Regal Beloit Corporation Announces Second Quarter 2019 Financial Results
BELOIT, Wis., Aug. 5, 2019 /PRNewswire/ -- Regal Beloit Corporation (NYSE: RBC) reported second quarter 2019 diluted earnings per share of $1.55, up 3.3% from the prior year. Second quarter 2019 adjusted diluted earnings per share* were $1.52, in line with the prior year.
Key financial results for the second quarter 2019 included:
-- Total net sales of $873.7 million decreased 9.0% from the prior year and
included a negative 1.5% impact from foreign currency and a negative
5.3% impact from businesses divested/to be exited. The result was a
negative organic sales growth rate of 2.2%.
-- Income from operations was $96.0 million or 11.0% of net sales, up 60
basis points from prior year. Adjusted income from operations was $95.4
million or 11.0% of adjusted net sales, down 20 basis points from prior
year.
-- Adjusted income from operations delevered at 16.3% from prior year.
-- Inventory adjustment of $3.4 million on a pre-tax basis incurred in the
Power Generation business, which had a negative $0.06 impact on diluted
earnings per share.
-- Net cash provided by operating activities was $112.3 million and capital
expenditures totaled $36.0 million, resulting in free cash flow of $76.3
million or 121.9% of adjusted net income.
-- Repurchased 731,745 shares for a total of $55.9 million.
On July 2, 2019, the Company closed on the divestiture of a vapor recovery business previously in the Commercial and Industrial Systems segment. The results from the business were included in the Company's second quarter financial statements but excluded from the Company's guidance. The Company's previous guidance for full year 2019 adjusted diluted earnings per share included $0.12 for this business.
Second quarter 2019 segment results versus the prior year second quarter included:
-- Commercial and Industrial Systems segment net sales were $401.8 million,
a decrease of 14.3%. Businesses divested/to be exited had a negative
6.6% impact, and foreign currency had a negative 2.2% impact. The result
was a negative organic sales growth rate of 5.5% driven by weakness in
the pool pump, China, commercial HVAC and power generation end markets.
Operating margin was 4.9%. Excluding adjustments of $4.5 million,
adjusted operating margin was 6.0% of adjusted net sales.
-- Climate Solutions segment net sales were $267.9 million, a decrease of
3.4%. The businesses divested/to be exited had a negative 5.0% impact,
and foreign currency had a negative 0.7% impact. The result was an
organic sales growth rate of 2.3% driven by the positive impact from the
FER pre-buy and slightly positive residential HVAC growth which was
negatively impacted by the cool weather in the quarter. Partially
offsetting this growth was weakness in commercial refrigeration and the
impacts from account pruning in residential HVAC. Operating margin was
19.3%. Including net adjustments of $5.6 million, adjusted operating
margin was 17.6% of adjusted net sales.
-- Power Transmission Solutions segment net sales were $204.0 million, a
decrease of 4.4%. The businesses divested/to be exited had a negative
2.6% impact, and foreign currency had a negative 1.0% impact. The result
was a negative organic sales growth rate of 0.8% driven by a slowdown in
North American industrial end markets and de-stocking of inventory.
There was also significant weakness in upstream oil & gas, agriculture
and beverage end markets, which were partially offset by strong demand
in renewable energy end markets. Operating margin was 12.2%. Excluding
net adjustments of $0.5 million, adjusted operating margin was 12.4% of
adjusted net sales.
*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.
"While the second quarter was challenging for Regal, our business model continues to demonstrate the resiliency of our operations as illustrated by our deleverage rate. Our financial results reflected lower than expected demand due to abnormally wet and mild weather, the ongoing global trade uncertainties, including the June Mexico tariff concerns, efforts by distribution partners to reduce excess channel inventories, along with an overall continued economic malaise in Asia/China, Australia, and Europe. Despite these headwinds, Regal performed at a deleverage rate of 16% of sales in the quarter," said Regal CEO Louis Pinkham.
