Regal Beloit Corporation Announces Second Quarter 2017 Financial Results
BELOIT, Wis., Aug. 7, 2017 /PRNewswire/ -- Regal Beloit Corporation (NYSE: RBC) today reported second quarter 2017 diluted earnings per share of $1.18, down 6.3% from the prior year. Second quarter 2017 adjusted diluted earnings per share* were $1.29, up 13.2% from the prior year.
Key financial results for the second quarter 2017 included:
-- Total net sales of $869.2 million increased 3.6% from the prior year and
included a negative 0.7% foreign currency translation impact and a
negative 0.5% divestiture impact. The result was a positive organic
sales growth rate of 4.8%.
-- Income from operations was $83.0 million or 9.5% of net sales. Adjusted
income from operations was $90.4 million or 10.4% of net sales up 70
basis points from the prior year.
-- Effective tax rate of 21.6% impacted by restructuring and related costs.
-- Net cash provided by operating activities was $98.4 million and capital
expenditures totaled $16.7 million, resulting in free cash flow of $81.7
million or 154.2% of net income.
-- The Company paid down $70.3 million of debt and repurchased $21.0
million of common stock.
Second quarter 2017 segment results versus the prior year second quarter included:
-- Commercial and Industrial Systems Segment net sales were $407.4 million,
an increase of 3.2%. Foreign currency had a negative 1.1% translation
impact. The result was a positive organic sales growth rate of 4.3%
driven by strength in Asia, oil & gas and commercial HVAC. Operating
margin was 5.1%. Excluding a net $6.6 million in restructuring and
related costs and the gain on sale of assets, adjusted operating margin
was 6.7%. Restructuring and related costs included $3.9 million
resulting from the exit of a non-core business.
-- Climate Solutions Segment net sales were $270.5 million, an increase of
6.3%. Foreign currency had a negative 0.2% translation impact. The
result was a positive organic sales growth rate of 6.5% driven by growth
in North American residential HVAC partially offset by weakness in
commercial refrigeration. Operating margin was 14.9%. Excluding
restructuring and related costs of $0.6 million, adjusted operating
margin was 15.1%.
-- Power Transmission Solutions Segment net sales were $191.3 million, an
increase of 1.0%. Foreign currency had a negative 0.5% translation
impact. Our June 2016 Mastergear divestiture resulted in a negative 2.0%
impact. The result was a positive organic sales growth rate of 3.5%
driven by improved oil & gas and renewable energy end market demand.
Operating margin was 11.6%. Excluding restructuring and related costs of
$0.2 million, adjusted operating margin was 11.7%.
*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.
"Overall, we had a solid quarter with organic sales growth of 4.8% and all three segments contributing," said Regal Chairman and CEO Mark Gliebe. "We continue to be pleased with the progress we are making on margin improvement."
2017 Outlook
"Our order trends remain positive, and we continue to expect low single digit organic sales growth for the full year. We are raising our 2017 adjusted diluted earnings per share guidance to $4.70 to $5.00 from our previous guidance of $4.55 to $4.95," continued Mr. Gliebe.
The Company forecasts 2017 GAAP diluted earnings per share of $4.51 to $4.81. Additionally, the Company has updated its forecast on 2017 full year effective tax rate to 22% from the previous forecast of 23%.
Conference Call
Regal will hold a conference call to discuss the earnings release at 9:00 AM CDT (10:00 AM EDT) on August 8, 2017. To listen to the live audio and view the presentation during the call, please visit Regal's Investors page:
http://investors.regalbeloit.com. To listen by phone or to ask the presenters a question, dial 888.317.6003 (U.S. callers) or 1.412.317.6061 (international callers) and enter 3706406 when prompted.
A webcast replay will be available at the link above, and a telephone replay will be available at 877.344.7529 (U.S. callers) or 1.412.317.0088 (international callers), conference ID 10105093. Both will be accessible until November 7, 2017.
