Regal Beloit Corporation Announces Third Quarter 2019 Financial Results
BELOIT, Wis., Nov. 4, 2019 /PRNewswire/ -- Regal Beloit Corporation (NYSE: RBC), a global leader in the engineering and manufacturing of high-efficiency electric motors and power transmission products, reported third quarter 2019 diluted earnings per share of $1.19. Third quarter 2019 adjusted diluted earnings per share* were $1.35.
Key financial results for the third quarter 2019 included:
-- Total net sales of $772.3 million decreased 16.5% from the prior year
and included a negative 0.7% impact from foreign currency and a negative
6.2% impact from businesses divested/to be exited. The result was a
negative organic sales growth rate of 9.6%.
-- Income from operations was $72.8 million or 9.4% of net sales, up 190
basis points from prior year. Adjusted income from operations was $81.3
million or 10.5% of adjusted net sales, down 110 basis points from prior
year.
-- Adjusted income from operations delevered at 20.7% from prior year.
-- Inventories down $39.6 million from the end of the second quarter 2019.
-- Net cash provided by operating activities was $140.6 million and capital
expenditures totaled $21.1 million, resulting in free cash flow of
$119.5 million or 239.5% of adjusted net income.
-- Purchased 1,282,037 shares for a total of $94.1 million.
-- The Board of Directors on October 25, 2019 approved a new $250 million
share purchase authorization replacing the previous authorization.
Third quarter 2019 segment results versus the prior year third quarter:
-- Commercial and Industrial Systems segment net sales were $358.6 million,
a decrease of 22.4%. Businesses divested/to be exited had a negative
8.6% impact, and foreign currency had a negative 1.1% impact. The result
was a negative organic sales growth rate of 12.7% driven by continued
inventory de-stocking in the North American pool pump market, weakness
in China industrial demand, a slowdown in the commercial HVAC market
combined with account pruning, and continued power generation project
delays due to end market overcapacity. Operating margin was 4.0%.
Excluding adjustments of $5.8 million, adjusted operating margin was
5.6% of adjusted net sales.
-- Climate Solutions segment net sales were $230.9 million, a decrease of
9.6%. The businesses divested/to be exited had a negative 4.6% impact,
and foreign currency had a negative 0.2% impact. The result was a
negative organic sales growth rate of 4.8% driven by the impact from the
FER pre-buy in residential HVAC in the first half of the year, OEM
destocking, and mild weather in the third quarter. Additionally, there
was weakness in commercial refrigeration and ongoing account pruning
efforts in the segment, which were partially offset by improving demand
in both the Asia Pacific and European end markets. Operating margin was
16.3%. Excluding net adjustments of $1.8 million, adjusted operating
margin was 17.1% of adjusted net sales.
-- Power Transmission Solutions segment net sales were $182.8 million, a
decrease of 12.0%. The businesses divested/to be exited had a negative
2.1% impact, and foreign currency had a negative 0.6% impact. The result
was a negative organic sales growth rate of 9.3% driven by a slowdown in
North American industrial end markets and continued de-stocking of
inventory in the distribution channel. There was also significant
weakness in upstream oil & gas, agriculture, and beverage end markets,
which were partially offset by strong demand in renewable energy.
Operating margin was 11.4%. Excluding net adjustments of $0.9 million,
adjusted operating margin was 11.9% 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 third quarter top line was challenging for Regal, our ability to quickly accelerate cost-out initiatives illustrates the opportunity to improve the long-term profitability of the business. Our financial results reflected lower than expected demand due to the slowdown in industrial markets, the ongoing global trade uncertainties, and the reduction in customer inventories. Despite these headwinds, Regal delevered at a below normal rate in the quarter and saw free cash flow of 240% of adjusted net income. I am very proud of our teams' efforts," said Regal CEO Louis Pinkham.
2019 Outlook
"We are increasing our free cash flow to adjusted net income guidance to over 115% for the year. For EPS, we are lowering our adjusted diluted earnings per share guidance to $5.45 to $5.55, a reduction of 2.7% at the midpoint. We believe this reduction reflects current market conditions. We continue to accelerate cost-out activities focused on three main initiatives; (1) 80/20 simplification efforts, (2) plant consolidations, of which five have been announced, and (3) product rationalization efforts, particularly in our Commercial and Industrial segment. This, along with growth plans that I have recently reviewed with our teams during the strategic planning process, are compelling value creation opportunities we have at Regal," continued Mr. Pinkham.
The Company forecasts 2019 GAAP diluted earnings per share of $5.85 to $5.95. 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 $0.34 per share, gain on businesses divested and assets to be exited of $0.70 per share, net income from businesses to be divested/exited of $0.08 per share, and CEO transition costs of $0.04 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.