2019 Outlook
"We are reducing our adjusted diluted earnings per share guidance to $5.50 to $5.80, a reduction of 9% at the midpoint on a comparable basis that excludes the $0.12 full year contribution of the divested vapor recovery business. We feel this reduction reflects current market conditions. However, we are excited about the progress on our strategic initiatives to better position Regal for future opportunities and profitable growth," continued Mr. Pinkham.
The Company forecasts 2019 GAAP diluted earnings per share of $6.00 to $6.30. The difference between the GAAP diluted earnings per share guidance and the adjusted diluted earnings per share guidance relates to expected restructuring and related costs of $0.23 per share, gain on businesses divested and assets to be exited of $0.68 per share, net income from businesses to be divested/exited of $0.10 per share, and CEO transition costs of $0.05 per share.
The Company's 2019 guidance excludes the sales and earnings from a number of businesses that have been or are expected to be divested or exited. Please see the table in the appendix for details.
Conference Call
Regal will hold a conference call to discuss the earnings release at 9:00 AM CDT (10:00 AM EDT) on Tuesday, August 6, 2019. 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 0318483# 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 10133128#. Both will be accessible until November 5, 2019.
About the Company
Regal Beloit Corporation (NYSE: RBC) is a leading manufacturer of electric motors and controls, power generation products and power transmission products serving customers throughout the world. We create a better tomorrow by developing and responsibly producing energy-efficient products and systems.
Our company is comprised of three operating segments: Commercial and 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
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, including but not limited to: 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, drives and controls, power generation and power transmission industries; our ability to develop new products based on technological innovation, such as the Internet of Things, 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; risks associated with global manufacturing; issues and costs arising from the integration of acquired companies and businesses and the timing and impact of purchase accounting adjustments; our overall debt levels and our ability to repay principal and interest on our outstanding debt; prolonged declines in one or more markets we serve, such as heating, ventilation, air conditioning, refrigeration, power generation, oil and gas, unit material handling or water heating; 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; 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 adverse effects or liabilities from business exits or divestitures; 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; effects on earnings of any significant impairment of goodwill or intangible assets; losses from failures, breaches, attacks or disclosures involving our information technology infrastructure and data; 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 with the U.S. Securities and Exchange Commission on February 26, 2019 and from time to time in other filed reports. 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.
