8-K
REGAL REXNORD CORP (RRX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K
_______________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 3, 2021
_______________________
Regal Beloit Corporation
(Exact name of registrant as specified in its charter)
| Wisconsin | 1-7283 | 39-0875718 |
|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
200 State Street, Beloit, Wisconsin 53511-6254
(Address of Principal Executive Offices, Including Zip Code)
Registrant's Telephone Number: (608) 364-8800
_______________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
_______________________
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock | RBC | New York Stock Exchange |
Item 2.02 Results of Operations and Financial Condition.
On May 3, 2021, Regal Beloit Corporation (the "Company") issued a news release reporting the financial results of the Company for its first quarter ended April 3, 2021. A copy of the Company's news release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 7.01 Regulation FD Disclosure.
The Company will hold a conference call at 9:00 a.m. CT on May 4, 2021 to discuss its financial results for its first quarter ended April 3, 2021 and will provide a presentation in connection therewith. A copy of the Company's conference call presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(a) Not Applicable
(b) Not Applicable
(c) Not Applicable
(d) Exhibits. The following exhibits are being furnished herewith:
Exhibit Index
| Exhibit Number | Exhibit Description |
|---|---|
| 99.1 | News Release of Regal Beloit Corporation datedMaya1q2021earningsannouncement.htm3, 2021. |
| 99.2 | Regal Beloit Corporation Presentation ofMay 4, 2021. |
| 104.1 | Cover Page Interactive Data File (the Cover Page Interactive Data File is embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
REGAL BELOIT CORPORATION
Date: May 4, 2020 By: /s/ Thomas E. Valentyn
Thomas E. Valentyn
Vice President, General Counsel and Secretary
Document
FOR RELEASE ON: May 3, 2021
CONTACT: Robert Barry, VP - Investor Relations
608-361-7530
robert.barry@regalbeloit.com
Regal Beloit Corporation Announces Record First Quarter 2021 Financial Results
•Sales Growth Accelerates, Up 10.9% Versus PY and Up 9.1% on an Organic Basis
•Record Adjusted Operating Margin of 13.9% Up 310 bps versus PY (GAAP Operating Margin 11.9%)
•Record Adjusted Diluted EPS of $1.98 Up Over 50% versus PY (GAAP Diluted EPS of $1.60)
•Raised Quarterly Dividend in April by 10% to $0.33
•Daily Orders Up 17% in 1Q and Up Almost 90% in April versus PY
•Net Debt to Adjusted EBITDA of 0.9x
•Announced Transformational Merger with Rexnord's PMC Business; On Track to Close in 4Q 2021
BELOIT, WI - Regal Beloit Corporation (NYSE: RBC), a global leader in the engineering and manufacturing of power transmission solutions and high-efficiency electric motors and systems, reported first quarter 2021 diluted earnings per share of $1.60 compared to $1.12 a year ago, up 43%. First quarter 2021 adjusted diluted earnings per share was a record $1.98 compared to $1.31 a year ago, up 51%.
Key financial results for the first quarter 2021 included:
•Total net sales of $814.1 million increased 10.9% from the prior year. Excluding the positive impacts of 1.8% from foreign currency, sales increased 9.1% on an organic basis.
•Income from operations was $97.1 million or 11.9% of net sales, up 240 bps versus prior year. Adjusted income from operations rose $33.9 million or 42.8% from a year ago, to $113.1 million. Adjusted operating margin of 13.9% - a record quarterly result for Regal - was up 310 basis points versus the prior year’s 10.8%.
•Net cash provided by operating activities was $49.5 million and capital expenditures totaled $10.7 million, resulting in free cash flow of $38.8 million, which is 59.1% of adjusted net income.
First quarter 2021 segment results versus the prior year first quarter:
•Commercial Systems segment net sales were $237.0 million, an increase of 18.9%. Foreign currency had a positive 2.9% impact. The result was a positive organic sales growth rate of 15.9%, driven by strong growth in China and Asia Pacific, gains in the global commercial HVAC business, and continued solid growth in the pool pump market. Operating margin was 11.6%. After net adjustments of $0.2 million, adjusted operating margin was 11.7% of adjusted net sales.
•Industrial Systems segment net sales were $136.4 million, an increase of 5.2%. Foreign currency had a positive 3.7% impact. The result was a positive organic sales growth rate of 1.5%, driven by strength in China, strong demand in India and continued healthy growth in the data center market. Somewhat offsetting these tailwinds were persistent, albeit diminishing, pressures on later cycle N.A. general industrial end markets, combined with ongoing proactive account pruning. Operating margin was 2.7%. After net adjustments of $0.4 million, adjusted operating margin was 3.0% of adjusted net sales.
•Climate Solutions segment net sales were $239.1 million, an increase of 13.8%. Foreign currency had a negative 0.2% impact. The result was a positive organic sales growth rate of 14.0%, driven primarily by continued strong demand in N.A. residential HVAC markets, and recovering demand in EMEA, N.A. general industrial markets and the commercial refrigeration business. Notably, orders in the N.A. HVAC business were up 21% in the first quarter on a daily basis, boosted by re-stocking activity, healthy underlying end
*This earnings release includes non-GAAP financial measures. Descriptions of why we believe these non-GAAP measures are useful and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included with this earnings release.
market demand and weather. Operating margin was 18.1%. After net adjustments of $0.3 million, adjusted operating margin was 18.2% of adjusted net sales.
•Power Transmission Solutions segment net sales were $201.6 million, an increase of 3.3%. Foreign currency had a positive 1.5% impact. The result was a positive organic sales growth rate of 1.8% driven by project wins in the aerospace end market, strength in the conveying business, healthy growth in China and recovering shorter cycle N.A. general industrial end markets. Partially offsetting these tailwinds were project timing in the still-healthy solar market, and continued, though moderating, declines in oil & gas end markets. Operating margin was 11.2%. After net adjustments of $15.1 million, adjusted operating margin was a record 18.7% of adjusted net sales.
Summarizing Regal’s first quarter 2021 performance, CEO Louis Pinkham commented, “Regal delivered a very strong first quarter that solidly beat our internal expectations, with sales growth accelerating into the double digits and adjusted operating margin expanding over 300 basis points versus prior year to a record level, resulting in adjusted earnings per share growth above 50%. Our Regal team is executing at a high level, and all segments are contributing to our strong performance, aided by recovering industrial end markets, particularly in China, continued strong momentum in the HVAC, pool and data center markets, as well as pockets of share gain across the business. We also announced a transformational merger with Rexnord’s PMC business, which will allow Regal to deliver unmatched capabilities across the industrial drive train, and remains on track to close in the fourth quarter of 2021.”
Mr. Pinkham went on to comment, “We raised our dividend by 10% in April and as I contemplate the remainder of 2021, I am optimistic about our performance, perhaps most notably on the top line, given solid recent order momentum. While we are clearly facing commodity inflation, all of our segments continue to execute outgrowth and margin enhancement initiatives, guided by an 80/20 mindset and, increasingly, by using lean tools to remove waste, overburden and variance from all processes. Finally, recently refining our business purpose – To Create a Better Tomorrow by Energy-Efficiently Converting Power into Motion – with the subtle but meaningful addition of ‘Energy' signals our commitment to be more intentional about leveraging Regal’s differentiated engineering capabilities to meet growing demand for more energy-efficient products, and do our part to help the environment.”
2021 Guidance
The Company is providing guidance for the second quarter of 2021, including sales growth rates in the high-20’s, GAAP diluted earnings per share in a range of $1.50 to $1.70, and adjusted diluted EPS in a range of $1.85 to $2.05. The mid-point of the adjusted diluted EPS range implies over 100% growth versus the prior year.
The Company’s guidance assumes no material decline in its production capacity, or in its ability to conduct commercial operations, either from COVID-related disruptions, or other factors, including supply chain disruptions, versus levels as of the date of this release.
