Attached files
| file | filename |
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| EX-99.2 - EXHIBIT 99.2 - REGAL BELOIT CORP | a1q2017slidesfinal4pm050.htm |
| 8-K - 8-K - REGAL BELOIT CORP | form8-k1q2017earningsrelea.htm |
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FOR RELEASE ON: May 8, 2017
CONTACT: Robert Cherry, VP - Business Development & Investor Relations
608-361-7530
robert.cherry@regalbeloit.com
Regal Beloit Corporation Announces First Quarter 2017 Financial Results
• | Diluted Earnings Per Share Up 9.7% |
• | 2017 Diluted Earnings per Share Guidance Increased |
BELOIT, WI - Regal Beloit Corporation (NYSE: RBC) today reported first quarter 2017 diluted earnings per share of $1.02, up 9.7% from the prior year. First quarter 2017 adjusted diluted earnings per share* were $1.07, up 12.6% from the prior year.
Key financial results for the first quarter 2017 included:
• | Total net sales of $813.5 million decreased 0.6% from the prior year and included a negative 0.6% foreign currency translation impact and a negative 0.6% divestiture impact. The result was a positive organic sales growth rate of 0.7%. |
• | Income from operations was $74.8 million or 9.2% of net sales up 70 basis points from the prior year. Adjusted income from operations was $77.8 million or 9.6% of net sales up 100 basis points from the prior year. |
• | The Company paid down $43.5 million of debt. |
First quarter 2017 segment results versus the prior year first quarter included:
• | Commercial and Industrial Systems Segment net sales were $381.2 million, an increase of 1.0%. Foreign currency had a negative 0.8% translation impact. The result was a positive organic sales growth rate of 1.7% driven by growth in Asia and in the power generation businesses. Operating margin was 6.8%. Excluding restructuring and related costs of $1.7 million, adjusted operating margin was 7.2%. |
• | Climate Solutions Segment net sales were $247.7 million, an increase of 3.3%. Foreign currency had a negative 0.4% translation impact. The result was a positive organic sales growth rate of 3.7% driven by growth in North American residential HVAC partially offset by diminishing weakness in Middle East end markets. Operating margin was 12.6%. Excluding restructuring and related costs of $1.1 million, adjusted operating margin was 13.0%. |
• | Power Transmission Solutions Segment net sales were $184.6 million, a decrease of 8.1%. Foreign currency had a negative 0.5% translation impact. Our June 2016 Mastergear divestiture resulted in a negative 2.6% impact. The result was an organic sales growth rate of negative 5.0% driven by renewable energy demand patterns and diminishing weakness in oil & gas. Operating margin was 9.6%. Excluding restructuring and related costs of $0.4 million, adjusted operating margin was 9.8%. |
*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.
“Our first quarter results were slightly ahead of our expectations and represented our fifth consecutive quarter of improving organic sales growth rates,” said Regal Chairman and CEO Mark Gliebe. “Strong growth in residential HVAC and most Asian end markets helped offset the lingering weakness in energy.”
2017 Outlook
“Our orders strengthened in the quarter, and we continue to expect positive organic sales growth in 2017. We expect improved margins from both volume growth and our simplification efforts to more than offset the continued challenges from commodity inflation. Given the progress that we made in the first quarter, we are revising our 2017 adjusted diluted earnings per share forecast to $4.55 to $4.95, an increase of $0.05,” continued Mr. Gliebe.
The Company forecasts 2017 GAAP diluted earnings per share of $4.40 to $4.80.