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 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 and adjusted operating margin 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
(Amounts in Millions, Except per Share Data)
Three Months Ended Six Months Ended
Jun 29, Jun 30, Jun 29, Jun 30,
2019 2018 2019 2018
Net Sales $
873.7 $
959.7 $
1,727.5 $
1,838.5
Cost of Sales 639.7 712.3 1,258.9 1,356.2
Gross Profit 234.0 247.4 468.6 482.3
Operating Expenses 138.0 147.8 242.0 294.5
Impairments 10.0
Total Operating Expenses 138.0 147.8 252.0 294.5
Income from Operations 96.0 99.6 216.6 187.8
Other Expenses, net 0.2 0.4 0.3 0.8
Interest Expense 13.4 14.2 27.0 27.2
Interest Income 1.4 0.6 2.5 0.8
Income before Taxes 83.8 85.6 191.8 160.6
Provision for Income Taxes 16.4 18.3 37.6 34.0
Net Income 67.4 67.3 154.2 126.6
Less: Net Income
Attributable to
Noncontrolling Interests 0.8 1.4 1.7 2.3
Net Income Attributable to
Regal Beloit Corporation $
66.6 $
65.9 $
152.5 $
124.3
Earnings Per Share
Attributable to Regal
Beloit Corporation:
Basic $
1.56 $
1.51 $
3.57 $
2.83
Assuming Dilution $
1.55 $
1.50 $
3.54 $
2.81
Cash Dividends Declared Per
Share $
0.30 $
0.28 $
0.58 $
0.54
Weighted Average Number of
Shares Outstanding:
Basic 42.6 43.8 42.7 44.0
Assuming Dilution 43.0 44.1 43.0 44.3
CONDENSED CONSOLIDATED
BALANCE SHEETS
---
Unaudited
(Dollars in Millions)
Jun 29, Dec 29,
2019 2018
ASSETS
Current Assets:
Cash and Cash Equivalents $
291.3 $
248.6
Trade Receivables, less
Allowances of $9.2 Million
in 2019 and $13.3 Million
in 2018 547.8 551.9
Inventories 765.3 767.2
Prepaid Expenses and Other
Current Assets 198.5 250.0
Total Current Assets 1,802.9 1,817.7
Net Property, Plant,
Equipment and Noncurrent
Assets 2,857.4 2,806.1
Total Assets $
4,660.3 $
4,623.8
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable $
416.7 $
424.8
Other Accrued Expenses 228.0 258.2
Current Maturities of Debt 0.6 0.5
Total Current Liabilities 645.3 683.5
Long-Term Debt 1,222.7 1,306.6
Other Noncurrent Liabilities 361.9 295.2
Equity:
Total Regal Beloit
Corporation Shareholders'
Equity 2,401.0 2,310.5
Noncontrolling Interests 29.4 28.0
Total Equity 2,430.4 2,338.5
Total Liabilities and Equity $
4,660.3 $
4,623.8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
---
Unaudited
(Dollars in Millions)
Three Months Ended Six Months Ended
Jun 29, Jun 30, Jun 29, Jun 30,
2019 2018 2019 2018
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $
67.4 $
67.3 $
154.2 $
126.6
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 32.2 36.2 66.5 71.0
Loss on Disposal of Assets 0.3 2.2 0.4 2.4
Gain on Businesses Divested and
