Regal Beloit Corporation Investor Relations...
Transcript of Regal Beloit Corporation Investor Relations...
Regal Beloit Corporation
Investor Relations Presentation
November 4, 2013
Mark J. Gliebe President Chief Executive Officer
Chuck Hinrichs Vice President Chief Financial Officer
John Perino Vice President Investor Relations
Jonathan Schlemmer Chief Operating Officer
Safe Harbor Statement
This presentation contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements represent our management’s judgment regarding future events. In many cases, you can identify forward-looking statements by terminology such as “may,” “will,” “plan,” “expect,” “anticipate,” “estimate,” “believe,” or “continue” or the negative of these terms or other similar words. Actual results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors, including: uncertainties regarding our ability to execute our restructuring plans within expected costs and timing; actions taken by our competitors and our ability to effectively compete in the increasingly competitive global electric motor, power generation and mechanical motion control industries; our ability to develop new products based on technological innovation and the marketplace acceptance of new and existing products; fluctuations in commodity prices and raw material costs; our dependence on significant customers; issues and costs arising from the integration of acquired companies and businesses, including the timing and impact of purchase accounting adjustments; unanticipated costs or expenses we may incur related to product warranty issues; our dependence on key suppliers and the potential effects of supply disruptions; infringement of our intellectual property by third parties, challenges to our intellectual property, and claims of infringement by us of third party technologies; increases in our overall debt levels as a result of acquisitions or otherwise and our ability to repay principal and interest on our outstanding debt; product liability and other litigation, or the failure of our products to perform as anticipated, particularly in high volume applications; economic changes in global markets where we do business, such as reduced demand for the products we sell, currency exchange rates, inflation rates, interest rates, recession, foreign government policies and other external factors that we cannot control; unanticipated liabilities of acquired businesses; cyclical downturns affecting the global market for capital goods; difficulties associated with managing foreign operations; and other risks and uncertainties including but not limited to those described in Item 1A-Risk Factors of the Company’s Annual Report on Form 10-K(A) filed on March 26, 2013 and from time to time in our reports filed with U.S. Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. The forward-looking statements included in this presentation are made only as of their respective dates, and we undertake no obligation to update these statements to reflect subsequent events or circumstances.
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Non-GAAP Financial Measures
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We prepare financial statements in accordance with accounting principles generally accepted in the United States (GAAP). We also disclose adjusted diluted earnings per share (EPS), adjusted gross profit, adjusted gross profit as a percentage of net sales, adjusted income from operations, free cash flow and free cash flow as a percentage of net income attributable to Regal Beloit Corporation (collectively, “non-GAAP financial measures”). We use these measures in our internal performance reporting and for reports to the Board of Directors. We also periodically disclose certain of these measures in our quarterly earnings releases, on investor conference calls, and in investor presentations and similar events. We believe that these non-GAAP financial measures are useful measures for providing investors with additional insight into our operating performance. This additional information is not meant to be considered in isolation or as a substitute for our results of operations prepared and presented in accordance with GAAP. Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment adjusted for grants received for capital expenditures.
Overview
Getting to Know Regal
Best in Class Industrial Performance
Growth Catalysts
Financial Performance
Building a Premier Global Enterprise
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Overview
Getting to Know Regal
Best in Class Industrial Performance
Growth Catalysts
Financial Performance
Building a Premier Global Enterprise
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OEM
Dist.
End User
Small MotorsLarge
Motors
Generators
MechanicalDrives Other
Blowers
Company Overview
Revenues $3.2B
Management Experienced, Credible,
Stable
2011, 2012, YTD 2013 Free Cash Flow Exceeds
Net Income
Founded 1955 Beloit, WI
Dividends Raised 8 out
of last 9 years
Revenue Growth 7-Year CAGR
14.2%
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Sales by Product/Platform Sales by End Market
Sales by Geography Sales by Channel
Asia
Europe RoW Canada
USA
Residential Industrial
Commercial
Necessary and Innovative Products
Electric Motors
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Power Transmission Electronic Controls
Power Generation
Diverse Applications
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Global Foot Print
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Able to Meet Customer Demands Anywhere In the World Aligning with Faster Growing Economies
Overview
Getting to Know Regal
Best in Class Industrial Performance
Growth Catalysts
Financial Performance
Building a Premier Global Enterprise
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Financial Performance Profile
2007 – 2012 Sales CAGR
Performance Consistent With Best In Class Industrials
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11.9% 10.6% 9.3% 7.5% 7.3%1.7%
0.0%
10.0%
20.0%
RBC DHR AME IEX ROP EMR
137.5% 134.8% 133.3% 120.0% 116.0% 108.1%
0.0%
200.0%
ROP RBC IEX AME DHR EMR
_____________________ Source: Capital IQ and Bloomberg Notes: CAGR represents cumulative annual growth rate for the 2007 – 2012 calendar periods. Free cash flow as a percentage of net income is defined as cash flow from operations less capital expenditures divided by net income. Represents the median percentage for the 2007 – 2012 calendar periods.