Conference Call
Regal will hold a conference call to discuss the earnings release at 9:00 AM CDT (10:00 AM EDT) on May 9, 2017. Individuals who would like to participate by phone should dial 888-317-6003 and enter 3706406 when prompted. International callers should dial 1-412-317-6061 and enter 3706406 when prompted. To view the presentation during the call, please follow this link to Regal’s Investors page:
http://investors.regalbeloit.com/phoenix.zhtml?c=116222&p=irol-presentations
To listen to the live audio and view the presentation via the internet, please go to:
https://services.choruscall.com/links/rbc170509w3hzlG7j.html
A telephone replay of the call will be available through August 8, 2017, at 877-344-7529, conference ID 10105093. International callers should call 1-412-317-0088 using the same conference ID. A webcast replay will be available until August 8, 2017, and can be accessed at:
http://investors.regalbeloit.com/phoenix.zhtml?c=116222&p=irol-calendarPast
About the Company
Regal Beloit Corporation (NYSE: RBC) is a leading manufacturer of electric motors, electrical motion controls, power generation and power transmission products serving markets throughout the world. The company is comprised of three business segments: Commercial and Industrial Systems, Climate Solutions and Power Transmission Solutions. Regal is headquartered in Beloit, Wisconsin, and has manufacturing, sales and service facilities throughout the United States, Canada, Mexico, Europe and Asia. For more information, visit RegalBeloit.com
CAUTIONARY 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 release 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,” “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 forward-looking statements due to a number of factors, including: 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 mechanical motion control 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; 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; effect on earnings of any significant impairment of goodwill or intangible assets; 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 March 1, 2017 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 release are made only as of their respective dates, and we undertake no obligation to update these statements to reflect subsequent events or circumstances.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||
Unaudited | |||||||||
(Amounts in Millions, Except per Share Data) | |||||||||
Three Months Ended | |||||||||
Apr 1, 2017 | Apr 2, 2016 | ||||||||
Net Sales | $ | 813.5 | $ | 818.2 | |||||
Cost of Sales | 597.9 | 600.8 | |||||||
Gross Profit | 215.6 | 217.4 | |||||||
Operating Expenses | 140.8 | 148.1 | |||||||
Income From Operations | 74.8 | 69.3 | |||||||
Interest Expense | 14.4 | 15.0 | |||||||
Interest Income | 1.0 | 1.1 | |||||||
Income Before Taxes | 61.4 | 55.4 | |||||||
Provision for Income Taxes | 13.8 | 12.7 | |||||||
Net Income | 47.6 | 42.7 | |||||||
Less: Net Income Attributable to Noncontrolling Interests | 1.3 | 1.1 | |||||||
Net Income Attributable to Regal Beloit Corporation | $ | 46.3 | $ | 41.6 | |||||
Earnings Per Share Attributable to Regal Beloit Corporation: | |||||||||
Basic | $ | 1.03 | $ | 0.93 | |||||
Assuming Dilution | $ | 1.02 | $ | 0.93 | |||||
Cash Dividends Declared | $ | 0.24 | $ | 0.23 | |||||
Weighted Average Number of Shares Outstanding: | |||||||||
Basic | 44.8 | 44.7 | |||||||
Assuming Dilution | 45.1 | 45.0 | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
Unaudited | ||||||||
(Dollars in Millions) | ||||||||
Apr 1, 2017 | Dec 31, 2016 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and Cash Equivalents | $ | 262.3 | $ | 284.5 | ||||
Trade Receivables, less Allowances of $11.9 Million in 2017 and $11.5 Million in 2016 | 509.0 | 462.2 | ||||||
Inventories | 687.9 | 660.8 | ||||||
Prepaid Expenses and Other Current Assets | 156.2 | 124.5 | ||||||
Total Current Assets | 1,615.4 | 1,532.0 | ||||||
Net Property, Plant, Equipment and Noncurrent Assets | 2,829.0 | 2,826.5 | ||||||
Total Assets | $ | 4,444.4 | $ | 4,358.5 | ||||
LIABILITIES AND EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts Payable | $ | 393.8 | $ | 334.2 | ||||