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," "forecast," "anticipate," "believe," "should," "project" or "plan" or the negative of these terms or other similar words. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such 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 Six Months Ended
Jul 1, Jul 2, Jul 1, Jul 2,
2017 2016 2017 2016
---- ---- ---- ----
Net Sales $869.2 $838.6 $1,682.7 $1,656.8
Cost of Sales 646.2 615.7 1,244.1 1,216.5
----- ----- ------- -------
Gross Profit 223.0 222.9 438.6 440.3
Operating Expenses 140.0 131.5 280.8 279.6
----- ----- ----- -----
Income From Operations 83.0 91.4 157.8 160.7
Interest Expense 14.7 14.8 29.1 29.8
Interest Income 1.0 1.2 2.0 2.3
--- --- --- ---
Income Before Taxes 69.3 77.8 130.7 133.2
Provision for Income Taxes 15.0 19.4 28.8 32.1
---- ---- ---- ----
Net Income 54.3 58.4 101.9 101.1
Less: Net Income
Attributable to
Noncontrolling Interests 1.3 1.8 2.6 2.9
Net Income Attributable to
Regal Beloit Corporation $53.0 $56.6 $99.3 $98.2
===== ===== ===== =====
Earnings Per Share
Attributable to Regal
Beloit Corporation:
Basic $1.19 $1.27 $2.22 $2.20
===== ===== ===== =====
Assuming Dilution $1.18 $1.26 $2.20 $2.19
===== ===== ===== =====
Cash Dividends Declared $0.26 $0.24 $0.50 $0.47
===== ===== ===== =====
Weighted Average Number of
Shares Outstanding:
Basic 44.7 44.7 44.8 44.7
==== ==== ==== ====
Assuming Dilution 45.1 45.0 45.1 45.0
==== ==== ==== ====
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
Unaudited
(Dollars in Millions)
Jul 1, Dec 31,
2017 2016
---- ----
ASSETS
Current Assets:
Cash and Cash Equivalents $243.7 $284.5
Trade Receivables, less
Allowances of $10.4 Million
in 2017 and $11.5 Million in
2016 544.5 462.2
Inventories 698.2 660.8
Prepaid Expenses and Other
Current Assets 156.7 124.5
----- -----
Total Current Assets 1,643.1 1,532.0
Net Property, Plant, Equipment
and Noncurrent Assets 2,839.9 2,826.5
Total Assets $4,483.0 $4,358.5
======== ========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable $406.5 $334.2
Other Accrued Expenses 225.6 266.8
Current Maturities of Debt 100.7 100.6
----- -----
Total Current Liabilities 732.8 701.6
Long-Term Debt 1,199.5 1,310.9
Other Noncurrent Liabilities 301.9 267.8
Equity:
Total Regal Beloit Corporation
Shareholders' Equity 2,205.8 2,038.8
Noncontrolling Interests 43.0 39.4
---- ----
Total Equity 2,248.8 2,078.2
Total Liabilities and Equity $4,483.0 $4,358.5
======== ========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
----------------------------------------------
Unaudited
(Dollars in Millions)
Three Months Ended Six Months Ended
Jul 1, Jul 2, Jul 1, Jul 2,
2017 2016 2017 2016
---- ---- ---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $54.3 $58.4 $101.9 $101.1
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 38.9 68.8 79.0
(Gain) Loss on Disposal of
Assets, Net (0.2) 0.4 (0.3) 1.0
Gain on Disposal of Businesses - (11.6) (0.1) (11.6)
Exit of Business 3.9 - 3.9 -
Share-Based Compensation
Expense 4.1 3.8 7.1 7.1
Change in Operating Assets and
Liabilities, Net of
Acquisitions and Divestitures 1.9 27.6 (32.4) (0.5)
--- ---- ----- ----
Net Cash Provided by Operating
Activities 98.4 117.5 148.9 176.1
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to Property, Plant
and Equipment (16.7) (16.8) (33.7) (31.7)
Net Sales of Investment
Securities - 6.2 - 4.5
Proceeds from Sale of Assets 0.3 0.1 1.3 0.1
Proceeds Received from
Disposal of Businesses - 25.0 0.5 25.0
--- ---- --- ----