As stated in the second quarter 2019 earnings release, the Company closed on July 2, 2019 the divestiture of a vapor recovery business previously included 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 full year 2019 guidance. The Company's adjusted results for the nine months ended September 28, 2019 exclude this business, which had adjusted diluted earnings per share of $0.06 in 2019, prior to the divestiture.
Conference Call
Regal will hold a conference call to discuss the earnings release at 9:00 AM CST (10:00 AM EST) on Monday, November 4, 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 8512252# 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 10135317#. Both will be accessible until February 4, 2020.
About the Company
Regal Beloit Corporation (NYSE: RBC) is a global leader in the engineering and manufacturing of electric motors and controls, power generation products and power transmission 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 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
(Amounts in Millions, Except per Share Data)
Three Months Ended Nine Months Ended
Sep 28, Sep 29, Sep 28, Sep 29,
2019 2019
2018 2018
Net Sales $
772.3 $
925.4 $
2,499.8 $
2,763.9
Cost of Sales 570.4 682.8 1,829.3 2,039.0
Gross Profit 201.9 242.6 670.5 724.9
Operating Expenses 129.1 155.0 371.1 449.5
Goodwill Impairment 9.5 9.5
Asset Impairments 8.7 10.0 8.7
Total Operating Expenses 129.1 173.2 381.1 467.7
Income from Operations 72.8 69.4 289.4 257.2
Other Expenses, net 0.1 0.4 0.4 1.2
Interest Expense 13.5 13.7 40.5 40.9
Interest Income 1.5 1.0 4.0 1.8
Income before Taxes 60.7 56.3 252.5 216.9
Provision for Income Taxes 9.9 3.6 47.5 37.6
Net Income 50.8 52.7 205.0 179.3
Less: Net Income Attributable to Noncontrolling
Interests 1.1 1.4 2.8 3.7
Net Income Attributable to Regal Beloit
Corporation $
49.7 $
51.3 $
202.2 $
175.6
Earnings Per Share Attributable to Regal Beloit
Corporation:
Basic $
1.20 $
1.18 $
4.78 $
4.01
Assuming Dilution $
1.19 $
1.17 $
4.75 $
3.98
Cash Dividends Declared Per Share $
0.30 $
0.28 $
0.88 $
0.82
Weighted Average Number of Shares Outstanding:
Basic 41.5 43.4 42.3 43.8
Assuming Dilution 41.7 43.8 42.6 44.1
CONDENSED
CONSOLIDATED
BALANCE
SHEETS
---
Unaudited
(Dollars in
Millions)
Sep 28, Dec 29,
2019
2018
ASSETS
Current
Assets:
Cash and
Cash
Equivalents $
293.0 $
248.6
Trade
Receivables,
less
Allowances
of $9.4
Million in
2019 and
$13.3
Million in
2018 491.7 551.9
Inventories 725.7 767.2
Prepaid
Expenses
and Other
Current
Assets 157.5 250.0
Total
Current
Assets 1,667.9 1,817.7
Net
Property,
Plant,
Equipment
and
Noncurrent
Assets 2,810.4 2,806.1
Total
Assets $
4,478.3 $
4,623.8
LIABILITIES
AND EQUITY
Current
Liabilities:
Accounts
Payable $
362.3 $
424.8
Other
Accrued
Expenses 226.3 258.2
Current
Maturities
of Debt 0.6 0.5
Total
Current
Liabilities 589.2 683.5
Long-Term
Debt 1,200.3 1,306.6
Other
Noncurrent
Liabilities 359.7 295.2
Equity:
Total Regal
Beloit
Corporation
Shareholders'
Equity 2,301.3 2,310.5
Noncontrolling
Interests 27.8 28.0
Total
Equity 2,329.1 2,338.5
Total
Liabilities
and Equity $
4,478.3 $
4,623.8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
---
Unaudited
(Dollars in Millions)
Three Months Ended Nine Months Ended
Sep 28, Sep 29, Sep 28, Sep 29,
2
019 2019
2018 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $
50.8 $
52.7 $
205.0 $
179.3
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 33.9 35.3 100.4 106.3
Loss on Disposal of Assets 1.3 1.1 1.7 3.5
(Gain) Loss on Businesses Divested and
Assets to be Exited 0.2 34.9 (35.2) 34.9