The Company's guidance does not take into account any costs, expenses or other effects of the transaction with respect to Rexnord's Process & Motion Control (PMC) business.
A reconciliation of the Company’s GAAP EPS guidance to its adjusted EPS guidance is included in a table later in this release.
Conference Call
Regal will hold a conference call to discuss this earnings release at 9:00 AM CT (10:00 AM ET) on Tuesday, May 4, 2021. To listen to the live audio and view the presentation during the call, please visit Regal’s Investors website: https://investors.regalbeloit.com. To listen by phone or to ask the presenters a question, dial 1.888.317.6003 (U.S. callers) or +1.412.317.6061 (international callers) and enter 1308781# when prompted.
A webcast replay will be available at the link above, and a telephone replay will be available at 1.877.344.7529 (U.S. callers) or +1.412.317.0088 (international callers), using a replay access code of 10154967#. Both will be accessible for three months after the earnings call.
Investor Conference Participation
Regal management will be participating in the following investor conferences during the second quarter of 2021 – the Oppenheimer 16th Annual Industrial Growth Conference on May 5th, the Goldman Sachs Industrials & Materials Conference on May 11th and the KeyBanc Industrials and Basic Materials Conference on June 1st. All conference participation will be virtual.
About the Company
Regal Beloit Corporation (NYSE: RBC) is a global leader in the engineering and manufacturing of electric motors and controls, power generation and power transmission products serving customers throughout the world. Our purpose is to create a better tomorrow by energy-efficiently converting power into motion.
The Company is comprised of four operating segments: Commercial Systems, Industrial Systems, Climate Solutions and Power Transmission Solutions. Regal is headquartered in Beloit, Wisconsin and has manufacturing, sales and service facilities worldwide. For more information, visit RegalBeloit.com.
CAUTIONARY STATEMENT
Certain statements made in this release are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. This release contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company’s current estimates, expectations and projections about the Company’s future results, performance, prospects and opportunities. Such forward-looking statements may include, among other things, statements about the Company’s future operations, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competition and other expectations and estimates for future periods. Forward-looking statements may also include statements relating to the proposed acquisition of Rexnord Corporation's (“Rexnord”) Process & Motion Control business (the “PMC Business”) (the “Rexnord Transaction”), the benefits and synergies of the Rexnord Transaction, future opportunities for the Company, the PMC Business and the combined company, and any other statements regarding the Rexnord Transaction or the combined company. Forward-looking statements include statements that are not historical facts and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “plan,” “may,” “should,” “will,” “would,” “project,” “forecast,” and similar expressions. These forward-looking statements are based upon information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause the performance, prospects, or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Important factors that could cause actual results to differ materially from the results referred to in the forward-looking statements the Company makes in this report include:
Operations and Strategy
•the continued financial and operational impacts of and uncertainties relating to the COVID-19 pandemic on customers and suppliers and the geographies in which they operate;
•uncertainties regarding the ability to execute restructuring plans within expected costs and timing;
•our ability to develop new products based on technological innovation, such as the Internet of Things ("IoT"), and marketplace acceptance of new and existing products, including products related to technology not yet adopted or utilized in certain geographic locations in which we do business;
•fluctuations in commodity prices and raw material costs;
•our dependence on significant customers;
•effects on earnings of any significant impairment of goodwill or intangible assets;
•prolonged declines or disruption in one or more markets we serve, such as heating, ventilation, air conditioning ("HVAC"), refrigeration, power generation, oil and gas, unit material handling or water heating;
•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;
•our overall debt levels and our ability to repay principal and interest on our outstanding debt, including debt assumed or incurred in connection with the Rexnord Transaction;
•our dependence on key suppliers and the potential effects of supply disruptions;
•seasonal impact on sales of our products into HVAC systems and other residential applications;
Global Footprint
•actions taken by our competitors and our ability to effectively compete in the increasingly competitive global electric motor and controls, power generation and power transmission industries;
•risks associated with global manufacturing, including risks associated with public health crises;
•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, tariffs, immigration, customs, border actions and the like, and other external factors that we cannot control;
Legal and Regulatory Environment
•unanticipated costs or expenses we may incur related to litigation, including product warranty issues;
•infringement of our intellectual property by third parties, challenges to our intellectual property and claims of infringement by us of third party technologies;
•losses from failures, breaches, attacks or disclosures involving our information technology infrastructure and data;
Mergers, Acquisitions and Divestitures
•the possibility that the conditions will not be satisfied or the approvals will not be obtained required to complete the Rexnord Transaction, including shareholder or regulatory approvals, and the possibility that the IRS ruling sought in connection with the Rexnord Transaction will not be received on the terms requested, or at all;
•changes in the extent and characteristics of the common shareholders of Rexnord and the Company and its effect pursuant to the merger agreement for the Rexnord Transaction on the number of shares of Company common stock issuable pursuant to the transaction, magnitude of the dividend payable to Company shareholders pursuant to the transaction and the extent of indebtedness to be incurred by the Company in connection with the transaction;
•failure to successfully integrate the PMC Business and any other future acquisitions into our business or achieve expected synergies and operating efficiencies, due to factors such as the future financial and operating performance of the acquired business, loss of key executives and employees, and operating costs, customer loss and business disruption being greater than expected;
•costs and indemnification obligations related to the Rexnord Transaction;
•unanticipated liabilities of acquired businesses, including the PMC Business;
•operating restrictions related to the Rexnord Transaction;
•unanticipated adverse effects or liabilities from business exits or divestitures;
General
•changes in the method of determining London Interbank Offered Rate ("LIBOR"), or the replacement of LIBOR with an alternative reference rate;
•cyclical downturns affecting the global market for capital goods;
•and other risks and uncertainties including, but not limited, to those described in "Part I - Item 1A - Risk Factors" in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on March 2, 2021 and from time to time in other filed reports.
Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this release are made only as of the date of this release, and the Company undertakes no obligation to update any forward-looking information contained in this release or with respect to the announcements described herein to reflect subsequent events or circumstances. Additional information regarding these and other risks and uncertainties is included in "Part I - Item 1A - Risk Factors" in our Annual Report on Form 10-K filed with the SEC on March 2, 2021 and from time to time in other filed reports, including the Company's Quarterly Reports on Form 10-Q.
NON-GAAP MEASURES AND OTHER DEFINITIONS
Unaudited
(Dollars in Millions, Except per Share Data)
We prepare financial statements in accordance with accounting principles generally accepted in the United States of America (“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 earnings release, 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 margin, adjusted net sales, net debt, adjusted EBITDA, adjusted operating leverage, adjusted net income attributable to Regal Beloit Corporation, free cash flow, free cash flow as a percentage of adjusted net income attributable to Regal Beloit Corporation, adjusted income before taxes, adjusted provision for income taxes, adjusted effective tax rate, net sales from ongoing business, adjusted income from operations of ongoing business, ongoing business adjusted operating margin and adjusted diluted earnings per share for ongoing business. 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, adjusted operating margin, and adjusted operating leverage to help us manage and evaluate our business and make operating decisions, while adjusted diluted earnings per share, net debt, adjusted EBITDA, adjusted net sales, adjusted net income attributable to Regal Beloit Corporation, free cash flow, free cash flow as a percentage of adjusted net income attributable to Regal Beloit Corporation, adjusted income before taxes, adjusted provision for income taxes, adjusted effective tax rate, net sales from ongoing business, adjusted income from operations of ongoing business, ongoing business adjusted operating margin and adjusted diluted earnings per share for ongoing business 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 any sales from acquired businesses recorded prior to the first anniversary of the acquisition (“net sales from business acquired") and excluding any sales from business divested/to be exited (“net sales from business divested/to be exited“) recorded prior to the first anniversary of the exit and excluding the impact of foreign currency translation. The impact of foreign currency translation is determined by translating the respective period’s organic sales using the 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.