Other Accrued Expenses | 219.8 | 266.8 | ||||||
Current Maturities of Debt | 100.4 | 100.6 | ||||||
Total Current Liabilities | 714.0 | 701.6 | ||||||
Long-Term Debt | 1,269.1 | 1,310.9 | ||||||
Other Noncurrent Liabilities | 287.5 | 267.8 | ||||||
Equity: | ||||||||
Total Regal Beloit Corporation Shareholders' Equity | 2,132.6 | 2,038.8 | ||||||
Noncontrolling Interests | 41.2 | 39.4 | ||||||
Total Equity | 2,173.8 | 2,078.2 | ||||||
Total Liabilities and Equity | $ | 4,444.4 | $ | 4,358.5 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | |||||||||
Unaudited | |||||||||
(Dollars in Millions) | |||||||||
Three Months Ended | |||||||||
Apr 1, 2017 | Apr 2, 2016 | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
Net income | $ | 47.6 | $ | 42.7 | |||||
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 | 34.4 | 40.1 | |||||||
Gain on Disposal of Businesses | (0.1 | ) | — | ||||||
(Gain) Loss on Disposal of Assets, Net | (0.1 | ) | 0.6 | ||||||
Share-Based Compensation Expense | 3.0 | 3.3 | |||||||
Change in Operating Assets and Liabilities, Net of Acquisitions and Divestitures | (34.3 | ) | (28.1 | ) | |||||
Net Cash Provided by Operating Activities | 50.5 | 58.6 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Additions to Property, Plant and Equipment | (17.0 | ) | (14.9 | ) | |||||
Net Purchases of Investment Securities | — | (1.7 | ) | ||||||
Proceeds Received from Disposal of Businesses | 0.5 | — | |||||||
Proceeds from Sale of Assets | 1.0 | — | |||||||
Net Cash Used in Investing Activities | (15.5 | ) | (16.6 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Net Borrowings Under Revolving Credit Facility | 6.8 | 33.0 | |||||||
Net Repayments from Short-Term Borrowings | (0.2 | ) | (0.2 | ) | |||||
Repayments of Long-Term Debt | (50.1 | ) | (50.1 | ) | |||||
Dividends Paid to Shareholders | (10.8 | ) | (10.2 | ) | |||||
Payments of Contingent Consideration | (5.3 | ) | — | ||||||
Proceeds from the Exercise of Stock Options | 0.4 | 0.5 | |||||||
Shares Surrendered for Taxes | (1.1 | ) | (0.4 | ) | |||||
Purchase of Subsidiary Shares from Noncontrolling Interest | — | (19.6 | ) | ||||||
Net Cash Used In Financing Activities | (60.3 | ) | (47.0 | ) | |||||
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | 3.1 | 1.2 | |||||||
Net Decrease in Cash and Cash Equivalents | (22.2 | ) | (3.8 | ) | |||||
Cash and Cash Equivalents at Beginning of Period | 284.5 | 252.9 | |||||||
Cash and Cash Equivalents at End of Period | $ | 262.3 | $ | 249.1 | |||||
SEGMENT INFORMATION | ||||||||||||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||||||
(Dollars In Millions) | ||||||||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||
Commercial & Industrial Systems | Climate Solutions | Power Transmission Solutions | Total Regal | |||||||||||||||||||||||||||||
Apr 1, 2017 | Apr 2, 2016 | Apr 1, 2017 | Apr 2, 2016 | Apr 1, 2017 | Apr 2, 2016 | Apr 1, 2017 | Apr 2, 2016 | |||||||||||||||||||||||||
Net Sales | $ | 381.2 | $ | 377.6 | $ | 247.7 | $ | 239.8 | $ | 184.6 | $ | 200.8 | $ | 813.5 | $ | 818.2 | ||||||||||||||||
GAAP Operating Margin | 6.8 | % | 5.7 | % | 12.6 | % | 10.3 | % | 9.6 | % | 11.5 | % | 9.2 | % | 8.5 | % | ||||||||||||||||
Adjusted Operating Margin* | 7.2 | % | 5.8 | % | 13.0 | % | 10.8 | % | 9.8 | % | 11.5 | % | 9.6 | % | 8.6 | % | ||||||||||||||||
Components of Net Sales: | ||||||||||||||||||||||||||||||||
Organic Sales Growth | 1.7 | % | (15.3 | )% | 3.7 | % | (13.5 | )% | (5.0 | )% | (5.5 | )% | 0.7 | % | (12.9 | )% | ||||||||||||||||
Acquisitions, Net of Divestitures | — | % | — | % | — | % | — | % | (2.6 | )% | 20.6 | % | (0.6 | )% | 3.9 | % | ||||||||||||||||
Foreign Currency Impact | (0.8 | )% | (1.9 | )% | (0.4 | )% | (1.0 | )% | (0.5 | )% | (0.2 | )% | (0.6 | )% | (1.3 | )% | ||||||||||||||||
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 (“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 income, adjusted operating margin, 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, 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. We use the term “acquisition growth” to refer to the increase in our sales between periods that is attributable to acquisition sales.
