Regal Beloit Corporation

Transcription

1 Regal Beloit Corporation Investor Relations Presentation November 2018 Mark Gliebe Chairman and Chief Executive Officer Jon Schlemmer Chief Operating Officer Rob Rehard Vice President Chief Financial Officer Robert Cherry Vice President Business Development & Investor Relations 2018 Regal Beloit Corporation

2 Safe Harbor Statement The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: With the exception of historical facts, the statements contained in this presentation may be forward-looking statements. 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, expect, intend, estimate, forecast, anticipate, believe, should, project or plan or the negative of these terms or other similar words. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forwardlooking statements, including but not limited to: 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 business of Emerson Electric Co. ( PTS ) 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 global electric motor, drives and controls, power generation and power transmission industries; our ability to develop new products based on technological innovation and marketplace acceptance of new and existing products; fluctuations in commodity prices and raw material costs; our dependence on significant customers; risks associated with global manufacturing; issues and costs arising from the integration of acquired companies and businesses including PTS, and the timing and impact of purchase accounting adjustments; prolonged declines in oil and gas up stream capital spending; 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, government policies, including policy changes affecting taxation, trade, immigration and the like, and other external factors that we cannot control; product liability and other litigation, or claims by end users, government agencies or others that our products or our customers applications failed to perform as anticipated, particularly in high volume applications or where such failures are alleged to be the cause of property or casualty claims; unanticipated liabilities of acquired businesses; 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; effects on earnings of any significant impairment of goodwill or intangible assets; losses from failures, breaches, attacks or disclosures involving our information technology infrastructure and data; cyclical downturns affecting the global market for capital goods; 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 27, 2018 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 Regal Beloit Corporation 2

3 Non-GAAP Financial Measures 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. 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 tables below to the most directly comparable GAAP financial measures: adjusted diluted earnings per share (both historical and projected), adjusted income from operations, adjusted operating income, adjusted operating margin, net debt, adjusted EBITDA, free cash flow, and free cash flow as a percentage of net income attributable to Regal Beloit Corporation. 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. Our management primarily uses adjusted income from operations, adjusted operating income and adjusted operating margin to help us manage and evaluate our business and make operating decisions, while adjusted diluted earnings per share, net debt, adjusted EBITDA, free cash flow and free cash flow as a percentage of net income are primarily used to help us evaluate our business and forecast our future results. Accordingly, we believe disclosing and reconciling each of these measures helps investors evaluate our business in the same manner as management. 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 (excluding acquisition 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. For further clarification, we may use the term acquisition growth to refer to the increase in our sales between periods that is attributable to acquisition sales Regal Beloit Corporation 3

4 Regal is A Leader in High Efficiency Motor & Power Transmission Systems Well-positioned for global energy efficiency trend A Strong Free Cash Flow Generator Five-year average free cash flow 133% of adjusted net income* Positioned to Drive Organic Growth through Innovation Disruptive products for both residential and industrial applications Delivering Results from Ongoing Simplification Initiative Primed for margin improvement and transition to automation We Create a Better Tomorrow by Efficiently Converting Power into Motion * Non-GAAP Financial Measurement, See Appendix for Reconciliation 2018 Regal Beloit Corporation 4

5 Regal Overview Sales by Product Sales by Segment Founded in 1955 with Headquarters in Beloit, Wisconsin 2017 Sales of $3.4B Other Couplings Generators Fans & Blowers Bearings Gearing Small Motors Climate Solutions 28% 50% 22% Power Transmission Solutions 9 Straight Years of Dividend Increases Large Motors Sales by Geography ROW Mexico Europe Commercial & Industrial Systems Production by Geography Europe Strong Brands Associated with High Efficiency Systems Asia Asia Mexico USA & Canada USA & Canada 2018 Regal Beloit Corporation 5

6 Segment End Markets, Products and Brands Commercial & Industrial Systems Climate Solutions Power Transmission Solutions 2018 Regal Beloit Corporation 6

7 Financial Snapshot Net Sales (billions) Adjusted Diluted EPS* $3.3 $3.5 $3.2 $3.4 $4.31 $5.33 $4.44 $ Free Cash Flow* (millions) Dividends Paid Per Share $292 $377 $0.84 $0.90 $0.94 $1.00 $215 $ * Non-GAAP Financial Measurement, See Appendix for Reconciliation 2018 Regal Beloit Corporation 7