2007 – 2012 Free Cash Flow / NI
Regal Compass Operating System
Near Term Income Statement
Quality Cost
Delivery
Cap Ex
Cash Cycle
New Products
Long Term Growth
Lean Six Sigma Tools Leadership Tools
Talent Management Long Range Plans
Compliance/Safety
Risk Management
Customer Care
Integrations
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Overview
Getting to Know Regal
Best in Class Industrial Performance
Growth Catalysts
Financial Performance
Building a Premier Global Enterprise
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$0
$100
$200
$300
$400
$500
$600
$700
2005 2006 2007 2008 2009 2010 2011 2012
Energy Efficiency Mega-Trend
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Energy Efficient Product Sales*
Regional SEER Update EISA Expansion Future HVAC Efficiency
Standards Under Review Proposed Furnace Fan
Efficiency Legislation
Anticipated Effective 2017 Expands NEMA Requirements to
Additional Motor Sizes Expect DOE to Publish Official
Requirement June 2014 * Management Estimate
New Products
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New Product Introductions
22
50 60
10 20 30 40 50 60
2008 2011 2012
Large Frame IEC Motor HERA-MAX Gear Motor
Aluminum Wound HVAC Motor
Variable Speed Pool Motor
Develop New Products with Focus on Energy Efficiency
Successful Acquirer and Integrator
Rigorous Evaluation and Integration Process Drives Return On Investment
Aligning Footprint with Faster Growing End Markets and Economies
Acquisition Pipeline Continues to Be Active
2010
2011
HARGIL DYNAMICS
PTY. LTD.
Consistent and Successful Acquirer p 16
2012
2013
Successful Acquirer and Integrator
Strategic Goals
Technology and Energy Efficiency
Expand Geographic Footprint
Margin Improvement
Acquisitions Driving Growth p 17
Financial Goals
EPS Accretive in First Year
Cash Flow Positive in First Year
Clear Path to Exceed ROIC Hurdle Rate within Three Years
Evaluating Acquisition Opportunities that Meet our Strategic and Financial Requirements
Simplification Initiative
Reduction Targets ERPs Factories Warehouses Design Platforms Entities Suppliers Brands
2011 3 2 0 2 10 50 2
Next 3 Years ~ 6 ~ 6 ~ 10 ~ 8 ~ 30 ~ 500 ~ 10
Improve Margins, Easier to do Business
2012 3 4 6 2 20
120 2
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Investing in Emerging Markets
Hermetic Motors - Taicang Generators - Shanghai
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Visual Management Lean Production
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Growth Catalyst Summary
Energy Efficiency Trends Introducing New Products Consistent and Successful Acquirer Simplification Initiative Investing in Emerging Markets
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Overview
Getting to Know Regal
Best in Class Industrial Performance
Growth Catalysts
Financial Performance
Building a Premier Global Enterprise
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Sales and EPS Growth
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
EPS Sales
Strong Track Record of Growth
$ T
hous
ands
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2011 and 2012 are adjusted EPS. See Non-GAAP reconciliation in Appendix
2005 2006 2007 2008 2009 2010 2011 2012 2004
0%
10%
20%
30%
40%
50%
60%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Tota
l Deb
t / T
otal
Cap
ital
Balance Sheet Strength
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Current Debt/Cap at 27% LTM Debt / EBITDA at 1.9x
Strong Free Cash Flow to Reduce Debt
2013
.
