Regal Beloit Corporation Investor Relations Presentation

Transcription

1 Regal Beloit Corporation Investor Relations Presentation August 11, 2014 Mark J. Gliebe President Chief Executive Officer Jonathan Schlemmer Chief Operating Officer 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: 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 filed on February 26, 2014 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, adjusted income from operations, organic growth, 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. p 3

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

5 Overview Getting to Know Regal Best in Class Industrial Performance Growth Catalysts Financial Performance Building a Premier Global Enterprise p 5

6 Company Overview Founded 1955 Beloit, WI Revenues $3.1B Revenue Growth 7-Year CAGR 9.7% Sales by Product/Platform Mechanical Other Pwr Gen C&I Motors HVAC Other Resi Percentage of Sales Industrial Residential 34% 39% 27% 2011, 2012, 2013 Free Cash Flow Exceeds Adj. Net Income Dividends Raised 9 out of last 10 years Management Experienced, Credible, Stable Sales by Geography Mexico Canada RoW Europe USA Asia Sales by Channel Dist. Commercial End User OEM p 6

7 Necessary and Innovative Products Electric Motors Power Generation Electronic Controls Mechanical p 7

8 Diverse Applications p 8

9 Global Foot Print Able to Meet Customer Demands Anywhere In the World Aligning with Faster Growing Economies p 9

10 Overview Getting to Know Regal Best in Class Industrial Performance Growth Catalysts Financial Performance Building a Premier Global Enterprise p 10

11 Total Shareholder Returns Five Year History 150% 130% 106.3% Regal Beloit 104.6% S&P % DJIA Total 5-YR Cumulative Shareholder Return 110% 90% 70% 50% 30% 10% (10%) (30%) (50%) 12/31/08 12/31/09 12/31/10 12/31/11 12/30/12 12/30/13 Source: Capital IQ p 11

12 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 12

13 Overview Getting to Know Regal Best in Class Industrial Performance Growth Catalysts Financial Performance Building a Premier Global Enterprise p 13

14 Energy Efficiency Mega-Trend Energy Efficient Product Sales* $700 $600 $500 $400 $300 $200 $100 $ Regional SEER Update APGA/HARDI & DOE settled Effective 1/1/15, 13 SEER in North, 14 SEER in South, 14 SEER and 12 EER in SW 18 Mo. Sell Through Provision for Inventory Mfg. Prior to 12/31/14 * Management Estimate US Small Motor Standard Update Effective March 9, 2015 Applies to Commercial and Industrial Motors Between.25 HP - 3 HP 2 year Allowance for Agency Approved designs (3/9/17) p 14

15 New Products New Product Introductions DEC Star Variable Speed Pool Motor SyMAX-I HERA-MAX Gear Motor Develop New Products with Focus on Energy Efficiency p 15

16 Successful Acquirer and Integrator 2014 Rigorous Evaluation and Integration Process Drives Return On Investment Aligning Footprint with Faster Growing End Markets and Economies Acquisition Pipeline Continues to Be Active PTY. LTD. HARGIL DYNAMICS Consistent and Successful Acquirer p 16

17 Successful Acquirer and Integrator Evaluating Acquisition Opportunities that Meet our Strategic and Financial Requirements Strategic Goals Technology and Energy Efficiency Expand Geographic Footprint Margin Improvement Financial Goals EPS Accretive in First Year Cash Flow Positive in First Year Clear Path to Exceed ROIC Hurdle Rate within Three Years Acquisitions Driving Growth p 17

18 Simplification Initiative Reduction Targets Next 3 Years ERPs ~ 4 Factories ~ 5 Warehouses ~ 7 Design Platforms ~ 6 Entities ~ 20 Suppliers ~ 400 Brands ~ 10 Improve Margins, Easier to do Business p 18

19 Design Platform Simplification Platform Description 48 Frame Fractional HVAC Motors 3.3 Fractional HVACR Motors and Blowers Worm Gear Mechanical IEC (IE3) Industrial Motors for Asia and Europe 48/56 Frame Fractional C&I Motors p 19