8 Consistently Generating Cash (millions) $ % 175% $ % $ % 100% $200 75% $100 50% 25% $ Free Cash Flow* % of Adj. Net Income* 0% Free Cash Flow % of Adj. Net Income 5-Year Average of 133% * Non-GAAP Financial Measurement, See Appendix for Reconciliation 2018 Regal Beloit Corporation 8

9 Returning Cash to Shareholders Dividends Paid Per Share $1.00 $0.90 $0.94 $0.84 $0.62 $0.64 $0.66 $0.70 $0.74 $ Dividend Increase of 8% Announced April 30, Regal Beloit Corporation 9

10 Capital Allocation Priorities Balance Sheet Targets Debt/EBITDA* Ratio: Capital Expenditures: Cash Dividends: 2.5% 3.0% of Sales 20% 24% Payout Ratio Acquisitions Share Repurchase Targeted Transactions to Strengthen the Core and Drive Shareholder Value Opportunistically Repurchase Shares while Maintaining Financial Flexibility Disciplined Approach to Drive Long-Term Shareholder Value * Non-GAAP Financial Measurement, See Appendix for Reconciliation 2018 Regal Beloit Corporation 10

11 Enterprise Strategy CORE CAPABILITIES FOUNDATIONAL PERFORMANCE Unique Culture Top Quartile Cash Generation Strong Operators KEY ELEMENTS Focus on Core Innovate to Grow Simplification Improving Margins Innovative Customer Favored Drives Long Term Growth and Improved Returns 2018 Regal Beloit Corporation 11

12 Enterprise Strategy Performance Targets Organic Sales Growth* Adj. Operating Margins* ROIC* Free Cash Flow to Net Income* 2% 4% CAGR bps bps 100% 125% By 2019 Strategy Drives Sustainable Improvements in Financial Performance * Non-GAAP Financial Measurement, See Appendix for Reconciliation 2018 Regal Beloit Corporation 12

13 Focus on the Core Acquisition First Serial Acquirer to Organic First Targeted Acquisitions Focus On Core Businesses Where We Can Differentiate with Technology Increase the Focus on the Distribution Channel to Drive Growth Selectively Prune Businesses Where We Do Not Have a Clear Advantage or Scale Management Incentivized to Deliver Organic Revenue Growth and Operating Margin Improvement Balanced Capital Deployment Between Share Repurchases and Acquisitions 2018 Regal Beloit Corporation 13

14 Innovate to Grow Energy Efficiency Disruptive Technology Internet of Things Commercial Refrigeration Effective March of 2017 Requires ECM type motor Commercial HVAC Effective July of 2018 Expecting shift to ECM HP Range Year Markets < Furnaces Boilers Appliances Furnaces Air Handlers Efficient motors use electronics Every motor can be a sensor Every motor can communicate Every motor can be programmed Fan Energy Rating (FER) Effective July of 2019 Expecting significant shift to ECM Ind. Fans Pumps Data Analytics Predictive Maintenance 2018 Regal Beloit Corporation 14

15 Energy Efficiency Requirements Increasing Comm. Ref. Equipment Commercial HVAC Fan Energy Rating (FER) IE3 Efficiency Industrial Motors Walk in Coolers & Freezers Multi-Year Trend Favors High Efficiency Suppliers 2018 Regal Beloit Corporation 15

16 Furnace Fan Regulation Impact Industry Units by Motor Type (million units) Fan Energy Rating (FER) New National Furnace Standard Electrical Efficiency Requirement High Eff Standard High Efficiency Motor Mandate 7/1/19 Effective Date Sources: AHRI & Management estimates Significant Industry Mix Shift by Regal Beloit Corporation 16

17 Four Paths To Meet FER Regulation 100% Heat Exchanger 93% Gas Modulation 82% Blower Housing 70% Blower Motor % of Volume 2018 Regal Beloit Corporation 17

18 Full Range of FER Solutions Ensite ECM Motor ECM 3.0+ High Efficiency Motor DEC Star Blower Highest Efficiency Solution Customer Benefits Full Range of Solutions Highest Motor Efficiency with Proven Reliability Premium Solution for Most Difficult Applications Regal Benefits Full Customer Engagement Est. $40-$60 Million Incremental Sales by 2020 Efficiency and Features Best FER Solution Set 2018 Regal Beloit Corporation 18

19 Disruptive Technology DEC Star Blower Standard Blower DEC Star Blower Innovative First to Market New Technology in the Motor, Drive, Blower Construction and Blower Wheel 17 Patents Issued & Pending Benefits Substantial Improvement in Energy Efficiency Less Noise Less Weight Uniform Airflow Helps Meet Difficult FER and SEER Regulations with One Simple Upgrade 2018 Regal Beloit Corporation 19