Net Cash Provided by (Used in)
Investing Activities (16.4) 14.5 (31.9) (2.1)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net (Repayments) Borrowings
Under Revolving Credit
Facility (8.9) (11.0) (2.1) 22.0
Net (Repayments) Proceeds from
Short-Term Borrowings 0.3 (6.5) 0.1 (6.7)
Proceeds from Long-Term Debt 0.3 - 0.3 -
Repayments of Long-Term Debt (62.0) (75.1) (112.1) (125.2)
Dividends Paid to Shareholders (10.6) (10.3) (21.4) (20.5)
Payments of Contingent
Consideration - - (5.3) -
Proceeds from the Exercise of
Stock Options - - 0.4 0.5
Repurchase of Common Stock (21.0) - (21.0) -
Distributions to
Noncontrolling Interest - (0.3) - (0.3)
Shares Surrendered for Taxes (2.3) (1.5) (3.4) (1.9)
Purchase of Subsidiary Shares
from Noncontrolling Interest - - - (19.6)
Net Cash Used In Financing
Activities (104.2) (104.7) (164.5) (151.7)
EFFECT OF EXCHANGE RATES ON
CASH AND CASH EQUIVALENTS 3.6 (4.9) 6.7 (3.7)
--- ---- --- ----
Net Increase (Decrease) in
Cash and Cash Equivalents (18.6) 22.4 (40.8) 18.6
Cash and Cash Equivalents at
Beginning of Period 262.3 249.1 284.5 252.9
-----
Cash and Cash Equivalents at
End of Period $243.7 $271.5 $243.7 $271.5
====== ====== ====== ======
SEGMENT INFORMATION
-------------------
Unaudited
(Dollars In Millions)
Three Months Ended
Commercial & Industrial Climate Solutions Power Transmission Total Regal
Systems Solutions
Jul 1, Jul 2, Jul 1, Jul 2, Jul 1, Jul 2, Jul 1, Jul 2,
2017 2016 2017 2016 2017 2016 2017 2016
---- ---- ---- ---- ---- ---- ---- ----
Net Sales $407.4 $394.7 $270.5 $254.5 $191.3 $189.4 $869.2 $838.6
GAAP Operating Margin 5.1% 6.4% 14.9% 14.2% 11.6% 16.0% 9.5% 10.9%
Adjusted Operating
Margin* 6.7% 6.5% 15.1% 14.4% 11.7% 10.1% 10.4% 9.7%
Components of Net Sales:
Organic Sales Growth 4.3% (9.0)% 6.5% (10.4)% 3.5% (10.9)% 4.8% (9.8)%
Acquisitions, Net of
Divestitures - % - % - % - % (2.0)% (0.9)% (0.5)% (0.2)%
Foreign Currency Impact (1.1)% (1.6)% (0.2)% (0.7)% (0.5)% (0.2)% (0.7)% (1.0)%
SEGMENT INFORMATION
-------------------
Unaudited
(Dollars In Millions)
Six Months Ended
Commercial & Industrial Climate Solutions Power Transmission Total Regal
Systems Solutions
Jul 1, Jul 2, Jul 1, Jul 2, Jul 1, Jul 2, Jul 1, Jul 2,
2017 2016 2017 2016 2017 2016 2017 2016
---- ---- ---- ---- ---- ---- ---- ----
Net Sales $788.6 $772.3 $518.2 $494.3 $375.9 $390.2 $1,682.7 $1,656.8
GAAP Operating Margin 5.9% 6.1% 13.8% 12.3% 10.6% 13.6% 9.4% 9.7%
Adjusted Operating
Margin* 6.9% 6.2% 14.1% 12.6% 10.8% 10.8% 10.0% 9.2%
Components of Net Sales:
Organic Sales Growth 3.0% (12.2)% 5.1% (11.9)% (0.8)% (8.5)% 2.8% (11.3)%
Acquisitions, Net of
Divestitures - % - % - % - % (2.3)% 8.7% (0.5)% 1.8%
Foreign Currency Impact (0.9)% (1.7)% (0.3)% (0.8% (0.5)% (0.2)% (0.6)% (1.1)%
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. 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.
ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Six Months Ended
---------------------------------
Jul 1, Jul 2, Jul 1, Jul 2,
2017 2016 2017 2016
---- ---- ---- ----
GAAP Diluted Earnings Per Share $1.18 $1.26 $2.20 $2.19
Restructuring and Related Costs 0.12 0.02 0.17 0.04
Gain on Disposal of Businesses - (0.14) - (0.14)
Gain on Sale of Assets (0.01) - (0.01) -
Adjusted Diluted Earnings Per Share $1.29 $1.14 $2.36 $2.09
===== ===== ===== =====
ADJUSTED OPERATING INCOME
-------------------------
Three Months Ended
Commercial & Industrial Climate Solutions Power Transmission Total Regal
Systems Solutions
Jul 1, Jul 2, Jul 1, Jul 2, Jul 1, Jul 2, Jul 1, Jul 2,