20 Footprint Simplification > Springfield, Acuna and Australia Programs Progressing Forward, Customer Demand Creating Challenges Expect to See Benefits in 4Q and 2015 > Announced Closure of Two Kentucky Manufacturing Facilities Moves Motor Parts Production Closer to Motor Assembly Operations Expect to be Completed by end of 3Q 2015 ~$7M Restructuring Expense, ~$5M Annual Savings Total Simplification Restructuring Expense ($M) $4.2 $4.3 $3.6 $3.7 $2.7 $2.9 4Q13 A 1Q14 A 2Q14 A 3Q14E 4Q14E 1H15E p 20

21 Investing in Emerging Markets Hermetic Motors - Taicang Generators - Shanghai Visual Management Lean Production p 21

22 Growth Catalyst Summary Energy Efficiency Trends Introducing New Products Consistent and Successful Acquirer Simplification Initiative Investing in Emerging Markets p 22

23 Overview Getting to Know Regal Best in Class Industrial Performance Growth Catalysts Financial Performance Building a Premier Global Enterprise p 23

24 Sales and EPS Growth $3,500 $3,000 Sales *EPS $4.75 $4.25 $3.75 $2,500 $3.25 $ Thousands $2,000 $1,500 $1,000 $ % Sales CAGR ( ) $2.75 $2.25 $1.75 $1.25 $0.75 $0.25 $0 -$ * 2012* 2013* *2011, 2012 and 2013 are adjusted EPS. See Non-GAAP reconciliation in Appendix Strong Track Record of Growth p 24

25 Balance Sheet Strength 60% 50% Total Debt / Total Capital 40% 30% 20% 10% 0% Current Debt/Cap at 26% Debt / LTM EBITDA at 1.8x 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 Q4 Q1 Q Strong Free Cash Flow to Reduce Debt p 25

26 Consistent Cash Flow and Growth Investment $400 $350 $300 $250 $200 $150 $100 $50 $0 Free Cash Flow Capex FCF% of Net Income % 250% 200% 150% 100% 50% 0% Cash Div $16.6 $18.1 $19.4 $21.6 $25.1 $27.6 $30.8 $35.1 ($M) Note: Free Cash Flow, see Non-GAAP reconciliation in Appendix.. April 2014 Increased Dividend 10% p 26

27 Capital Allocation Strong Balance Sheet Consistent Free Cash Flow Acquisition Strategy Return Capital to Shareholders Dividends Share Repurchases p 27

28 Investment Thesis Global Leader in Key Markets 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 9% Consistently Strong Free Cash Flow Strong Balance Sheet p 28

29 Thank You Mark J Gliebe President Chief Executive Officer Jonathan Schlemmer Chief Operating Officer Chuck Hinrichs Vice President Chief Financial Officer John Perino Vice President Investor Relations p 29

30 Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year 2013 GAAP Diluted Earnings (Loss) Per Share $ 1.09 $ 1.13 $ 1.16 $ (0.74) $ 2.64 Asset Impairment and Other Net of Taxes Purchase Accounting and Transaction Costs Restructuring Costs Prior Year Tax Benefit (0.02) (0.02) (0.04) 2013 Adjusted Diluted Earnings Per Share $ 1.08 $ 1.13 $ $ 4.36 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 Restructuring Costs 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 $ $ 4.73 p 30

31 Appendix Non-GAAP Reconciliations EBITDA Reconciliation Dollars in Millions 3Q Q Q Q 2014 LTM Net Income $52.6 ($33.2) $43.8 $56.2 $119.4 Asset Impairment and Other, Net Plus: Minority Interest Plus: Taxes Plus: Interest Expense Less: Interest Income Plus: Depreciation Plus: Amortization Adjusted EBITDA $110.5 $86.6 $102.5 $123.9 $423.5 p 31

32 Appendix Non-GAAP Reconciliations Free Cash Flow Reconciliation (Dollars in Millions) Cash Flow from Operation 93.5 $ $ $ $ $ $ $ Capital Expenditures (52.5) (36.6) (52.2) (33.6) (45.0) (57.6) (91.0) (82.7) Grants Received for Capital Expenditures Free Cash Flow 41.0 $ $ $ $ $ $ $ p 32