Regal Beloit Corporation

Transcription

1 Regal Beloit Corporation Investor Relations Presentation August 2017 Mark Gliebe Chairman Chief Executive Officer Chuck Hinrichs Vice President Chief Financial Officer Jon Schlemmer Chief Operating Officer Robert Cherry Vice President Business Development & Investor Relations 2017 Regal Beloit Corporation

2 Safe Harbor Statement August Regal Beloit Corporation 2

3 Non-GAAP Financial Measures August 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 138% 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 August Regal Beloit Corporation 4

5 Regal Overview Sales by Product Sales by Segment Founded in 1955 with Headquarters in Beloit, Wisconsin 2016 Sales of $3.2B Other Couplings Bearings Gearing Drives Generators Fractional HP Motors Power Transmission Solutions 23% 47% 30% Climate Solutions Integral HP Motors Blowers Commercial & Industrial Systems 8 Straight Years of Dividend Increases Sales by Geography ROW Mexico Europe Production by Geography Europe Strong Brands Associated with High Efficiency Systems Asia Asia Mexico USA & Canada USA & Canada August Regal Beloit Corporation 5

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

7 Financial Snapshot Net Sales (billions) Adjusted Diluted EPS* $3.1 $3.3 $3.5 $3.2 $4.36 $4.31 $5.33 $ Free Cash Flow* (millions) $289 $224 $215 $374 Dividends Per Share $0.90 $0.94 $0.84 $ * Non-GAAP Financial Measurement, See Appendix for Reconciliation August 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 138% * Non-GAAP Financial Measurement, See Appendix for Reconciliation August Regal Beloit Corporation 8

9 Returning Cash to Shareholders Dividends Per Share Paid $0.90 $0.94 $0.84 $0.58 $0.62 $0.64 $0.66 $0.70 $0.74 $ Dividend Increase of 8% Announced May 1, 2017 August 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 August 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 August 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 August 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 August 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 August 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 August 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 Efficiency Motor Mandate High Eff Standard 7/1/19 Effective Date Sources: AHRI & Management estimates Significant Industry Mix Shift by 2020 August 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 August 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 August 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 August 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 August 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 Sales Begin in 2017 Est. $70 Million Incremental Sales by 2023 Differentiated Form Factor Delivers Significant Value August 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 August 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 August 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 August Regal Beloit Corporation 24

25 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 August Regal Beloit Corporation 25

26 Thank You Mark Gliebe Chairman Chief Executive Officer Chuck Hinrichs Vice President Chief Financial Officer Jon Schlemmer Chief Operating Officer Robert Cherry Vice President Business Development & Investor Relations 2017 Regal Beloit Corporation

27 Appendix Non-GAAP Reconciliations (Dollars in Millions) FREE CASH FLOW Dec 29, 2012 Dec 28, 2013 Twelve Months Ended Jan 3, 2015 Jan 2, 2016 Dec 31, 2016 Net Cash Provided by Operating Activities $ $ $ $ $ Additions to Property Plant and Equipment (91.0) (82.7) (83.6) (92.2) (65.2) Grants Received for Capital Expenditures Free Cash Flow $ $ $ $ $ (Dollars in Millions) ADJUSTED NET INCOME Dec 29, 2012 Dec 28, 2013 Twelve Months Ended Jan 3, 2015 Jan 2, 2016 Dec 31, 2016 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 Attributable to Regal Beloit Corporation 137.7% 115.1% 120.4% 134.9% 184.1% Five Year Average Free Cash Flow to Adjusted Net Income 138.4% August Regal Beloit Corporation 27

28 Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Twelve Months Ended Dec 31, 2016 Jan 2, 2016 GAAP Diluted Earnings (Loss) Per Share $ 4.52 $ 3.18 Goodwill Impairment Venezuelan Asset Write Down Restructuring and Related Costs Gain on Sale of Assets (0.04) - Gain on Disposal of Real Estate - (0.04) Purchase Accounting and Transaction Costs Venezuelan Currency Devaluation Gain on Disposal of Business (0.14) - Adjusted Diluted Earnings Per Share $ 4.44 $ 5.33 August Regal Beloit Corporation 28

29 Appendix Non-GAAP Reconciliations EBIT AND EBITDA RECONCILIATION (Dollars In Millions) Fiscal 2016 Income From Operations $ Plus: Goodwill Impairment - Plus: Asset Impairment and Other Net, - Plus: Restructuring and Related Costs 6.8 Plus: Purchase Accounting and Transaction Costs - Plus: Venezuelan Asset Write Down - Plus: Venezuelan Currency Devaluation - Plus: Gain on the Sale of Realestate - Plus: Loss (Gain) on Disposal of Business (13.3) Plus: Loss on Divestiture Bankruptcy - Adjusted EBIT $ Adjusted EBIT % of Net Sales 9.7% Plus: Depreciation 93.4 Plus: Amortization 62.0 Adjusted EBITDA $ Adjusted EBITDA % of Net Sales 14.6% Total Debt $ 1,412.0 Total Debt / Adjusted EBITDA 3.0 August Regal Beloit Corporation 29

30 Appendix Non-GAAP Reconciliations ORGANIC GROWTH (Dollars in Millions) Fiscal 2016 Net Sales $ 3,224.5 Net Sales from Businesses Acquired (35.9) Net Sales from Businesses Divested 11.6 Impact from Foreign Currency Exchange Rates 31.2 Adjusted Net Sales $ 3,231.4 Net Sales Ended Jan 2, 2016 $ 3,509.7 Organic Growth % (7.9)% Net Sales Growth % (8.1)% August Regal Beloit Corporation 30

31 Appendix Non-GAAP Reconciliations RETURN ON INVESTED CAPITAL (ROIC) RECONCILIATION (Data in Millions) Fiscal 2015 Fiscal 2016 Cash $ (253) $ (285) Current Maturities of Long Term Debt Long Term Debt 1,716 1,311 Total Net Debt $ 1,469 $ 1,127 Total Regal Beloit Corporation Shareholders' Equity 1,937 2,039 Noncontrolling Interests Total Equity $ 1,983 $ 2,078 Total Ending Invested Capital $ 3,452 $ 3,205 Average Total Invested Capital $ 3,329 Adjusted Operating Profit* 314 Less Income Tax 23% 23.0% Adjusted NOPAT $ 242 Return on Invested Capital 7.3% * Non-GAAP Financial Measurement, See Appendix for Reconciliation. August Regal Beloit Corporation 31

32 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 and 2017 have 52 weeks Fiscal Year 2014 had 53 weeks August Regal Beloit Corporation 32