Assets to be Exited (4.2) (35.4)
Share-Based Compensation Expense 3.1 3.8 7.4 7.2
Change in Operating Assets and
Liabilities 13.5 (7.7) (62.5) (62.9)
Net Cash Provided by Operating
Activities 112.3 101.8 130.6 144.3
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to Property, Plant and
Equipment (36.0) (21.2) (56.2) (40.5)
Proceeds Received from Sales of
Property, Plant and Equipment 1.7 0.1 1.7 0.4
Net Sales of Investment
Securities 0.5
Business Acquisitions, Net of
Cash Acquired (161.5) (161.5)
Proceeds Received from Disposal
of Businesses 18.8 138.2
Net Cash (Used in) Provided by
Investing Activities (15.5) (182.6) 83.7 (201.1)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net Borrowings (Repayments) Under
Revolving Credit Facility 9.2 152.9 (60.4) 193.9
Net Repayments of Short-Term
Borrowings (1.6) (0.3) (0.7)
Proceeds from Long-Term Debt 0.2 0.2
Repayments of Long-Term Debt (0.1) (24.2) (0.1)
Dividends Paid to Shareholders (12.0) (11.4) (24.0) (22.9)
Repurchase of Common Stock (55.9) (45.1) (55.9) (71.1)
Distributions to Noncontrolling
Interest (0.3)
Shares Surrendered for Taxes (5.9) (2.0) (7.5) (2.9)
Net Cash (Used in) Provided by
Financing Activities (66.3) 94.3 (172.3) 96.4
EFFECT OF EXCHANGE RATES ON CASH
AND CASH EQUIVALENTS (3.5) (7.8) 0.7 (3.6)
Net Increase in Cash and Cash
Equivalents 27.0 5.7 42.7 36.0
Cash and Cash Equivalents at
Beginning of Period 264.3 169.9 248.6 139.6
Cash and Cash Equivalents at End
of Period $
291.3 $
175.6 $
291.3 $
175.6
SEGMENT INFORMATION
Unaudited
(Dollars in Millions)
Three Months Ended
Commercial & Industrial Climate Solutions Power Transmission
Total Regal
Systems Solutions
Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30,
2019 2018 2019 2018 2019 2018 2019 2018
Net Sales $
401.8 $
469.0 $
267.9 $
277.3 $
204.0 $
213.4 $
873.7 $
959.7
Net Sales for Businesses
Divested/to be Exited (33.6) (5.6) (19.2) (5.6) (5.6) (58.4)
Adjusted Net Sales* $
401.8 $
435.4 $
262.3 $
258.1 $
204.0 $
207.8 $
868.1 $
901.3
GAAP Operating Margin 4.9 6.5 19.3 15.9 12.2
% % % %
% %
% % 11.8 11.0 10.4
Adjusted Operating Margin* 6.0 7.6 17.6 16.5 12.4
% % % %
% %
% % 12.0 11.0 11.2
Components of Net Sales:
Organic Sales Growth* (5.5) 5.4 2.3 3.7 (0.8)
%
% % %
%
% % 10.0 (2.2) 5.9
%
Acquisitions % 8.0
% % % % % % 3.7
%
Businesses Divested/to be (6.6) (0.3) (5.0) (1.3) (2.6)
Exited % % %
% %
% % % 0.3 (5.3) (0.5)
Foreign Currency Impact (2.2) 2.1 (0.7) 0.1 (1.0)
% % %
%
% % % 1.2 (1.5) 1.3
%
SEGMENT INFORMATION
Unaudited
(Dollars in Millions)
Six Months Ended
Commercial & Industrial Climate Solutions Power Transmission
Total Regal
Systems Solutions
Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30,
2019 2018 2019 2018 2019 2018 2019 2018
Net Sales $
782.1 $
883.0 $
531.2 $
537.2 $
414.2 $
418.3 $
1,727.5 $
1,838.5
Net Sales for Businesses
Divested/to be Exited (67.1) (21.1) (37.2) (5.6) (9.9) (26.7) (114.2)
Adjusted Net Sales* $
782.1 $
815.9 $
510.1 $
500.0 $
408.6 $
408.4 $
1,700.8 $
1,724.3
GAAP Operating Margin 9.3 6.7 17.1 14.2 12.8