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Unaudited | ||||||||||||||||||||||||||||||
| (Dollars in Millions, Except per Share Data) | ||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||
| Apr 3,<br>2021 | Mar 28,<br>2020 | |||||||||||||||||||||||||||||
| Net Sales | $ | 814.1 | $ | 734.2 | ||||||||||||||||||||||||||
| Cost of Sales | 568.7 | 530.9 | ||||||||||||||||||||||||||||
| Gross Profit | 245.4 | 203.3 | ||||||||||||||||||||||||||||
| Operating Expenses | 148.3 | 131.8 | ||||||||||||||||||||||||||||
| Asset Impairments | — | 1.5 | ||||||||||||||||||||||||||||
| Total Operating Expenses | 148.3 | 133.3 | ||||||||||||||||||||||||||||
| Income from Operations | 97.1 | 70.0 | ||||||||||||||||||||||||||||
| Other Income, Net | (1.2) | (1.1) | ||||||||||||||||||||||||||||
| Interest Expense | 12.6 | 11.6 | ||||||||||||||||||||||||||||
| Interest Income | 1.5 | 1.1 | ||||||||||||||||||||||||||||
| Income before Taxes | 87.2 | 60.6 | ||||||||||||||||||||||||||||
| Provision for Income Taxes | 20.2 | 13.9 | ||||||||||||||||||||||||||||
| Net Income | 67.0 | 46.7 | ||||||||||||||||||||||||||||
| Less: Net Income Attributable to Noncontrolling Interests | 1.4 | 0.9 | ||||||||||||||||||||||||||||
| Net Income Attributable to Regal Beloit Corporation | $ | 65.6 | $ | 45.8 | ||||||||||||||||||||||||||
| Earnings Per Share Attributable to Regal Beloit Corporation: | ||||||||||||||||||||||||||||||
| Basic | $ | 1.62 | $ | 1.13 | ||||||||||||||||||||||||||
| Assuming Dilution | $ | 1.60 | $ | 1.12 | ||||||||||||||||||||||||||
| Cash Dividends Declared Per Share | $ | 0.30 | $ | 0.30 | ||||||||||||||||||||||||||
| Weighted Average Number of Shares Outstanding: | ||||||||||||||||||||||||||||||
| Basic | 40.6 | 40.6 | ||||||||||||||||||||||||||||
| Assuming Dilution | 41.0 | 40.8 | ||||||||||||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | ||||||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||||||||||
| (Dollars in Millions) | ||||||||||||||||||||||||||||||
| Apr 3, 2021 | Jan 2, 2021 | |||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||
| Current Assets: | ||||||||||||||||||||||||||||||
| Cash and Cash Equivalents | $ | 566.4 | $ | 611.3 | ||||||||||||||||||||||||||
| Trade Receivables, less Allowances<br><br>of $18.8 million in 2021 and $18.3 million in 2020 | 483.9 | 432.0 | ||||||||||||||||||||||||||||
| Inventories | 722.2 | 690.3 | ||||||||||||||||||||||||||||
| Prepaid Expenses and Other Current Assets | 153.9 | 117.7 | ||||||||||||||||||||||||||||
| Total Current Assets | 1,926.4 | 1,851.3 | ||||||||||||||||||||||||||||
| Net Property, Plant, Equipment and Noncurrent Assets | 2,700.8 | 2,737.7 | ||||||||||||||||||||||||||||
| Total Assets | $ | 4,627.2 | $ | 4,589.0 | ||||||||||||||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||||||||||||||||||
| Current Liabilities: | ||||||||||||||||||||||||||||||
| Accounts Payable | $ | 412.3 | $ | 360.1 | ||||||||||||||||||||||||||
| Other Accrued Expenses | 227.9 | 230.9 | ||||||||||||||||||||||||||||
| Current Maturities of Debt | 230.8 | 231.0 | ||||||||||||||||||||||||||||
| Total Current Liabilities | 871.0 | 822.0 | ||||||||||||||||||||||||||||
| Long-Term Debt | 786.9 | 840.4 | ||||||||||||||||||||||||||||
| Other Noncurrent Liabilities | 351.5 | 349.6 | ||||||||||||||||||||||||||||
| Equity: | ||||||||||||||||||||||||||||||
| Total Regal Beloit Corporation Shareholders' Equity | 2,584.1 | 2,544.4 | ||||||||||||||||||||||||||||
| Noncontrolling Interests | 33.7 | 32.6 | ||||||||||||||||||||||||||||
| Total Equity | 2,617.8 | 2,577.0 | ||||||||||||||||||||||||||||
| Total Liabilities and Equity | $ | 4,627.2 | $ | 4,589.0 | ||||||||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | ||||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | ||||||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||||||||||
| (Dollars in Millions) | ||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||
| Apr 3, 2021 | Mar 28, 2020 | |||||||||||||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||||||||
| Net Income | $ | 67.0 | $ | 46.7 | ||||||||||||||||||||||||||
| Adjustments to Reconcile Net Income and Changes in Assets and Liabilities (Net of Acquisitions and Divestitures) to Net Cash Provided by Operating Activities: | ||||||||||||||||||||||||||||||
| Depreciation and Amortization | 31.8 | 32.6 | ||||||||||||||||||||||||||||
| Loss on Disposal of Assets | 0.6 | 0.7 | ||||||||||||||||||||||||||||
| Loss on Businesses Divested and Assets to be Exited | — | 1.4 | ||||||||||||||||||||||||||||
| Share-Based Compensation Expense | 3.3 | 2.7 | ||||||||||||||||||||||||||||
| Change in Operating Assets and Liabilities | (53.2) | 18.6 | ||||||||||||||||||||||||||||
| Net Cash Provided by Operating Activities | 49.5 | 102.7 | ||||||||||||||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||||||||
| Additions to Property, Plant and Equipment | (10.7) | (10.9) | ||||||||||||||||||||||||||||
| Proceeds Received from Sales of Property, Plant and Equipment | 0.9 | 2.7 | ||||||||||||||||||||||||||||
| Business Acquisitions, Net of Cash Acquired | (1.9) | — | ||||||||||||||||||||||||||||
| Proceeds Received from Disposal of Businesses | — | 0.3 | ||||||||||||||||||||||||||||
| Net Cash Used in Investing Activities | (11.7) | (7.9) | ||||||||||||||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||||||||
| Net Borrowings Under Revolving Credit Facility | — | 227.1 | ||||||||||||||||||||||||||||
| Net Repayments of Short-Term Borrowings | (0.2) | — | ||||||||||||||||||||||||||||
| Repayments of Long-Term Debt | (50.1) | (0.1) | ||||||||||||||||||||||||||||
| Dividends Paid to Shareholders | (12.2) | (12.2) | ||||||||||||||||||||||||||||
| Proceeds from the Exercise of Stock Options | 0.1 | — | ||||||||||||||||||||||||||||
| Repurchase of Common Stock | — | (25.0) | ||||||||||||||||||||||||||||
| Shares Surrendered for Taxes | (1.9) | (1.1) | ||||||||||||||||||||||||||||
| Financing Fees Paid | (12.4) | — | ||||||||||||||||||||||||||||
| Net Cash (Used in) Provided by Financing Activities | (76.7) | 188.7 | ||||||||||||||||||||||||||||
| EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | (6.0) | (10.4) | ||||||||||||||||||||||||||||
| Net (Decrease) Increase in Cash and Cash Equivalents | (44.9) | 273.1 | ||||||||||||||||||||||||||||
| Cash and Cash Equivalents at Beginning of Period | 611.3 | 331.4 | ||||||||||||||||||||||||||||
| Cash and Cash Equivalents at End of Period | $ | 566.4 | $ | 604.5 | ||||||||||||||||||||||||||
| SEGMENT INFORMATION | ||||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Unaudited | ||||||||||||||||||||||||||||||
| (Dollars in Millions) | ||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||
| Commercial Systems | Industrial Systems | Climate Solutions | Power Transmission Solutions | Total Regal | ||||||||||||||||||||||||||
| Apr 3,<br>2021 | Mar 28,<br>2020 | Apr 3,<br>2021 | Mar 28,<br>2020 | Apr 3,<br>2021 | Mar 28,<br>2020 | Apr 3,<br>2021 | Mar 28,<br>2020 | Apr 3,<br>2021 | Mar 28,<br>2020 | |||||||||||||||||||||
| Net Sales | $ | 237.0 | $ | 199.4 | $ | 136.4 | $ | 129.6 | $ | 239.1 | $ | 210.1 | $ | 201.6 | $ | 195.1 | $ | 814.1 | $ | 734.2 | ||||||||||
| Adjusted Net Sales* | $ | 237.0 | $ | 199.4 | $ | 136.4 | $ | 129.6 | $ | 239.1 | $ | 210.1 | $ | 201.6 | $ | 195.1 | $ | 814.1 | $ | 734.2 | ||||||||||
| GAAP Operating Margin | 11.6 | % | 6.1 | % | 2.7 | % | (0.1) | % | 18.1 | % | 14.0 | % | 11.2 | % | 14.6 | % | 11.9 | % | 9.5 | % | ||||||||||
| Adjusted Operating Margin* | 11.7 | % | 7.6 | % | 3.0 | % | 1.1 | % | 18.2 | % | 15.2 | % | 18.7 | % | 15.7 | % | 13.9 | % | 10.8 | % | ||||||||||