20 Scaling Axial Technology Axial Draft Inducer Axial Gas Pre-Mix DEC Star Blower HVAC Solution UlteMAX Motor & Control Growth Opportunities in Both Existing and New Markets for Regal 2018 Regal Beloit Corporation 20

21 Disruptive Technology UlteMAX Motor Standard Industrial Motor UlteMAX Motor & Control Customer Benefits Compact Form Factor 50% 75% Lower Weight Higher Efficiency Regal Benefits Significant Customer Interest First Sales in 2017 Est. $70 Million Incremental Sales by 2023 Differentiated Form Factor Delivers Significant Value 2018 Regal Beloit Corporation 21

22 UlteMAX Motor Industrial Applications Standard Air Handling Axial Air Handling Innovative First to Market Revolutionary Form Factor New Technology in the Motor, Drive 8 Patents Issued and Pending Benefits to Customers Substantial Improvement in Energy Efficiency 50% - 75% Less Weight and Size Improving Energy Efficiency with Less Weight and Lower System Cost 2018 Regal Beloit Corporation 22

23 Simplification Completed thru 2016 Planned for ERPs 75% of Sales on One ERP 90% of Sales on One ERP 1,845,000 sq ft Reduced 15% Reduction Manufacturing Footprint Another 1,100,000 sq ft Cumulative 25% Reduction 4 Major Design Platforms Consolidated Design Platforms 1 Additional Design Platform to be Consolidated ~1,400 Suppliers Consolidated Suppliers ~500 More Suppliers to Consolidate Reducing Our Costs and Making it Easy for the Customer 2018 Regal Beloit Corporation 23

24 Leveraging Simplification Rooftop Consolidation Automation 1,845K sq ft consolidated Enables ERP Consolidation Digital Customer Experience 75% revenue on one system Enables Platform Consolidation 4 design platforms eliminated Enables Innovation Energy Efficiency Disruptive Technology Internet of Things 2018 Regal Beloit Corporation 24

25 Nicotra Gebhardt Transaction Overview Closed on Acquisition of Nicotra Gebhardt on April 10, 2018 A Premier Air Moving Business with ~$150 Million in Annual Sales Adds to Regal s Growing Lineup of Energy Efficient Air Moving Systems Integrating into Commercial and Industrial Systems Segment 2018 Regal Beloit Corporation 25

26 Nicotra Gebhardt Product Offering Roof Fan Air Handling Unit Ventilation Unit Packaged Air Conditioning 2018 Regal Beloit Corporation 26

27 Key Takeaways Regal is A Leader in High Efficiency Motor & Power Transmission Systems A Strong Free Cash Flow Generator Positioned to Drive Organic Growth through Innovation Delivering Results from Ongoing Simplification Initiative We Create a Better Tomorrow by Efficiently Converting Power into Motion 2018 Regal Beloit Corporation 27

28 Thank You Mark Gliebe Chairman and Chief Executive Officer Jon Schlemmer Chief Operating Officer Rob Rehard Vice President Chief Financial Officer Robert Cherry Vice President Business Development & Investor Relations 2018 Regal Beloit Corporation

29 Appendix Non-GAAP Reconciliations (Dollars in Millions) FREE CASH FLOW Dec 28, 2013 Jan 3, 2015 Twelve Months Ended Jan 2, 2016 Dec 31, 2016 Dec 30, 2017 Net Cash Provided by Operating Activities $ $ $ $ $ Additions to Property Plant and Equipment (82.7) (83.6) (92.2) (65.2) (65.2) Grants Received for Capital Expenditures Free Cash Flow $ $ $ $ $ (Dollars in Millions) ADJUSTED NET INCOME EXCLUDING ASSET WRITE DOWNS Dec 28, 2013 Jan 3, 2015 Twelve Months Ended Jan 2, 2016 Dec 31, 2016 Dec 30, 2017 GAAP Net Income (Loss) Attributable to Regal Beloit Corporation $ $ 31.0 $ $ $ Goodwill and Asset Impairments and Other, Net Tax Effect from Goodwill and Asset Impairments and Other, Net (6.4) (12.3) (21.8) - - Adjusted Net Income $ $ $ $ $ Free Cash Flow as a Percentage of Adjusted Net Income Excluding Asset Write Downs Attributable to Regal Beloit Corporation 115.1% 120.4% 136.4% 185.4% 106.4% Five Year Average Free Cash Flow to Adjusted Net Income 132.7% 2018 Regal Beloit Corporation 29