% % % %
% %
% % 12.4 12.5 10.2
Adjusted Operating Margin* 6.0 7.4 16.7 14.7 13.4
% % % %
% %
% % 12.8 11.0 10.8
Components of Net Sales:
Organic Sales Growth (5.9)
%
% %
% %
%
% 5.0 3.0 4.3 1.2 9.6 (1.6) 5.9
%
Acquisitions 3.9 4.1 % % % % 1.8
% %
% 1.9
%
Businesses Divested/to be (7.2) 0.3 (3.2) (1.2) (1.0)
Exited % %
% %
% % % % (4.6) (0.3)
Foreign Currency Impact (2.2) 2.5 (0.9) 0.6 (1.2)
% % %
%
% % % 1.7 (1.6) 1.7
%
ADJUSTED DILUTED
EARNINGS PER
SHARE Three Months Ended Six Months Ended
---
Jun 29, Jun 30, Jun 29, Jun 30,
2019 2018 2019 2018
GAAP Diluted
Earnings Per
Share $
1.55 $
1.50 $
3.54 $
2.81
Restructuring and
Related Costs 0.07 0.03 0.11 0.06
Purchase
Accounting and
Transaction Costs 0.08 0.08
Gain on Businesses
Divested and
Assets to be
Exited (0.10) (0.69)
Net Income from
Businesses
Divested/to be
Exited (0.09) (0.04) (0.17)
CEO Transition
Costs 0.03
Adjusted Diluted
Earnings Per
Share $
1.52 $
1.52 $
2.95 $
2.78
2019 ADJUSTED
ANNUAL GUIDANCE Minimum Maximum
---
2019 Diluted EPS
Annual Guidance $
6.00 $
6.30
Restructuring
and Related
Costs 0.23 0.23
Gain on
Businesses
Divested and
Assets to be
Exited (0.68) (0.68)
Net Income from
Businesses
Divested/to be
Exited (0.10) (0.10)
CEO Transition
Costs 0.05 0.05
2019 Adjusted
Diluted EPS
Annual Guidance $
5.50 $
5.80
ADJUSTED INCOME FROM OPERATIONS
Three Months Ended
Commercial & Climate Solutions
Power
Total Regal
Industrial Transmission
Systems Solutions
Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30,
2019 2018 2019 2018 2019 2018 2019 2018
GAAP Income from Operations $
19.5 $
30.5 $
51.7 $
44.0 $
24.8 $
25.1 $
96.0 $
99.6
Restructuring and Related
Costs 2.6 0.7 0.6 0.7 0.4 0.1 3.6 1.5
Purchase Accounting and
Transaction Costs 5.1 5.1
(Gain) Loss on Businesses
Divested and Assets to be
Exited 1.8 (6.1) 0.1 (4.2)
Operating Income from
Businesses Divested/to be
Exited (3.0) (0.1) (2.1) (0.3) (0.1) (5.4)
CEO Transition Costs 0.1 0.1
Adjusted Income from
Operations $
24.0 $
33.3 $
46.1 $
42.6 $
25.3 $
24.9 $
95.4 $
100.8
GAAP Operating Margin % 4.9 6.5 19.3 15.9 12.2 11.8 11.0
% % % %
% % % % 10.4
Adjusted Operating Margin % 6.0 7.6 17.6 16.5 12.4 12.0 11.0
% % % %
% % % % 11.2
ADJUSTED INCOME FROM OPERATIONS
Six Months Ended
Commercial & Climate Solutions
Power
Total Regal
Industrial Transmission
Systems Solutions
Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30, Jun 29, Jun 30,
2019 2018 2019 2018 2019 2018 2019 2018
GAAP Income from Operations $
73.0 $
59.6 $
90.6 $
76.3 $
53.0 $
51.9 $
216.6 $
187.8
Restructuring and Related
Costs 4.7 2.0 0.7 1.1 0.5 0.1 5.9 3.2
Purchase Accounting and
Transaction Costs 0.1 5.1 0.1 5.1
(Gain) Loss on Businesses
Divested and Assets to be
Exited (31.8) (4.8) 1.2 (35.4)
Operating (Income) Loss
from Businesses Divested/
to be Exited (6.3) (2.0) (3.7) (0.3) 0.1 (2.3) (9.9)
CEO Transition Costs 0.8 0.5 0.4 1.7
Adjusted Income from
Operations $
46.8 $
60.4 $
85.0 $
73.7 $
54.8 $
52.1 $
186.6 $
186.2
GAAP Operating Margin % 9.3 6.7 17.1 14.2 12.8 12.4 12.5