| Components of Net Sales: | ||||||||||||||||||||||||||||||
| Organic Sales Growth* | 15.9 | % | (12.5) | % | 1.5 | % | (4.5) | % | 14.0 | % | (14.8) | % | 1.8 | % | (4.2) | % | 9.1 | % | (9.8) | % | ||||||||||
| Businesses Divested/to be Exited | — | % | (4.5) | % | — | % | — | % | — | % | (5.0) | % | — | % | (2.5) | % | — | % | (3.5) | % | ||||||||||
| Foreign Currency Impact | 2.9 | % | (0.7) | % | 3.7 | % | (1.7) | % | (0.2) | % | (0.4) | % | 1.5 | % | (0.5) | % | 1.8 | % | (0.7) | % | ||||||||||
| ADJUSTED DILUTED EARNINGS PER SHARE | Three Months Ended | |||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | ||||||||||||||||||||||||||
| Apr 3,<br>2021 | Mar 28,<br>2020 | |||||||||||||||||||||||||||||
| GAAP Diluted Earnings Per Share | $ | 1.60 | $ | 1.12 | ||||||||||||||||||||||||||
| Restructuring and Related Costs | 0.03 | 0.10 | ||||||||||||||||||||||||||||
| Loss on Businesses Divested and Assets to be Exited | — | 0.03 | ||||||||||||||||||||||||||||
| Net Loss from Businesses Divested/to be Exited | — | 0.01 | ||||||||||||||||||||||||||||
| Executive Transition Costs | — | 0.05 | ||||||||||||||||||||||||||||
| Transaction Costs | 0.36 | — | ||||||||||||||||||||||||||||
| Gain on Sale of Assets | (0.01) | — | ||||||||||||||||||||||||||||
| Adjusted Diluted Earnings Per Share | $ | 1.98 | $ | 1.31 | 2021 ADJUSTED SECOND QUARTER GUIDANCE | Minimum | Maximum | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | ||||||||||||||||||||||||||
| 2021 Diluted EPS Second Quarter Guidance | $ | 1.50 | $ | 1.70 | ||||||||||||||||||||||||||
| Restructuring and Related Costs | 0.11 | 0.11 | ||||||||||||||||||||||||||||
| Transaction and Related Costs | 0.24 | 0.24 | ||||||||||||||||||||||||||||
| 2021 Adjusted Diluted EPS Second Quarter Guidance | $ | 1.85 | $ | 2.05 | ||||||||||||||||||||||||||
| ADJUSTED INCOME FROM OPERATIONS | ||||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||
| Commercial Systems | Industrial Systems | Climate Solutions | Power Transmission Solutions | Total Regal | ||||||||||||||||||||||||||
| Apr 3,<br>2021 | Mar 28,<br>2020 | Apr 3,<br>2021 | Mar 28,<br>2020 | Apr 3,<br>2021 | Mar 28,<br>2020 | Apr 3,<br>2021 | Mar 28,<br>2020 | Apr 3,<br>2021 | Mar 28,<br>2020 | |||||||||||||||||||||
| GAAP Income (Loss) from Operations | $ | 27.5 | $ | 12.1 | $ | 3.7 | $ | (0.1) | $ | 43.3 | $ | 29.5 | $ | 22.6 | $ | 28.5 | $ | 97.1 | $ | 70.0 | ||||||||||
| Restructuring and Related Costs | 0.2 | 1.8 | 0.5 | 0.9 | 0.3 | 1.1 | 0.7 | 1.8 | 1.7 | 5.6 | ||||||||||||||||||||
| Transaction Costs | — | — | — | — | — | — | 14.7 | — | 14.7 | — | ||||||||||||||||||||
| Loss on Businesses Divested and Assets to be Exited | — | 0.7 | — | 0.2 | — | 0.5 | — | — | — | 1.4 | ||||||||||||||||||||
| Gain on Sale of Assets | — | — | (0.1) | — | — | — | (0.3) | — | (0.4) | — | ||||||||||||||||||||
| Operating Loss from Businesses Divested/to be Exited | — | — | — | — | — | 0.4 | — | — | — | 0.4 | ||||||||||||||||||||
| Executive Transition Costs | — | 0.5 | — | 0.4 | — | 0.5 | — | 0.4 | — | 1.8 | ||||||||||||||||||||
| Adjusted Income from Operations | $ | 27.7 | $ | 15.1 | $ | 4.1 | $ | 1.4 | $ | 43.6 | $ | 32.0 | $ | 37.7 | $ | 30.7 | $ | 113.1 | $ | 79.2 | ||||||||||
| GAAP Operating Margin % | 11.6% | 6.1% | 2.7% | (0.1)% | 18.1% | 14.0% | 11.2% | 14.6% | 11.9% | 9.5% | ||||||||||||||||||||
| Adjusted Operating Margin % | 11.7% | 7.6% | 3.0% | 1.1% | 18.2% | 15.2% | 18.7% | 15.7% | 13.9% | 10.8% | ||||||||||||||||||||
| DEBT TO EBITDA | Last Twelve Months | |||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | ||||||||||||||||||||||||||
| Apr 3, 2021 | Jan 2, 2021 | |||||||||||||||||||||||||||||
| Net Income | $ | 214.1 | $ | 193.8 | ||||||||||||||||||||||||||
| Interest Expense | 40.8 | 39.8 | ||||||||||||||||||||||||||||
| Interest Income | (6.3) | (5.9) | ||||||||||||||||||||||||||||
| Taxes | 63.1 | 56.8 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 130.6 | 131.4 | ||||||||||||||||||||||||||||
| EBITDA | $ | 442.3 | $ | 415.9 | ||||||||||||||||||||||||||
| Restructuring and Related Costs | 32.9 | 36.8 | ||||||||||||||||||||||||||||
| Transactions Costs | 15.4 | 0.7 | ||||||||||||||||||||||||||||
| Impairment and Exit Related Costs | 3.8 | 5.3 | ||||||||||||||||||||||||||||
| Executive Transition Costs | — | 1.8 | ||||||||||||||||||||||||||||
| Goodwill Impairment | 10.5 | 10.5 | ||||||||||||||||||||||||||||
| Operating Loss from Businesses Divested/to be Exited | — | 0.4 | ||||||||||||||||||||||||||||
| Loss on Sale of Assets | 0.2 | 0.6 | ||||||||||||||||||||||||||||
| Gain on Divestiture of Businesses | — | (0.1) | ||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 505.1 | $ | 471.9 | ||||||||||||||||||||||||||
| Current Maturities of Long-Term Debt | $ | 230.8 | $ | 231.0 | ||||||||||||||||||||||||||
| Long-Term Debt | 786.9 | 840.4 | ||||||||||||||||||||||||||||
| Total Gross Debt | $ | 1,017.7 | $ | 1,071.4 | ||||||||||||||||||||||||||
| Cash | (566.4) | (611.3) | ||||||||||||||||||||||||||||
| Net Debt | $ | 451.3 | $ | 460.1 | ||||||||||||||||||||||||||
| Gross Debt/EBITDA | 2.3 | 2.6 | ||||||||||||||||||||||||||||
| Gross Debt/Adjusted EBITDA | 2.0 | 2.3 | ||||||||||||||||||||||||||||
| Net Debt/EBITDA | 1.0 | 1.1 | ||||||||||||||||||||||||||||
| Net Debt/Adjusted EBITDA | 0.9 | 1.0 | ||||||||||||||||||||||||||||
| FREE CASH FLOW | Three Months Ended | |||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||||||||||||||||||
| Apr 3,<br>2021 | Mar 28,<br>2020 | |||||||||||||||||||||||||||||
| Net Cash Provided by Operating Activities | $ | 49.5 | $ | 102.7 | ||||||||||||||||||||||||||
| Additions to Property Plant and Equipment | (10.7) | (10.9) | ||||||||||||||||||||||||||||
| Free Cash Flow | $ | 38.8 | $ | 91.8 | ||||||||||||||||||||||||||
| GAAP Net Income Attributable to Regal Beloit Corporation | $ | 65.6 | $ | 45.8 | ||||||||||||||||||||||||||
| Loss on Businesses Divested and Impairments | — | 1.4 | ||||||||||||||||||||||||||||
| Tax Effect from Loss on Businesses Divested and Impairments | — | (0.3) | ||||||||||||||||||||||||||||
| Adjusted Net Income Attributable to Regal Beloit Corporation1 | $ | 65.6 | $ | 46.9 | ||||||||||||||||||||||||||
| Free Cash Flow as a Percentage of Adjusted Net Income Attributable to Regal Beloit Corporation | 59.1 | % | 195.7 | % | ||||||||||||||||||||||||||
| 1 The Net Income Attributable to Regal Beloit Corporation is adjusted for the gains and losses on divested businesses and goodwill and asset impairments related to the businesses to be exited and used in the Free Cash Flow Calculation. | ||||||||||||||||||||||||||||||
| ADJUSTED EFFECTIVE TAX RATE | Three Months Ended | |||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||||||||||||||||||
| Apr 3,<br>2021 | Mar 28,<br>2020 | |||||||||||||||||||||||||||||
| Income before Taxes | $ | 87.2 | $ | 60.6 | ||||||||||||||||||||||||||
| Provision for Income Taxes | 20.2 | 13.9 | ||||||||||||||||||||||||||||
| Effective Tax Rate | 23.2 | % | 22.9 | % | ||||||||||||||||||||||||||
| Income before Taxes | $ | 87.2 | $ | 60.6 | ||||||||||||||||||||||||||
| Loss on Businesses Divested and Assets to be Exited | — | 1.4 | ||||||||||||||||||||||||||||
| Adjusted Income before Taxes | $ | 87.2 | $ | 62.0 | ||||||||||||||||||||||||||
| Provision for Income Taxes | $ | 20.2 | $ | 13.9 | ||||||||||||||||||||||||||
| Tax Effect from Loss on Businesses Divested and Assets to be Exited | — | 0.3 | ||||||||||||||||||||||||||||
| Non-deductible Portion of Executive Transition Costs | — | (0.5) | ||||||||||||||||||||||||||||
| Adjusted Provision for Income Taxes | $ | 20.2 | $ | 13.7 | ||||||||||||||||||||||||||
| Adjusted Effective Tax Rate | 23.2 | % | 22.1 | % | ||||||||||||||||||||||||||