30 Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Twelve Months Ended Dec 30, 2017 Dec 31, 2016 GAAP Diluted Earnings Per Share $ 4.74 $ 4.52 Restructuring and Related Costs Gain on Disposal of Businesses - (0.14) Gain on Sale of Assets (0.07) (0.04) Provisional Benefit of the New US Tax Legislation (0.02) - Adjusted Diluted Earnings Per Share $ 4.87 $ Regal Beloit Corporation 30

31 Appendix Non-GAAP Reconciliations TOTAL DEBT/ADJUSTED EBITDA (Dollars in Millions) LTM Dec 30, 2017 Net Income Attributable to Regal Beloit Corporation $ Plus: Minority Interest 5.1 Plus: Taxes 59.1 Plus: Interest Expense 56.1 Less: Interest Income (3.2) Plus: Depreciation and Amortization Plus: Restructuring and Related Costs 14.1 Less: Gain on Sale of Assets (3.9) Less: Gain on Disposal of Business (0.1) Adjusted EBITDA $ Current Maturities of Debt $ Long-Term Debt 1,039.9 Total Debt $ 1,141.1 Total Debt/Adjusted EBITDA Regal Beloit Corporation 31

32 Appendix Non-GAAP Reconciliations ORGANIC SALES GROWTH (Dollars in Millions) Commercial & Industrial Systems Climate Solutions Twelve Months Ended December 30, 2017 Power Transmission Solutions Total Regal Net Sales $ 1,604.3 $ $ $ 3,360.3 Net Sales from Business Divested Impact from Foreign Currency Exchange Rates (2.5) (0.7) (1.6) (4.8) Adjusted Net Sales $ 1,601.8 $ $ $ 3,364.5 Net Sales Twelve Months Ended Dec 31, 2016 $ 1,530.9 $ $ $ 3,224.5 Organic Sales Growth % 4.6 % 3.1 % 5.3 % 4.3 % Net Sales Growth % 4.8 % 3.2 % 4.3 % 4.2 % ADJUSTED OPERATING INCOME (Dollars in Millions) Dec 30, 2017 Commercial & Industrial Systems Dec 31, 2016 Dec 30, 2017 Twelve Months Ended Climate Solutions Dec 31, 2016 Power Transmission Solutions GAAP Income from Operations $ $ $ $ $ 89.5 $ 87.2 $ $ Restructuring and Related Costs Gain on Disposal of Businesses (0.1) (11.6) (0.1) (11.6) Gain on Sale of Assets (1.1) (1.7) - - (2.8) - (3.9) (1.7) Adjusted Income from Operations $ $ $ $ $ 87.3 $ 77.3 $ $ Dec 30, 2017 Dec 31, 2016 Dec 30, 2017 Total Regal Dec 31, 2016 GAAP Operating Margin % 6.2 % 6.8 % 14.2 % 13.5 % 11.7 % 11.9 % 9.8 % 9.9 % Adjusted Operating Margin % 6.8 % 6.8 % 14.4 % 13.8 % 11.4 % 10.5 % 10.1 % 9.7 % 2018 Regal Beloit Corporation 32

33 Appendix Non-GAAP Reconciliations RETURN ON INVESTED CAPITAL (ROIC) Twelve Months Ended (Dollars in Millions) Dec 30, 2017 Dec 31, 2016 Cash and Cash Equivalents $ (139.6) $ (284.5) Current Maturities of Debt $ Long-Term Debt 1, ,310.9 Total Net Debt $ 1,001.5 $ 1,127.0 Total Regal Beloit Corporation Shareholders' Equity $ 2,325.5 $ 2,038.8 Noncontrolling Interests 29.2 $ 39.4 Total Equity $ 2,354.7 $ 2,078.2 Total Invested Capital $ 3,356.2 $ 3,205.2 Average Total Invested Capital $ 3,280.7 $ 3,328.5 Adjusted Income from Operations $ $ Less: Income Tax Provision* 21.7 % 21.4 % Adjusted Income from Operations after Tax $ $ Return on Invested Capital 8.1 % 7.4 % *2017 Tax Rate adjusted for impact of the Tax Cuts and Jobs Act of Regal Beloit Corporation 33

34 Appendix Regal Shipping Days 1Q 2Q 3Q 4Q FY Regal operates on a 52/53 week fiscal year ending on the Saturday closest to December 31 Fiscal Years 2015, 2016, 2017 and 2018 have 52 weeks Fiscal Year 2014 had 53 weeks 2018 Regal Beloit Corporation 34