2017 2016 2017 2016 2017 2016 2017 2016
---- ---- ---- ---- ---- ---- ---- ----
GAAP Income from Operations $20.6 $25.1 $40.2 $36.1 $22.2 $30.2 $83.0 $91.4
Restructuring and Related
Costs 6.9 0.7 0.6 0.5 0.2 0.5 7.7 1.7
Gain on Disposal of
Businesses - - - - - (11.6) - (11.6)
Gain on Sale of Assets (0.3) - - - - - (0.3) -
---- --- --- --- --- ---- ---
Adjusted Income from
Operations $27.2 $25.8 $40.8 $36.6 $22.4 $19.1 $90.4 $81.5
===== ===== ===== ===== ===== ===== ===== =====
GAAP Operating Margin % 5.1% 6.4% 14.9% 14.2% 11.6% 16.0% 9.5% 10.9%
Adjusted Operating Margin % 6.7% 6.5% 15.1% 14.4% 11.7% 10.1% 10.4% 9.7%
ADJUSTED OPERATING INCOME
-------------------------
Six Months Ended
Commercial & Industrial Climate Solutions Power Transmission Total Regal
Systems Solutions
Jul 1, Jul 2, Jul 1, Jul 2, Jul 1, Jul 2, Jul 1, Jul 2,
2017 2016 2017 2016 2017 2016 2017 2016
---- ---- ---- ---- ---- ---- ---- ----
GAAP Income from Operations $46.4 $46.8 $71.4 $60.7 $40.0 $53.2 $157.8 $160.7
Restructuring and Related
Costs 8.6 0.8 1.7 1.8 0.6 0.5 10.9 3.1
Gain on Disposal of
Businesses - - - - (0.1) (11.6) (0.1) (11.6)
Gain on Sale of Assets (0.4) - - - - - (0.4) -
Adjusted Income from
Operations $54.6 $47.6 $73.1 $62.5 $40.5 $42.1 $168.2 $152.2
===== ===== ===== ===== ===== ===== ====== ======
GAAP Operating Margin % 5.9% 6.1% 13.8% 12.3% 10.6% 13.6% 9.4% 9.7%
Adjusted Operating Margin % 6.9% 6.2% 14.1% 12.6% 10.8% 10.8% 10.0% 9.2%
FREE CASH FLOW RECONCILIATION Three Months Ended Six Months Ended
-----------------------------
Jul 1, Jul 2, Jul 1, Jul 2,
2017 2016 2017 2016
---- ---- ---- ----
Net Cash Provided by
Operating Activities $98.4 $117.5 $148.9 $176.1
Additions to Property Plant
and Equipment (16.7) (16.8) (33.7) (31.7)
----- ----- ----- -----
Free Cash Flow $81.7 $100.7 $115.2 $144.4
===== ====== ====== ======
Free Cash Flow as a
Percentage of Net Income
Attributable to Regal Beloit
Corporation 154.2% 177.9% 116.0% 147.0%
RECONCILIATION OF 2017 ADJUSTED
ANNUAL GUIDANCE Minimum Maximum
------------------------------- ------- -------
2017 Diluted EPS Annual Guidance $4.51 $4.81
Restructuring and Related Costs 0.21 0.21
Gain on Sale of Assets (0.02) (0.02)
2017 Adjusted Diluted EPS Annual
Guidance $4.70 $5.00
===== =====
ORGANIC
SALES
GROWTH Three Months Ended
July 1, 2017
Commercial & Climate Power Total Regal
Industrial Solutions Transmission
Systems Solutions
------- ---------
Net Sales $407.4 $270.5 $191.3 $869.2
Net Sales
from
Business
Divested - - 3.8 3.8
Impact from
Foreign
Currency
Exchange
Rates 4.2 0.5 1.0 5.7
Adjusted Net
Sales $411.6 $271.0 $196.1 $878.7
====== ====== ====== ======
Net Sales
Three
Months
Ended July
2, 2016 $394.7 $254.5 $189.4 $838.6
====== ====== ====== ======
Organic
Sales
Growth % 4.3% 6.5% 3.5% 4.8%
Net Sales
Growth % 3.2% 6.3% 1.0% 3.6%
ORGANIC
SALES
GROWTH Six Months Ended
July 1, 2017
Commercial & Climate Power Total Regal
Industrial Solutions Transmission
Systems Solutions
------- ---------
Net Sales $788.6 $518.2 $375.9 $1,682.7
Net Sales
from
Business
Divested - - 9.0 9.0
Impact from
Foreign
Currency
Exchange
Rates 7.1 1.5 2.1 10.7
Adjusted Net
Sales $795.7 $519.7 $387.0 $1,702.4
====== ====== ====== ========
Net Sales
Six Months
Ended July
2, 2016 $772.3 $494.3 $390.2 $1,656.8
====== ====== ====== ========
Organic
Sales
Growth % 3.0% 5.1% (0.8)% 2.8%
Net Sales
Growth % 2.1% 4.8% (3.7)% 1.6%
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SOURCE Regal Beloit Corporation