| ORGANIC SALES GROWTH | Three Months Ended | |||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||||||||||
| April 3, 2021 | ||||||||||||||||||||||||||||||
| Commercial Systems | Industrial Systems | Climate Solutions | Power Transmission Solutions | Total Regal | ||||||||||||||||||||||||||
| Net Sales Three Months Ended Apr 3, 2021 | $ | 237.0 | $ | 136.4 | $ | 239.1 | $ | 201.6 | $ | 814.1 | ||||||||||||||||||||
| Impact from Foreign Currency Exchange Rates | (5.8) | (4.8) | 0.4 | (2.9) | (13.1) | |||||||||||||||||||||||||
| Organic Sales Three Months Ended Apr 3, 2021 | $ | 231.2 | $ | 131.6 | $ | 239.5 | $ | 198.7 | $ | 801.0 | ||||||||||||||||||||
| Net Sales Three Months Ended Mar 28, 2020 | $ | 199.4 | $ | 129.6 | $ | 210.1 | $ | 195.1 | $ | 734.2 | ||||||||||||||||||||
| Adjusted Net Sales Three Months Ended Mar 28, 2020 | $ | 199.4 | $ | 129.6 | $ | 210.1 | $ | 195.1 | $ | 734.2 | ||||||||||||||||||||
| Three Months Ended Apr 3, 2021 Organic Sales Growth % | 15.9 | % | 1.5 | % | 14.0 | % | 1.8 | % | 9.1 | % | ||||||||||||||||||||
| Three Months Ended Apr 3, 2021 Net Sales Growth % | 18.9 | % | 5.2 | % | 13.8 | % | 3.3 | % | 10.9 | % |
a1q2021earningscallslide
1Q M a y 4 , 2 0 2 1 First Quarter 2021 Earnings CO NF ERENC E CALL Louis Pinkham Chief Executive Officer Rob Rehard Vice President Chief Financial Officer
©2021 Regal Beloit Corporation 2 1Q 2021 CAUTIONARY STATEMENT Forward Looking Statements Certain statements made in this release are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. This release contains forward- looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company’s current estimates, expectations and projections about the Company’s future results, performance, prospects and opportunities. Such forward-looking statements may include, among other things, statements about the Company’s future operations, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competition and other expectations and estimates for future periods. Forward-looking statements may also include statements relating to the proposed acquisition of Rexnord Corporation’s (“Rexnord”) Process & Motion Control business (the “PMC Business”) (the “Rexnord Transaction”), the benefits and synergies of the Rexnord Transaction, future opportunities for the Company, the PMC Business and the combined company, and any other statements regarding the Rexnord Transaction or the combined company. Forward-looking statements include statements that are not historical facts and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “plan,” “may,” “should,” “will,” “would,” “project,” “forecast,” and similar expressions. These forward-looking statements are based upon information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause the performance, prospects, or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Important factors that could cause actual results to differ materially from the results referred to in the forward-looking statements the Company makes in this release include: the continued financial and operational impacts of and uncertainties relating to the COVID-19 pandemic on customers and suppliers and the geographies in which they operate; uncertainties regarding the ability to execute restructuring plans within expected costs and timing; our ability to develop new products based on technological innovation, such as the Internet of Things (“IoT”), and marketplace acceptance of new and existing products, including products related to technology not yet adopted or utilized in certain geographic locations in which we do business; fluctuations in commodity prices and raw material costs; our dependence on significant customers; effects on earnings of any significant impairment of goodwill or intangible assets; prolonged declines or disruption in one or more markets we serve, such as heating, ventilation, air conditioning (“HVAC”), refrigeration, power generation, oil and gas, unit material handling or water heating; 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; our overall debt levels and our ability to repay principal and interest on our outstanding debt, including debt assumed or incurred in connection with the Rexnord Transaction; our dependence on key suppliers and the potential effects of supply disruptions; seasonal impact on sales of our products into HVAC systems and other residential applications; actions taken by our competitors and our ability to effectively compete in the increasingly competitive global electric motor and controls, power generation and power transmission industries; risks associated with global manufacturing, including risks associated with public health crises; 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, tariffs, immigration, customs, border actions and the like, and other external factors that we cannot control; unanticipated costs or expenses we may incur related to litigation, including product warranty issues; infringement of our intellectual property by third parties, challenges to our intellectual property and claims of infringement by us of third party technologies; losses from failures, breaches, attacks or disclosures involving our information technology infrastructure and data; the possibility that the conditions will not be satisfied or the approvals will not be obtained required to complete the Rexnord Transaction, including shareholder or regulatory approvals, and the possibility that the IRS ruling sought in connection with the Rexnord Transaction will not be received on the terms requested, or at all; changes in the extent and characteristics of the common shareholders of Rexnord and the Company and its effect pursuant to the merger agreement for the Rexnord Transaction on the number of shares of Company common stock issuable pursuant to the transaction, magnitude of the dividend payable to Company shareholders pursuant to the transaction and the extent of indebtedness to be incurred by the Company in connection with the transaction; failure to successfully integrate the PMC Business and any other future acquisitions into our business or achieve expected synergies and operating efficiencies, due to factors such as the future financial and operating performance of the acquired business, loss of key executives and employees, and operating costs, customer loss and business disruption being greater than expected; costs and indemnification obligations related to the Rexnord Transaction; unanticipated liabilities of acquired businesses, including the PMC Business; operating restrictions related to the Rexnord Transaction; unanticipated adverse effects or liabilities from business exits or divestitures; changes in the method of determining London Interbank Offered Rate (“LIBOR”), or the replacement of LIBOR with an alternative reference rate; cyclical downturns affecting the global market for capital goods; and other risks and uncertainties including, but not limited, to those described in “Part I - Item 1A - Risk Factors” in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 2, 2021 and from time to time in other filed reports. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this release are made only as of the date of this release, and the Company undertakes no obligation to update any forward-looking information contained in this release or with respect to the announcements described herein to reflect subsequent events or circumstances. Additional information regarding these and other risks and uncertainties is included in “Part I - Item 1A - Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 2, 2021 and from time to time in other filed reports.
