Wells Fargo Securities Industrial and Construction Conference

Transcription

1 Wells Fargo Securities Industrial and Construction Conference MAY 8, 2012 Chuck Hinrichs Vice President Chief Financial Officer John Perino Vice President Investor Relations

2 Safe Harbor Statement This presentation contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 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: 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; 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; unanticipated costs or expenses we may incur related to product warranty issues; 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 filed on February 29, 2012 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. p 2

3 Non-GAAP Financial Measures 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, 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. These non-gaap financial measures exclude the effects of certain items that are not comparable from one period to the next. Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment. p 3

4 Overview Getting to Know Regal Best in Class Industrial Performance Growth Catalysts Financial Consistency Building a Premier Global Enterprise p 4

6 Company Overview Founded 1955 Beloit, WI Revenues (PF) $3B + Employees ~25,800 Sales by Product/Platform Drives Other Mechanical Generators Blowers Large Motors Small Motors Production by Region Mexico Asia US ROW Four CEOs Revenue Growth 11-Year CAGR 16% Total Shareholder Returns 7-Year TSR 181% Transformation A Mid Cap Diversified Industrial A Truly Global Manufacturer A Lean Six Sigma Continuous Improvement Culture A Company Innovating Around Energy Efficiency A Consistent and Successful Acquirer A Top Tier Team of Global Industrial Talent p 6

7 Necessary and Innovative Products Electric Motors Electric Generators Custom Electric Drives Power Transmission p 7

8 Balanced and Diversified Business Model Revenues by Channel Revenues by Geography ROW Canada Europe Distribution OEM Asia USA Revenues by End Markets Cyclicality Commercial Industrial Late Mid Residential New Early Management Estimates Residential Replacement 2011 p 8

9 One Regal Concept One Team Unified under a new corporate brand Clarifies corporate and product brands to our customers, shareholders, employees Enhances team work and collaboration Global recognition Regal Identifies the Company Legal Name Not Changing p 9

11 Total Shareholder Returns 250% Total 7-YR Cumulative Shareholder Return 200% 150% 100% 50% 0% 181.2% Regal Beloit 142.5%Best in Class Industrials 1 (AME, DHR, EMR, ROP, IEX) 21.0% S&P 500 (50%) 5/2/05 9/25/06 2/18/08 7/13/09 12/6/10 5/1/12 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. p 11

12 Relative Performance Profile 5-Year Sales CAGR 20.0% 10.0% 0.0% 11.6% 11.2% 10.5% 10.4% 9.7% 3.2% RBC DHR ROP AME IEX EMR 5 Year FCF / NI 200.0% 100.0% 0.0% 140.5% 137.6% 123.0% 108.3% 103.1% 98.6% RBC ROP AME IEX DHR EMR Performance Consistent With Best In Class Industrials Source: Capital IQ and Bloomberg Notes: CAGR represents cumulative annual growth rate for the calendar periods. Free cash flow is defined as cash flow from operations less capital expenditures. p 12

13 Regal Compass Operating System Lean Six Sigma Tools Quality Cost Delivery Cap Ex Cash Cycle New Products Leadership Tools Talent Management Long Range Plans Compliance/Safety Risk Management Customer Care Integrations Near Term Income Statement Long Term Growth p 13

15 EPC Broad Product Platform Commercial HVAC&R Residential HVAC&R Pump Distribution General Industry 25% 26% 16% 24% 9% Management Estimates p 15

16 Global Efficiency Regulations Canada Adopts Energy Efficiency Measures Already Implemented In US Energy Regulations for: - Commercial Refrigeration Equipment - Vending Machines - Walk-in Coolers & Freezers - Pool Filter Pumps IE3 Efficiency Level Required For Sizes 7.5 Kw 375 Kw Efficiency Regulations for: - Fractional HP Motors - Water - Unitary Air Conditioners IE3 Efficiency Level Required For Sizes.75 Kw 375 Kw December 19, 2010: EISA Legislation June 4, 2010 December 19, 2010 June 16, 2011 IE2 Efficiency Required Motor Efficiency Legislation (MEPS) to IE2 California Title 24 Updated Efficiency Regulations for: - Furnaces - Commercial Clothes Washers Energy Regulations for: - Commercial Refrigeration Equipment - Commercial Air Conditioners - Furnace Fans China Energy Efficiency And Benefit Society Project. Provide Incentives To Promote High Efficiency IE2 And IE3 Motors Energy Efficiency Ratings Required On AC Equipment In Both China and India. Higher Ratings Require Energy Efficient Motors Continuing Catalyst for Growth p 16

17 Increasing Global Presence Five Year Growth Rate 2011 Proforma Sales 464% Europe 6% ROW 5% 292% 213% Asia 18% Asia ROW Europe Canada 3% US 68% Management Estimates Expanding in Higher Growth Regions p 17

18 Technology Leader $ Millions $500 $400 $300 $200 $100 $0 Energy Efficient Product Sales New Product Introductions E How Energy Efficient Products Aid Customers End Users and Consumers Saves Energy Costs Certain Applications can Deliver Payback in 2 Years Distributors and Contractors Delivers an Up-sell Opportunity Helps Provide Value to Their Customers OEMs Helps Meet Efficiency Regulations Saves Material Costs Management Estimates 18