ADJUSTED DILUTED EARNINGS PER SHARE | Three Months Ended | ||||||||
Apr 1, 2017 | Apr 2, 2016 | ||||||||
GAAP Diluted Earnings Per Share | $ | 1.02 | $ | 0.93 | |||||
Restructuring and Related Costs | 0.05 | 0.02 | |||||||
Adjusted Diluted Earnings Per Share | $ | 1.07 | $ | 0.95 | |||||
ADJUSTED OPERATING INCOME | ||||||||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||
Commercial & Industrial Systems | Climate Solutions | Power Transmission Solutions | Total Regal | |||||||||||||||||||||||||||||
Apr 1, 2017 | Apr 2, 2016 | Apr 1, 2017 | Apr 2, 2016 | Apr 1, 2017 | Apr 2, 2016 | Apr 1, 2017 | Apr 2, 2016 | |||||||||||||||||||||||||
GAAP Income from Operations | $ | 25.8 | $ | 21.7 | $ | 31.2 | $ | 24.6 | $ | 17.8 | $ | 23.0 | $ | 74.8 | $ | 69.3 | ||||||||||||||||
Gain on Disposal of Business | (0.1 | ) | — | — | — | — | — | (0.1 | ) | — | ||||||||||||||||||||||
Gain on Sale of Assets | — | — | — | — | (0.1 | ) | — | (0.1 | ) | — | ||||||||||||||||||||||
Restructuring and Related Costs | 1.7 | 0.1 | 1.1 | 1.3 | 0.4 | — | 3.2 | 1.4 | ||||||||||||||||||||||||
Adjusted Income from Operations | $ | 27.4 | $ | 21.8 | $ | 32.3 | $ | 25.9 | $ | 18.1 | $ | 23.0 | $ | 77.8 | $ | 70.7 | ||||||||||||||||
GAAP Operating Margin % | 6.8% | 5.7% | 12.6% | 10.3% | 9.6% | 11.5% | 9.2 | % | 8.5 | % | ||||||||
Adjusted Operating Margin % | 7.2% | 5.8% | 13.0% | 10.8% | 9.8% | 11.5% | 9.6 | % | 8.6 | % | ||||||||
FREE CASH FLOW RECONCILIATION | Three Months Ended | ||||||||
Apr 1, 2017 | Apr 2, 2016 | ||||||||
Net Cash Provided by Operating Activities | $ | 50.5 | $ | 58.6 | |||||
Additions to Property Plant and Equipment | (17.0 | ) | (14.9 | ) | |||||
Free Cash Flow | $ | 33.5 | $ | 43.7 | |||||
Free Cash Flow as a Percentage of Net Income Attributable to Regal Beloit Corporation | 72.4 | % | 105.0 | % | |||||
RECONCILIATION OF 2017 ADJUSTED ANNUAL GUIDANCE | Minimum | Maximum | ||||||
2017 Diluted EPS Annual Guidance | $ | 4.40 | $ | 4.80 | ||||
Restructuring and Related Costs | 0.15 | 0.15 | ||||||
2017 Adjusted Diluted EPS Annual Guidance | $ | 4.55 | $ | 4.95 | ||||
ORGANIC SALES GROWTH | Three Months Ended | ||||||||||||||||
April 1, 2017 | |||||||||||||||||
Commercial & Industrial Systems | Climate Solutions | Power Transmission Solutions | Total Regal | ||||||||||||||
Net Sales | $ | 381.2 | $ | 247.7 | $ | 184.6 | $ | 813.5 | |||||||||
Net Sales from Business Divested | — | — | 5.2 | 5.2 | |||||||||||||
Impact from Foreign Currency Exchange Rates | 2.9 | 1.0 | 1.1 | 5.0 | |||||||||||||
Adjusted Net Sales | $ | 384.1 | $ | 248.7 | $ | 190.9 | $ | 823.7 | |||||||||
Net Sales Three Months Ended April 2, 2016 | $ | 377.6 | $ | 239.8 | $ | 200.8 | $ | 818.2 | |||||||||
Organic Sales Growth % | 1.7 | % | 3.7 | % | (5.0 | )% | 0.7 | % | |||||||||
Net Sales Growth % | 1.0 | % | 3.3 | % | (8.1 | )% | (0.6 | )% | |||||||||