©2021 Regal Beloit Corporation 3 NON-GAAP FINANCIAL MEASURES We prepare financial statements in accordance with accounting principles generally accepted in the United States of America (“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 in the appendix to the most directly comparable GAAP financial measures: adjusted diluted earnings per share (both historical and projected), adjusted income from operations, adjusted operating margin, adjusted net sales, net debt, adjusted EBITDA, adjusted operating leverage, adjusted net income attributable to Regal Beloit Corporation, free cash flow, free cash flow as a percentage of adjusted net income attributable to Regal Beloit Corporation, adjusted income before taxes, adjusted provision for income taxes, adjusted effective tax rate, net sales from ongoing business, adjusted income from operations of ongoing business, ongoing business adjusted operating margin, and adjusted diluted earnings per share for ongoing business. 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, adjusted operating margin, and adjusted operating leverage to help us manage and evaluate our business and make operating decisions, while adjusted diluted earnings per share, net debt, adjusted EBITDA, adjusted net sales, adjusted net income attributable to Regal Beloit Corporation, free cash flow, free cash flow as a percentage of adjusted net income attributable to Regal Beloit Corporation, adjusted income before taxes, adjusted provision for income taxes, adjusted effective tax rate, net sales from ongoing business, adjusted income from operations of ongoing business, ongoing business adjusted operating margin and adjusted diluted earnings per share for ongoing business 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 any sales from acquired businesses recorded prior to the first anniversary of the acquisition (“net sales from business acquired") and excluding any sales from business divested/to be exited (“net sales from business divested/to be exited“) recorded prior to the first anniversary of the exit and excluding the impact of foreign currency translation. The impact of foreign currency translation is determined by translating the respective period’s organic sales using the 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. 1Q 2021
©2021 Regal Beloit Corporation 4 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 1Q 2021 Results & 2Q 2021 Outlook ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO 1Q 2021
©2021 Regal Beloit Corporation 5 • Sales Up 9.1% on an Organic Basis • Short Cycle Industrial Recovery Gaining Momentum • 80/20 Pruning Initiatives Reduced Sales by ~200bps • Adjusted Operating Margin Up 310bps On Volume, Cost-Out’s, Mix • Incremental Margin of 42% • Adjusted Gross Margin Up ~180bps • Free Cash Flow of $39M • FCF Conversion at 59%, Consistent with Typical Seasonality • Order Rates Accelerated in 1Q/April • Orders +17%** in 1Q, with April Up ~90% • N.A. HVAC Orders +21%** in 1Q • Pool Pump Orders +14%** in 1Q * Non-GAAP Financial Measurement, See Appendix for Reconciliation . CEO COMMENTARY AND OVERVIEW ($ in millions, except per share data) 1Q 2020 1Q 2021 Adjusted Net Sales* $734.2 $814.1 Adjusted Income from Operations* $79.2 $113.1 Adjusted Operating Margin* 10.8% 13.9% Adjusted Diluted EPS* $1.31 $1.98 Free Cash Flow* $91.8 $38.8 1Q 2021 ** Daily basis
©2021 Regal Beloit Corporation 6 CASE STUDY – PTS HUB CITY HERA GEAR DRIVES1Q 2021 Regal domain expertise and superior technologies are helping customers improve operational efficiency – reducing downtime, lowering energy costs, and limiting waste streams. Aligning Energy-Saving Solutions & Profitable Growth In The Industrial Drive Train Customer Problem A large distribution warehouse had oil leaks on its conveyor system due to competitor gear drive seal failures, costing the owner downtime and wasted lubricant. Regal Solution • Replace faulty competitor drives with Regal’s Hub City HERA, which runs significantly cooler given its higher efficiency, resulting in longer seal life and saving the customer over $200K annually in avoided line downtime. • Using our Perceptiv diagnostic tools, Regal “right-sized” the conveyor motors, saving ¼ amp/motor, worth $80K/year. Regal / Customer Win-Win • Customer realizes significant savings, improved uptime, operates using less energy and less wasted lubricant. • Regal sells superior system of advanced gear boxes and replacement motors. • Solidly strengthens customer relationship.