Consistent Cash Flow and Growth Investment
0%
50%
100%
150%
200%
250%
300%
$0
$50
$100
$150
$200
$250
$300
$350
$400
2005 2006 2007 2008 2009 2010 2011 2012
Free Cash Flow Capex FCF% of Net Income
Cash Div($M) $14.7 $16.6 $18.1 $19.4 $21.6 $25.1 $26.8 $30.8
_____________________ Note: Free Cash Flow, see Non-GAAP reconciliation in Appendix.
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Investment Thesis
Global Leader in Key Markets – “Best in Class” Performance – Innovative Product Leadership – Operating System Driving Results
Growth Drivers – New Products with Focus on Energy Efficiency – Well Positioned in Emerging Markets – Successful and Disciplined Acquirer
Executing on Operating Profit Improvement Plan – EPC Synergies – Simplification Initiative
Consistent Financial Performance – Seven Year Sales Growth ≈ 14% – Consistently Strong Free Cash Flow – Strong Balance Sheet
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Thank You
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Mark J Gliebe President Chief Executive Officer
Chuck Hinrichs Vice President Chief Financial Officer
John Perino Vice President Investor Relations
Jonathan Schlemmer Chief Operating Officer
Appendix Non-GAAP Reconciliations
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year
2012 GAAP Diluted Earnings Per Share $ 1.16 $ 1.49 $ 1.29 $ 0.70 $ 4.64 Purchase Accounting Costs 0.01 — — — 0.01 Restructuring Costs — 0.01 0.08 0.06 0.15 Gain on Disposal of Real Estate (0.02 ) — — — (0.02 ) Prior Year Tax Benefit — — (0.05 ) — (0.05 ) 2012 Adjusted Diluted Earnings Per Share $ 1.15 $ 1.50 $ 1.32 0.76 $ 4.73
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year
2011 GAAP Diluted Earnings Per Share $ 0.99 $ 0.88 $ 1.13 $ 0.80 $ 3.79 Acquisition and Purchase Accounting Costs 0.12 0.06 0.28 0.26 0.73 Warranty Expense Item — 0.44 — (0.23 ) 0.19 Restructuring Costs — — — 0.10 0.10 Gain on Divestiture — — (0.10 ) — (0.10 ) 2011 Adjusted Diluted Earnings Per Share $ 1.11 $ 1.38 $ 1.31 0.93 $ 4.71
ADJUSTED DILUTED EARNINGS PER SHARE
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Appendix Non-GAAP Reconciliations
ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended Nine Months Ended
Sep 28,
2013 Sep 29,
2012 Sep 28,
2013 Sep 29,
2012 GAAP Diluted Earnings Per Share $ 1.16 $ 1.29 $ 3.38 $ 3.94 Restructuring Costs 0.02 0.08 0.05 0.09 Gain on Disposal of Real Estate — — — (0.02 ) Purchase Accounting Costs — — — 0.01 Tax Benefit Recorded Attributable to Prior Year — (0.05 ) (0.04 ) (0.05 ) Adjusted Diluted Earnings Per Share $ 1.18 $ 1.32 $ 3.39 $ 3.97
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Appendix Non-GAAP Reconciliations
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EBITDA Reconciliation
(Dollars in Millions) 1Q 2012 2 Q2012 3Q 2012 4Q 2012 FY 2012
Net Income $ 48.7 $ 62.7 $ 54.3 $ 29.9 $ 195.6
Plus: Minority Interest 1.2 1.6 0.9 1.0 4.7
Plus: Taxes 17.8 28.2 17.9 5.7 69.6
Plus: Interest Expense 11.8 11.2 10.6 10.9 44.5
Plus: Interest Income (0.4 ) (0.4 ) (0.4 ) (0.4 ) (1.6 )
Plus: Depreciation 20.1 21.3 20.9 19.7 82.0
Plus: Amortization 10.8 10.9 11.0 11.3 44.0
EBITDA $ 110.0 $ 135.5 $ 115.2 $ 78.1 $ 438.8
Appendix Non-GAAP Reconciliations
EBITDA Reconciliation Dollars in Millions 4Q 2012 1Q 2013 2Q 2013 3Q 2013 LTM Net Income $29.9 $49.5 $51.1 $52.6 $183.1 Plus: Minority Interest 1.0 1.2 2.5 1.9 6.6 Plus: Taxes 5.7 15.3 17.9 15.0 53.9 Plus: Interest Expense 10.9 10.6 10.7 10.6 42.8 Less: Interest Income -0.4 -0.7 -1.1 -1.3 -3.5 Plus: Depreciation 19.7 20.5 20.7 20.8 81.7 Plus: Amortization 11.3 11.1 11.1 10.9 44.4 EBITDA $78.1 $107.5 $112.9 $110.5 $409.0
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Free Cash Flow Reconciliation
Appendix Non-GAAP Reconciliations
(Dollars in Millions) 2005 2006 2007 2008 2009 2010 2011 2012
Cash Flow from Operation $ 112.2 $ 93.5 $ 200.6 $ 154.2 $ 314.9 $ 175.4 $ 265.3 $ 351.7
Capital Expenditures (28.3 ) (52.5 ) (36.6 ) (52.2 ) (33.6 ) (45.0 ) (57.6 ) (91.0 )
Grants Received for Capital Expenditures
- -
-
-
-
-
-
8.7
Free Cash Flow $ 83.9 $ 41.0 $ 164.0 $ 102.0 $ 281.3 $ 130.4 $ 207.7 $ 269.4
Appendix Non-GAAP Reconciliations
Dollars in Millions
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