% % % %
% % % % 10.2
Adjusted Operating Margin % 6.0 7.4 16.7 14.7 13.4 12.8 11.0
% % % %
% % % % 10.8
DEBT TO EBITDA Last Twelve Months
---
Jun 29, Dec 29,
2019 2018
Net Income $
263.4 $
235.8
Interest Expense 55.0 55.2
Interest Income (3.6) (1.9)
Taxes 60.0 56.4
Depreciation and Amortization 137.9 142.4
EBITDA $
512.7 $
487.9
Restructuring and Related
Costs 10.4 7.7
Purchase Accounting and
Transactions Costs 0.4 5.4
Impairment and Exit Related
Costs 44.9 34.9
CEO Transition Costs 5.5 3.8
Operating Income from
Businesses Divested/to be
Exited (12.0) (19.6)
Gain on Sale of Assets (2.2) (2.2)
Gain on Divestiture of
Businesses (45.4)
Adjusted EBITDA $
514.3 $
517.9
Current Maturities of Long-
Term Debt $
0.6 $
0.5
Long-Term Debt 1,222.7 1,306.6
Total Gross Debt $
1,223.3 $
1,307.1
Cash (291.3) (248.6)
Net Debt $
932.0 $
1,058.5
Gross Debt/EBITDA 2.4 2.7
Gross Debt/Adjusted EBITDA 2.4 2.5
Net Debt/EBITDA 1.8 2.2
Net Debt/Adjusted EBITDA 1.8 2.0
FREE CASH FLOW Three Months Ended Six Months Ended
---
Jun 29, Jun 30, Jun 29, Jun 30,
2019 2018 2019 2018
Net Cash Provided
by Operating
Activities $
112.3 $
101.8 $
130.6 $
144.3
Additions to
Property Plant
and Equipment (36.0) (21.2) (56.2) (40.5)
Free Cash Flow $
76.3 $
80.6 $
74.4 $
103.8
GAAP Net Income
Attributable to
Regal Beloit
Corporation $
66.6 $
65.9 $
152.5 $
124.3
Gain on
Businesses
Divested and
Assets to be
Exited (4.2) (35.4)
Tax Effect from
Gain on
Businesses
Divested and
Assets to be
Exited 0.2 5.5
Adjusted Net
Income
Attributable to
Regal Beloit
Corporation(1) $
62.6 $
65.9 $
122.6 $
124.3
Free Cash Flow as
a Percentage of % %
Adjusted Net % %
Income
Attributable to
Regal Beloit
Corporation 121.9 122.3 60.7 83.5
(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
business to be exited and used
in the Free Cash Flow
Calculation.
ADJUSTED
EFFECTIVE TAX
RATE Three Months Ended Six Months Ended
---
Jun 29, Jun 30, Jun 29, Jun 30,
2019 2018 2019 2018
Income before
Taxes $
83.8 $
85.6 $
191.8 $
160.6
Provision for
Income Taxes 16.4 18.3 37.6 34.0
Effective Tax 19.6 21.4 19.6
Rate % %
% % 21.2
Income before
Taxes $
83.8 $
85.6 $
191.8 $
160.6
Gain on
Businesses
Divested and
Assets to be
Exited (4.2) (35.4)
Adjusted Income
before Taxes $
79.6 $
85.6 $
156.4 $
160.6
Provision for
Income Taxes $
16.4 $
18.3 $
37.6 $
34.0
Tax Effect from
Gain on
Businesses
Divested and
Assets to be
Exited (0.2) (5.5)
Adjusted
Provision for
Income Taxes $
16.2 $
18.3 $
32.1 $
34.0
Adjusted 20.4 21.4 20.5
Effective Tax % %
Rate % % 21.2
ORGANIC SALES
GROWTH
Three Months Ended
---
June 29, 2019
Commercial & Climate Power Total Regal
Industrial Solutions Transmission
Systems Solutions
Net Sales Three
Months Ended
Jun 29, 2019 $
401.8 $
267.9 $
204.0 $
873.7
Net Sales from
Businesses
Divested/to
be Exited (5.6) (5.6)
Impact from
Foreign
Currency
Exchange Rates 9.5 1.8 2.1 13.4
Organic Sales
Three Months
Ended Jun 29,
2019 $
411.3 $
264.1 $
206.1 $
881.5
Net Sales Three
Months Ended
Jun 30, 2018 $
469.0 $
277.3 $