©2021 Regal Beloit Corporation 7 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 1Q 2021 Results & 2Q 2021 Outlook ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO 1Q 2021
©2021 Regal Beloit Corporation 8 Adjusted Net Sales* ($ Millions) $199.4 $237.0 1Q20 1Q21 $15.1 $27.7 1Q20 1Q21 Adjusted Income from Operations* ($ Millions) Sales • Organic Sales* Up 15.9% • Key Drivers + China/Asia-Pacific + C-HVAC Globally + Pool Pump ‒ 80/20 Account Pruning (~1.6%) Adjusted Operating Margin* • 11.7% of Adj. Net Sales • Up 410 bps from Prior Year + Volume + Mix + Productivity ‒ Expedited Freight ‒ Logistics (port congestion) COMMERCIAL SYSTEMS * Non-GAAP Financial Measurement, See Appendix for Reconciliation. 1Q 2021 Strong Organic Growth & Mix Drive Sizable Margin Gains
©2021 Regal Beloit Corporation 9 Adjusted Net Sales* ($ Millions) $129.6 $136.4 1Q20 1Q21 Adjusted Income from Operations* ($ Millions) Sales • Organic Sales* Up 1.5% • Key Drivers + China + India + Data Centers – General Industrial (N.A., MENA) – 80/20 Account Pruning (~1.8%) Adjusted Operating Margin* • 3.0% of Adj. Net Sales • Up 190 bps from Prior Year + Mix + Volume + Cost Reductions – Net Material Cost INDUSTRIAL SYSTEMS * Non-GAAP Financial Measurement, See Appendix for Reconciliation. 1Q 2021 $1.4 $4.1 1Q20 1Q21 Volume, Mix & Cost Reductions Benefit Margins; Expect Further Expansion Ahead
©2021 Regal Beloit Corporation 10 Adjusted Net Sales* ($ Millions) $210.1 $239.1 1Q20 1Q21 $32.0 $43.6 1Q20 1Q21 Adjusted Income from Operations* ($ Millions) Sales • Organic Sales* Up 14.0% • Key Drivers + N.A. HVAC + EMEA + G.I. + Commercial Refrigeration – 80/20 Pruning (~3.0%) Adjusted Operating Margin* • 18.2% of Adj. Net Sales • Up 300 bps from Prior Year + Volume + Cost Reductions + Mix (Distribution, ECM, Pruning) – Net Material Cost CLIMATE SOLUTIONS * Non-GAAP Financial Measurement, See Appendix for Reconciliation. 1Q 2021 HVAC Momentum Remains Strong, Further Re-stock Ahead
©2021 Regal Beloit Corporation 11 $195.1 $201.6 1Q20 1Q21 $30.7 $37.7 1Q20 1Q21 Adjusted Income from Operations* ($ Millions) Sales • Organic Sales* Up 1.8% • Key Drivers + Aero (Project Win) + Unit Handling (Modsort Gains) + China – Solar YOY Project Timing – O&G Adjusted Operating Margin* • 18.7% of Adj. Net Sales • Up 300 bps from Prior Year + Cost Reductions + Net Material Cost + Mix POWER TRANSMISSION SOLUTIONS Adjusted Net Sales* ($ Millions) * Non-GAAP Financial Measurement, See Appendix for Reconciliation. 1Q 2021 Margin Performance Outpaced Sales Growth As Business Transformation Continues
©2021 Regal Beloit Corporation 12 Capital Expenditures • $10.7 Million in 1Q 2021 • $57.0 Million Expected in FY 2021** Effective Tax Rate (ETR) • 23.2% Adj. ETR* in 1Q 2021 • 21.0% Adj. ETR* Expected in FY 2021** Restructuring & Related Costs • $1.7 Million in 1Q 2021 • $16.0 Million Expected in FY 2021** FCF Consistent With Typical Seasonality; Net Leverage Down To 0.9x KEY FINANCIAL METRICS Balance Sheet as April 3, 2021 • Total Debt of $1,017.7 Million • Net Debt of $451.3 Million • Net Debt/Adj. EBITDA* of 0.9 Free Cash Flow* • $38.8 Million in 1Q 2021 • 1Q Conversion of 59.1% • No Shares Purchased in 1Q 2021 • Remaining authorization $210M * Non-GAAP Financial Measurement, See Appendix for Reconciliation. 1Q 2021 ** Guidance does not factor any costs, expenses or other effects of the Rexnord-PMC transaction.
©2021 Regal Beloit Corporation 13 Strong Momentum Continues as 2021 Unfolds Introducing 2Q 2021 Guidance* • Adjusted Diluted Earnings per Share** in a Range of $1.85 to $2.05 for 2Q, Up Over 100% YOY at the Mid-Point Other FY 2021 Modeling Assumptions • Net Interest Expense of ~$28 Million*** • Capital Expenditures of ~$57 Million • Depreciation & Amortization Expense of ~$131 Million • Effective Tax Rate of ~21% • Expect FCF > 100% of Adj. Net Income 2Q 2021 OUTLOOK1Q 2021 ** Non-GAAP Financial Measurement, See Appendix for Reconciliation. *** Excludes Rexnord transaction-related financing costs. * Guidance does not factor any costs, expenses or other effects of the Rexnord-PMC transaction.
©2021 Regal Beloit Corporation 14 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 1Q 2021 Results & 2Q 2021 Outlook ROB REHARD, CFO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO 1Q 2021
1Q Appendix
©2021 Regal Beloit Corporation 16 APPENDIX1Q 2021 ADJUSTED DILUTED EARNINGS PER SHARE Apr 3, 2021 Mar 30, 2020 GAAP Diluted Earnings Per Share 1.60$ 1.12$ Restructuring and Related Costs 0.03 0.10 Transaction Costs 0.36 — Loss on Businesses Divested and Assets to be Exited — 0.03 Gain on Sales of Assets (0.01) — Net Loss from Businesses Divested/to be Exited — 0.01 Executive Transition Costs — 0.05 Adjusted Diluted Earnings Per Share 1.98$ 1.31$ Three Months Ended
©2021 Regal Beloit Corporation 17 APPENDIX1Q 2021 2021 ADJUSTED SECOND QUARTER GUIDANCE Minimum Maximum 2021 Diluted EPS Second Quarter Guidance 1.50$ 1.70$ Transaction and Related Costs 0.24 0.24 Restructuring and Related Costs 0.11 0.11 2021 Adjusted Diluted EPS Second Quarter Guidance 1.85$ 2.05$
©2021 Regal Beloit Corporation 18 APPENDIX1Q 2021 ADJUSTED INCOME FROM OPERATIONS (Dollars in Millions) Apr 3, 2021 Mar 28, 2020 Apr 3, 2021 Mar 28, 2020 Apr 3, 2021 Mar 28, 2020 Apr 3, 2021 Mar 28, 2020 Apr 3, 2021 Mar 28, 2020 GAAP Income (Loss) from Operations 27.5$ 12.1$ 3.7$ (0.1)$ 43.3$ 29.5$ 22.6$ 28.5$ 97.1$ 70.0$ Restructuring and Related Costs 0.2 1.8 0.5 0.9 0.3 1.1 0.7 1.8 1.7 5.6 Transaction Costs - - - - - - 14.7 - 14.7 - Loss on Businesses Divested and Assets to be Exited - 0.7 - 0.2 - 0.5 - - - 1.4 Gain on Sale of Assets - - (0.1) - - - (0.3) - (0.4) - Operating Loss from Businesses Divested/to be Exited - - - - - 0.4 - - - 0.4 Executive Transition Costs - 0.5 - 0.4 - 0.5 - 0.4 - 1.8 Adjusted Income from Operations 27.7$ 15.1$ 4.1$ 1.4$ 43.6$ 32.0$ 37.7$ 30.7$ 113.1$ 79.2$ GAAP Operating Margin % 11.6 % 6.1 % 2.7 % (0.1)% 18.1 % 14.0 % 11.2 % 14.6 % 11.9 % 9.5 % Adjusted Operating Margin % 11.7 % 7.6 % 3.0 % 1.1 % 18.2 % 15.2 % 18.7 % 15.7 % 13.9 % 10.8 % Three Months Ended Commercial Systems Climate Solutions Power Transmission SolutionsIndustrial Systems Total Regal
