2, 2016
Jan 3, 2015
Jan 2, 2016
Jan 3, 2015
Jan 2, 2016
Jan 3, 2015
GAAP Income from Operations (59.7)$ (84.2)$ 28.9$ 7.1$ 16.7$ (33.5)$ (14.1)$ (110.6)$
Goodwill Impairment 1 79.9 99.7 - 7.7 - 11.1 79.9 118.5
Asset Impairments and Other, Net - - - 13.8 - 26.2 - 40.0
Venezuelan Asset Write Down 12.8 - - - - - 12.8 -
Purchase Accounting and Transaction Costs - 0.7 - - - 4.4 - 5.1
Restructuring Costs (Benefit) 2.3 0.4 2.2 1.8 - 0.2 4.3 2.4
Venezuelan Currency Devaluation - 10.4 - - - - - 10.4
Gain on Disposal of Real Estate - (11.9) (3.4) - - - (3.4) (11.9)
Loss on Divestiture Bankruptcy - 6.3 - - - - - 6.3
Adjusted Income from Operations 35.3$ 21.4$ 27.7$ 30.4$ 16.7$ 8.4$ 79.5$ 60.2$
GAAP Operating Margin % (16.1)% (18.7)% 13.7 % 2.8 % 8.7 % (49.1)% (1.8)% (14.2)%
Adjusted Operating Margin % 9.5 % 4.7 % 13.2 % 11.9 % 8.7 % 12.3 % 10.3 % 7.8 %
1. Goodwill impairment is subject to finalization.
ADJUSTED INCOME FROM OPERATIONSJan 2, 2016
Jan 3, 2015
Jan 2, 2016
Jan 3, 2015
Jan 2, 2016
Jan 3, 2015
Jan 2, 2016
Jan 3, 2015
GAAP Income from Operations 53.9$ 33.6$ 146.7$ 99.6$ 52.2$ (11.7)$ 252.8$ 121.5$
Goodwill Impairment 1 79.9 100.7 - 7.7 - 11.1 79.9 119.5
Asset Impairments and Other, Net - - - 13.8 - 26.2 - 40.0
Venezuelan Asset Write Down 12.8 - - - - - 12.8 -
Purchase Accounting and Transaction Costs - 4.0 - - 29.8 4.4 29.8 8.4
Restructuring Costs 6.8 1.6 1.5 11.4 0.6 0.2 8.9 13.2
Venezuelan Currency Devaluation1 1.5 10.4 - - - - 1.5 10.4
Gain on Disposal of Real Estate - (13.9) (3.4) - - - (3.4) (13.9)
Loss on Divestiture Bankruptcy - 6.3 - - - - - 6.3
Loss on Sale of Joint Venture - 1.9 - - - - - 1.9 Adjusted Income from Operations 154.9$ 144.6$ 144.8$ 132.5$ 82.6$ 30.2$ 382.3$ 307.3$
—
GAAP Operating Margin % 3.2 % 1.8 % 14.1 % 8.8 % 6.8 % (4.4)% 7.2 % 3.7 %
Adjusted Operating Margin % 9.1 % 7.8 % 13.9 % 11.7 % 10.7 % 11.3 % 10.9 % 9.4 %
1. Goodwill impairment is subject to finalization.
Three Months Ended
Commercial & Industrial Systems Climate Solutions
Power Transmission Solutions Total Regal
Twelve Months EndedCommercial & Industrial
Systems Climate SolutionsPower Transmission
Solutions Total Regal
Dollars in Millions
Dollars in Millions
Appendix Non-GAAP Reconciliations
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Appendix Non-GAAP Reconciliations
Free Cash Flow as a Percentage of Adjusted Net Income Attributable to Regal Beloit Corporation Adjusted to Exclude the Non-Cash,Net of Tax, Goodwill and Asset Impairments and Other, Net
25
ADJUSTED NET INCOME
Dollars in Millions 2011 2012 2013 2014 2015 2016 (E)
GAAP Net Income Attributable to Regal Beloit Corporation 152.3$ 195.6$ 120.0$ 31.0$ 143.3$ 200.0$
Goodwill and Asset Impairments and Other —$ —$ 81.0$ 159.5$ 92.7$ —$
Tax Effect from Goodwill and Asset Impairments and Other —$ —$ (6.4)$ (12.3)$ (21.8)$ —$
Adjusted Net Income 152.3$ 195.6$ 194.6$ 178.2$ 214.2$ 200.0$
FREE CASH FLOW
Dollars in Millions 2011 2012 2013 2014 2015 2016 (E)
GAAP Net Cash Provided by Operating Activities 265.3$ 351.7$ 305.0$ 298.2$ 381.1$ 387.0$
Additions to Property, Plant and Equipment (57.6)$ (91.0)$ (82.7)$ (83.6)$ (92.2)$ (80.0)$
Grants Received for Capital Expenditures —$ 8.7$ 1.6$ —$ —$ —$
Free Cash Flow 207.7$ 269.4$ 223.9$ 214.6$ 288.9$ 307.0$
Free Cash Flow as a Percentage of Adjusted Net Income 136.4% 137.7% 115.1% 120.4% 134.9% 153.5%
Fiscal Years
Fiscal Years
Appendix Regal Shipping Days
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
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