213.4 $
959.7
Net Sales from
Businesses
Divested/to
be Exited (33.6) (19.2) (5.6) (58.4)
Adjusted Net
Sales Three
Months Ended
Jun 30, 2018 $
435.4 $
258.1 $
207.8 $
901.3
Three Months
Ended Jun 29, % % % %
2019 Organic
Sales Growth % (5.5) 2.3 (0.8) (2.2)
Three Months
Ended Jun 29, % % % %
2019 Net Sales
Growth % (14.3) (3.4) (4.4) (9.0)
ORGANIC SALES
GROWTH
Six Months Ended
---
September 29,
2018
June 29, 2019
Commercial & Climate Power Total Regal
Industrial Solutions Transmission
Systems Solutions
Net Sales Six
Months Ended
Jun 29, 2019 $
782.1 $
531.2 $
414.2 $
1,727.5
Net Sales from
Business
Acquired (31.7) (31.7)
Net Sales from
Businesses
Divested/to
be Exited (21.1) (5.6) (26.7)
Impact from
Foreign
Currency
Exchange Rates 17.6 4.7 4.9 27.2
Organic Sales
Six Months
Ended Jun 29,
2019 $
768.0 $
514.8 $
413.5 $
1,696.3
Net Sales Six
Months Ended
Jun 30, 2018 $
883.0 $
537.2 $
418.3 $
1,838.5
Net Sales from
Businesses
Divested/to
be Exited (67.1) (37.2) (9.9) (114.2)
Adjusted Net
Sales Six
Months Ended
Jun 30, 2018 $
815.9 $
500.0 $
408.4 $
1,724.3
Six Months
Ended Jun 29, % % % %
2019 Organic
Sales Growth % (5.9) 3.0 1.2 (1.6)
Six Months
Ended Jun 29, % % % %
2019 Net Sales
Growth % (11.4) (1.1) (1.0) (6.0)
The following tables outline by quarter and full year the 2018 net sales and income from operations, and the full year adjusted diluted earnings per share, illustrating the impact of businesses divested and to be exited, which can be used to compare to Regal's 2019 guidance and actual performance.
Commercial & Climate Power Total Regal
Industrial Solutions Transmission
Systems Solutions
Fiscal 2018 First
Quarter Schedule
for Ongoing
Business
Net Sales Three
Months Ended
March 31, 2018 $
414.0 $
259.9 $
204.9 $
878.8
Net Sales from
Businesses
Divested/to be
Exited (43.9) (18.0) (4.3) (66.2)
Net Sales from
Ongoing Business $
370.1 $
241.9 $
200.6 $
812.6
GAAP Income from
Operations Three
Months Ended
March 31, 2018 $
29.1 $
32.3 $
26.8 $
88.2
Restructuring and
Related Costs 1.3 0.4 1.7
(Income) Loss from
Operations of
Businesses
Divested/to be
Exited (2.8) (1.6) 0.4 (4.0)
Adjusted Income
from Operations
of Ongoing
Business $
27.6 $
31.1 $
27.2 $
85.9
Ongoing Business
Adjusted % % % %
Operating Margin
% 7.5 12.9 13.6 10.6
Fiscal 2018 Second
Quarter Schedule
for Ongoing
Business
Net Sales Three
Months Ended June
30, 2018 $
469.0 $
277.3 $
213.4 $
959.7
Net Sales from
Businesses
Divested/to be
Exited (43.7) (19.2) (5.6) (68.5)
Net Sales from
Ongoing Business $
425.3 $
258.1 $
207.8 $
891.2
GAAP Income from
Operations Three
Months Ended June
30, 2018 $
30.5 $
44.0 $
25.1 $
99.6
Restructuring and
Related Costs 0.7 0.7 0.1 1.5
Purchase
Accounting and
Transaction Costs 5.1 5.1
Income from
Operations of
Businesses
Divested/to be
Exited (4.0) (2.1) (0.3) (6.4)
Adjusted Income
from Operations
of Ongoing
Business $
32.3 $
42.6 $
24.9 $
99.8
Ongoing Business
Adjusted % % % %
Operating Margin
% 7.6 16.5 12.0 11.2
Commercial & Climate Power Total Regal