©2021 Regal Beloit Corporation 19 APPENDIX1Q 2021 ADJUSTED NET SALES (Dollars in Millions) Apr 3, 2021 Mar 28, 2020 Apr 3, 2021 Mar 28, 2020 Apr 3, 2021 Mar 28, 2020 Apr 3, 2021 Mar 28, 2020 Apr 3, 2021 Mar 28, 2020 Net Sales 237.0$ 199.4$ 136.4$ 129.6$ 239.1$ 210.1$ 201.6$ 195.1$ 814.1$ 734.2$ Adjusted Net Sales 237.0$ 199.4$ 136.4$ 129.6$ 239.1$ 210.1$ 201.6$ 195.1$ 814.1$ 734.2$ Total Regal Three Months Ended Commercial Systems Climate Solutions Power Transmission SolutionsIndustrial Systems
©2021 Regal Beloit Corporation 20 APPENDIX1Q 2021 ADJUSTED EFFECTIVE TAX RATE (Dollars in Millions) Apr 3, 2021 Mar 28, 2020 Income before Taxes 87.2$ 60.6$ Provision for Income Taxes 20.2 13.9 Effective Tax Rate 23.2% 22.9% Income before Taxes 87.2$ 60.6$ Loss on Businesses Divested and Assets to be Exited - 1.4 Adjusted Income before Taxes 87.2$ 62.0$ Provision for Income Taxes 20.2$ 13.9$ Tax Effect from Loss on Businesses Divested and Assets to be Exited - 0.3 Non-deductible Portion of Executive Transition Costs - (0.5) Adjusted Provision for Income Taxes 20.2$ 13.7$ Adjusted Effective Tax Rate 23.2% 22.1% Three Months Ended
©2021 Regal Beloit Corporation 21 APPENDIX1Q 2021 FREE CASH FLOW (Dollars in Millions) Apr 3, 2021 Mar 28, 2020 Net Cash Provided by Operating Activities 49.5$ 102.7$ Additions to Property Plant and Equipment (10.7) (10.9) Free Cash Flow 38.8$ 91.8$ GAAP Net Income Attributable to Regal Beloit Corporation 65.6$ 45.8$ Loss on Businesses Divested and Impairments - 1.4 Tax Effect from Loss on Businesses Divested and Impairments - (0.3) Adjusted Net Income Attributable to Regal Beloit Corporation 65.6$ 46.9$ Free Cash Flow as a Percentage of Adjusted Net Income Attributable to Regal Beloit Corporation 59.1 % 195.7 % Three Months Ended
©2021 Regal Beloit Corporation 22 APPENDIX1Q 2021 ORGANIC SALES GROWTH (Dollars in Millions) Commercial Systems Industrial Systems Climate Solutions Power Transmission Solutions Total Regal Net Sales Three Months Ended Apr 3, 2021 237.0$ 136.4$ 239.1$ 201.6$ 814.1$ Impact from Foreign Currency Exchange Rates (5.8) (4.8) 0.4 (2.9) (13.1) Organic Sales Three Months Ended Apr 3, 2021 231.2$ 131.6$ 239.5$ 198.7$ 801.0$ Net Sales Three Months Ended Mar 28, 2020 199.4$ 129.6$ 210.1$ 195.1$ 734.2$ Organic Sales Growth % 15.9 % 1.5 % 14.0 % 1.8 % 9.1 % Net Sales Growth % 18.9 % 5.2 % 13.8 % 3.3 % 10.9 % Three Months Ended
©2021 Regal Beloit Corporation 23 APPENDIX1Q 2021 OPERATING LEVERAGE-TOTAL REGAL (Dollars in Millions) Apr 3, 2021 Mar 28, 2020 Change GAAP Income from Operations 97.1$ 70.0$ 27.1$ Adjusted Income from Operations 113.1$ 79.2$ 33.9$ Net Sales 814.1$ 734.2$ 79.9$ Adjusted Net Sales 814.1$ 734.2$ 79.9$ GAAP Operating Leverage 33.9 % Adjusted Operating Leverage 42.4 % Three Months Ended
©2021 Regal Beloit Corporation 24 APPENDIX1Q 2021 (Dollars in Millions) LTM Apr 3, 2021 Net Income 214.1$ Plus: Income Taxes 63.1 Plus: Interest Expense 40.8 Less: Interest Income (6.3) Plus: Depreciation and Amortization 130.6 EBITDA 442.3$ Current Maturities of Debt 230.8$ Long-Term Debt 786.9 Total Gross Debt 1,017.7$ Total Gross Debt/EBITDA 2.3 TOTAL GROSS DEBT/EBITDA (Dollars in Millions) LTM Apr 3, 2021 Net Income 214.1$ Plus: Income Taxes 63.1 Plus: Interest Expense 40.8 Less: Interest Income (6.3) Plus: Depreciation and Amortization 130.6 Plus: Restructuring and Related Costs 32.9 Plus: Transaction Costs 15.4 Plus: Impairment and Exit Related Costs 3.8 Plus: Goodwill Impairment 10.5 Plus: Loss on Sale of Assets 0.2 Adjusted EBITDA 505.1$ Current Maturities of Debt 230.8$ Long-Term Debt 786.9 Total Gross Debt 1,017.7$ Total Gross Debt/Adjusted EBITDA 2.0 TOTAL GROSS DEBT/ADJUSTED EBITDA
©2021 Regal Beloit Corporation 25 APPENDIX1Q 2021 (Dollars in Millions) LTM Apr 3, 2021 Net Income 214.1$ Plus: Income Taxes 63.1 Plus: Interest Expense 40.8 Less: Interest Income (6.3) Plus: Depreciation and Amortization 130.6 EBITDA 442.3$ Current Maturities of Debt 230.8$ Long-Term Debt 786.9 Less: Cash (566.4) Total Net Debt 451.3$ Total Net Debt/EBITDA 1.0 TOTAL NET DEBT/EBITDA (Dollars in Millions) LTM Apr 3, 2021 Net Income 214.1$ Plus: Income Taxes 63.1 Plus: Interest Expense 40.8 Less: Interest Income (6.3) Plus: Depreciation and Amortization 130.6 Plus: Restructuring and Related Costs 32.9 Plus: Transaction Costs 15.4 Plus: Impairment and Exit Related Costs 3.8 Plus: Goodwill Impairment 10.5 Plus: Loss on Sale of Assets 0.2 Adjusted EBITDA 505.1$ Current Maturities of Debt 230.8$ Long-Term Debt 786.9 Less: Cash (566.4) Total Net Debt 451.3$ Total Net Debt/Adjusted EBITDA 0.9 TOTAL NET DEBT/ADJUSTED EBITDA
©2021 Regal Beloit Corporation 26 APPENDIX1Q 2021 RECONCILIATION FOR LIFO ADJUSTMENT (Dollars in Millions) GAAP Income from Operations - Recasted 12.1 (0.1) 12.1 (0.1) Adjusted Income from Operations - Recasted 15.1 1.4 15.1 1.4 GAAP Operating Margin % - Recasted 6.1 % (0.1)% 6.1 % (0.1)% Adjusted Operating Margin % - Recasted 7.6 % 1.1 % 7.6 % 1.1 % GAAP Income from Operations - Recasted 6.2 3.2 18.3 3.1 Adjusted Income from Operations - Recasted 10.5 5.2 25.6 6.6 GAAP Operating Margin % - Recasted 3.5 % 2.7 % 4.9 % 1.2 % Adjusted Operating Margin % - Recasted 6.0 % 4.3 % 6.8 % 2.6 % GAAP Income from Operations - Recasted 24.6 7.3 42.9 10.4 Adjusted Income from Operations - Recasted 25.6 10.0 51.2 16.6 GAAP Operating Margin % - Recasted 11.3 % 5.3 % 7.2 % 2.7 % Adjusted Operating Margin % - Recasted 11.7 % 7.2 % 8.6 % 4.3 % GAAP Income from Operations - Recasted 22.2 (14.9) 66.2 (5.6) Adjusted Income from Operations - Recasted 23.7 2.6 76.0 18.1 GAAP Operating Margin % - Recasted 9.8 % (10.7)% 8.1 % (1.1)% Adjusted Operating Margin % - Recasted 10.5 % 1.9 % 9.3 % 3.4 % Three Months Ended September 26, 2020 Three Months Ended January 2, 2021 Three Months Ended March 28, 2020 Three Months Ended June 27, 2020 Three Months Ended March 28, 2020 Six Months Ended June 27, 2020 Nine Months Ended September 26, 2020 Twelve Months Ended January 2, 2021 Quarter-to-Date Commercial Systems Industrial Systems Commercial Systems Industrial Systems Year-to-Date
©2021 Regal Beloit Corporation 27 APPENDIX Shipping Days 1Q 2Q 3Q 4Q FY 2015 64 63 64 59 250 2016 64 64 63 60 251 2017 64 63 63 60 250 2018 63 64 63 61 251 2019 63 63 63 61 250 2020 63 63 63 64 253 2021 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, 2016, 2017, 2018, 2019 and 2021 have 52 weeks Fiscal Year 2020 had 53 weeks 1Q 2021