19 Successful Acquirer and Integrator Acquisition Strategy Technology and Energy Efficiency Expand Geographic Footprint Synergy Opportunities Acquisition Pipeline Continues to Be Active HARGIL DYNAMICS PTY. LTD Rigorous Evaluation and Integration Process Drives Return On Investment Consistent and Successful Acquirer p 19

20 Record of Strong, Continuous Growth Record of Consistent Growth and Execution Momentum with 11 Acquisitions Energy Efficiency Innovation Tailwind Continuing to Globalize and Simplify Continuous Improvement Headset Est p 20

22 First Quarter 2012 Financial Highlights $663 $808 $64 $79 $0.99 $ Revenue ($M) Operating Income ($M) Diluted EPS p 22

23 Second Quarter 2012 Guidance EPS Guidance of $1.42 to $1.48 Typical Growth with Seasonal Businesses Strength Expected in C&I, Mechanical, Unico to Partially Offset Weakness in HVAC and China Milwaukee Gear Contributing to Earnings EPC Integration Synergies Underway, with Minimal Restructuring Charges Expected in 2Q 2012 p 23

24 Sales and EPS Growth $3,500 $6.00 $3,000 $5.00 $2,500 Sales EPS $4.00 $ Thousands $2,000 $1,500 $1,000 $500 $3.00 $2.00 $1.00 $ C 2012C is Consensus Sales and EPS per Thomson First Call as of May 6, 2012 $0.00 Strong Track Record of Growth Source: Capital IQ and StreetAccount. Note: 2011 Adjusted EPS, see Non-GAAP reconciliation in Appendix. 2012C is Consensus Sales and EPS per Thomson First Call as of May 6, 2012 p 24

25 Consistent Cash Flow and Growth Investment $350 Free Cash Flow Capex FCF% of Net Income 300% $ % $250 $200 $150 $100 $50 200% 150% 100% 50% $ % Cash Div($M) $ $18.1 $19.4 $21.6 $25.1 $26.8 Note: Free Cash Flow, see Non-GAAP reconciliation in Appendix. p 25

26 Balance Sheet Strength 60% 50% Total Debt / Total Capital 40% 30% 20% 10% 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 Q p 26

27 Investment Thesis Global Business Model - well positioned Best in Class Performance Innovative Product Leadership Operating System Driving Results Accelerating Growth Drivers EPC Revenue Growth and Long Term Synergies Global Growth and Alignment with Fast Growing Economies Leadership in Energy Efficiency Technology Consistent and Successful Acquirer and Integrator Consistent Financial Performance Eleven Year Sales Growth 16% Seven Year TSR 181% Consistently Strong Cash Flow p 27

28 Thank you Chuck Hinrichs Vice President Chief Financial Officer John Perino Vice President Investor Relations p 28

29 APPENDIX Non-GAAP Measures Dollars in Thousands, Except Per Share Data Fiscal Year 2011 GAAP Diluted Earnings Per Share $ 3.79 EPC Purchase Accounting Adjustments and Acquisition Costs 0.73 Incremental Warranty Accrual 0.19 Gain on Divestiture (0.10) Restructuring Costs 0.10 Adjusted Diluted Earnings Per Share $ 4.71 p 29

30 APPENDIX Non-GAAP Measures Dollars in Thousands, Except Per Share Data Fiscal Year 2011 GAAP Income from Operations $ 255,713 EPC Purchase Accounting Adjustments and Acquisition Costs 41,300 Incremental Warranty Accrual 12,600 Gain on Divestiture (6,500) Restructuring Costs 5,800 Adjusted Income From Operations $ 308,913 Adjusted Income From Operations as a Percentage of Net Sales 11.0% Fiscal Year 2011 GAAP Net Cash Provided by Operating Activities $ 265,296 Additions to Property Plant and Equipment (57,621) Free Cash Flow $ 207,675 Free Cash Flow as a Percentage of Net Income Attributable to Regal Beloit 136.4% p 30

31 Appendix Reconciliation of Historic Free Cash Flow (Data in $ Millions) Cash Flow from Operation $112.2 $93.5 $200.6 $154.2 $314.9 $175.4 $265.3 Capital Expenditures (28.3) (52.5) (36.6) (52.2) (33.6) (45.0) (57.6) Free Cash Flow $83.9 $41.0 $164.0 $102.0 $281.3 $130.4 $207.7 p 31

32 Appendix Non-GAAP Reconciliations EBITDA Reconciliation Dollars in Millions 2Q Q Q Q 2012 LTM Net Income $34.3 $45.7 $33.5 $48.7 $162.2 Plus: Minority Interest Plus: Taxes Plus: Interest Expense Less: Interest Income (.4) (.5) (.6) (.4) (1.9) Plus: Depreciation Plus: Amortization EBITDA $76.8 $104.2 $87.1 $110.0 $378.1 Free Cash Flow Reconciliation Dollars in Millions 2Q 2012 GAAP Net Cash Provided by Operating Activities $68.5 Additions to Property Plant and Equipment (19.8) Free Cash Flow $48.7 p 32