Industrial Solutions Transmission
Systems Solutions
Fiscal 2018 Third
Quarter Schedule
for Ongoing
Business
Net Sales Three
Months Ended
September 29,
2018 $
462.3 $
255.4 $
207.7 $
925.4
Net Sales from
Businesses
Divested/to be
Exited (46.7) (13.3) (4.8) (64.8)
Net Sales from
Ongoing Business $
415.6 $
242.1 $
202.9 $
860.6
GAAP Income from
Operations Three
Months Ended
September 29,
2018 $
35.3 $
6.0 $
28.1 $
69.4
Restructuring and
Related Costs 1.9 0.3 0.1 2.3
Purchase
Accounting and
Transaction Costs 0.2 0.2
Impairment and
Exit Related
Costs 34.9 34.9
Income from
Operations of
Businesses
Divested/to be
Exited (5.2) (1.5) (0.3) (7.0)
Adjusted Income
from Operations
of Ongoing
Business $
32.2 $
39.7 $
27.9 $
99.8
Ongoing Business
Adjusted % % % %
Operating Margin
% 7.7 16.4 13.8 11.6
Fiscal 2018 Fourth
Quarter Schedule
for Ongoing
Business
Net Sales Three
Months Ended
December 29, 2018 $
436.7 $
232.2 $
212.8 $
881.7
Net Sales from
Businesses
Divested/to be
Exited (47.5) (11.2) (5.2) (63.9)
Net Sales from
Ongoing Business $
389.2 $
221.0 $
207.6 $
817.8
GAAP Income from
Operations Three
Months Ended
December 29, 2018 $
32.1 $
33.3 $
24.4 $
89.8
Restructuring and
Related Costs 1.7 0.4 0.1 2.2
Purchase
Accounting and
Transaction Costs 0.1 0.1
Gain on Sale of
Assets (1.5) (0.7) (2.2)
CEO Transition
Costs 1.8 1.1 0.9 3.8
Income from
Operations of
Businesses
Divested/to be
Exited (4.6) (1.6) (0.3) (6.5)
Adjusted Income
from Operations
of Ongoing
Business $
29.6 $
32.5 $
25.1 $
87.2
Ongoing Business
Adjusted % % % %
Operating Margin
% 7.6 14.7 12.1 10.7
Commercial & Climate Power Total Regal
Industrial Solutions Transmission
Systems Solutions
Fiscal 2018 Full
Year Schedule for
Ongoing Business
Net Sales Twelve
Months Ended
December 29, 2018 $
1,782.0 $
1,024.8 $
838.8 $
3,645.6
Net Sales from
Businesses
Divested/to be
Exited (181.8) (61.7) (19.9) (263.4)
Net Sales from
Ongoing Business $
1,600.2 $
963.1 $
818.9 $
3,382.2
GAAP Income from
Operations Twelve
Months Ended
December 29, 2018 $
127.0 $
115.6 $
104.4 $
347.0
Restructuring and
Related Costs 5.6 1.8 0.3 7.7
Purchase
Accounting and
Transaction Costs 5.4 5.4
Gain on Sale of
Assets (1.5) (0.7) (2.2)
CEO Transition
Costs 1.8 1.1 0.9 3.8
Impairment and
Exit Related
Costs 34.9 34.9
Income from
Operations of
Businesses
Divested/to be
Exited (16.6) (6.8) (0.5) (23.9)
Adjusted Income
from Operations
of Ongoing
Business $
121.7 $
145.9 $
105.1 $
372.7
Ongoing Business
Adjusted % % %
Operating Margin
% 7.6
% 15.1 12.8 11.0
2018 ADJUSTED
DILUTED
EARNINGS PER
SHARE FOR
ONGOING
BUSINESS
Three Months Ended Twelve
Months
Ended Dec
29, 2018
---
Mar 31, Jun 30, Sep 29, Dec 29,
2018 2018 2018 2018
Adjusted Diluted
Earnings Per
Share $
1.33 $
1.59 $
1.67 $
1.41 $
6.00
Earnings Per
Share from
Businesses
Divested/to be
Exited (0.06) (0.09) (0.11) (0.10) (0.36)
Adjusted Diluted
Earnings Per
Share for
Ongoing
Business $
1.27 $
1.50 $
1.56 $
1.31 $
5.64
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SOURCE Regal Beloit Corporation