Share-Based Compensation Expense 2.6 3.3 10.0 10.5
Change in Operating Assets and Liabilities 51.8 (21.3) (10.7) (84.2)
Net Cash Provided by Operating Activities 140.6 106.0 271.2 250.3
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant and Equipment (21.1) (18.7) (77.3) (59.2)
Proceeds Received from Sales of Property,
Plant and Equipment 4.0 1.7 4.4
Net Sales of Investment Securities 0.5
Business Acquisitions, Net of Cash Acquired (161.5)
Proceeds Received from Disposal of
Businesses 21.4 159.6
Net Cash (Used in) Provided by Investing
Activities 0.3 (14.7) 84.0 (215.8)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (Repayments) Borrowings Under Revolving
Credit Facility (22.7) (168.3) (83.1) 25.6
Net (Repayments) Borrowings of Short-Term
Borrowings 0.1 (0.6)
Proceeds from Long-Term Debt 900.0 900.2
Repayments of Long-Term Debt (786.2) (24.2) (786.3)
Dividends Paid to Shareholders (12.6) (12.2) (36.6) (35.1)
Repurchase of Common Stock (94.2) (7.2) (150.1) (78.3)
Distributions to Noncontrolling Interest (1.5) (1.6) (1.8) (1.6)
Shares Surrendered for Taxes (0.5) (0.5) (8.0) (3.4)
Purchase of Subsidiary Shares from
Noncontrolling Interest (0.8) (0.8)
Financing Fees Paid (3.5) (3.5)
Net Cash (Used in) Provided by Financing
Activities (131.5) (80.2) (303.8) 16.2
EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS (7.7) (2.3) (7.0) (5.9)
Net Increase in Cash and Cash Equivalents 1.7 8.8 44.4 44.8
Cash and Cash Equivalents at Beginning of
Period 291.3 175.6 248.6 139.6
Cash and Cash Equivalents at End of Period $
293.0 $
184.4 $
293.0 $
184.4
SEGMENT INFORMATION
Unaudited
(Dollars in Millions)
Three Months Ended
Commercial & Industrial Climate Solutions Power Transmission
Total Regal
Systems Solutions
Sep 28, Sep 29, Sep 28, Sep 29, Sep 28, Sep 29, Sep 28, Sep 29,
2019 2018 2019 2018 2019 2018 2019
2018
Net Sales $
358.6 $
462.3 $
230.9 $
255.4 $
182.8 $
207.7 $
772.3 $
925.4
Net Sales from Businesses
Divested/to be Exited (46.7) (0.9) (13.3) (4.8) (0.9) (64.8)
Adjusted Net Sales* $
358.6 $
415.6 $
230.0 $
242.1 $
182.8 $
202.9 $
771.4 $
860.6
GAAP Operating Margin 4.0 7.6
% 16.3 2.3 11.4
% % %
%
% % 13.5 9.4 7.5
%
Adjusted Operating 5.6 7.7
% 17.1 16.4 11.9
Margin*
% % %
% %
% % 13.8 10.5 11.6
Components of Net Sales:
Organic Sales Growth* (12.7) 5.1
% (4.8) 1.5 (9.3)
% %
%
% % % 8.1 (9.6) 4.7
%
Acquisitions % 9.5
% % % % % % 4.4
%
Businesses Divested/to (8.6) (0.2) (4.6) (1.0) (2.1)
be Exited
% % %
% %
% % % (6.2) (0.3)
Foreign Currency Impact (1.1) (1.1) (0.2) (0.7) (0.6)
% % % %
% %
% % (0.4) (0.7) (0.8)
SEGMENT INFORMATION
---
Unaudited
(Dollars in Millions)
Nine Months Ended
Commercial & Industrial Climate Solutions Power Transmission
Total Regal
Systems Solutions
Sep 28, Sep 29, Sep 28, Sep 29, Sep 28, Sep 29, Sep 28, Sep 29,
2019 2018 2019 2018 2019 2018 2019 2018
Net Sales $
1,140.7 $
1,345.3 $
762.1 $
792.6 $
597.0 $
626.0 $
2,499.8 $
2,763.9
Net Sales from Businesses
Divested/to be Exited (25.0) (134.3) (22.0) (50.5) (5.6) (14.7) (52.6) (199.5)
Adjusted Net Sales* $
1,115.7 $
1,211.0 $
740.1 $
742.1 $
591.4 $
611.3 $
2,447.2 $
2,564.4
GAAP Operating Margin 7.7 7.1
% 16.8 10.4 12.4
% % %
%
% % 12.8 11.6 9.3
%
Adjusted Operating 5.7 7.6
% 16.8 15.3 13.0
Margin*
% % %
% %
% % 13.1 10.8 11.1
Components of Net Sales:
Organic Sales Growth (8.7) 4.8
% 0.4 3.4 (2.2)
% % %
%
% % 9.1 (4.5) 5.4
%
Acquisitions 2.6 6.0
% % % % % 1.2
%
% 2.8
%
Businesses Divested/to (7.3) 0.5
% (3.5) (1.1) (1.4)
be Exited
% %
% %
% % % (5.0) (0.1)
Foreign Currency Impact (1.8) 1.2
% (0.7) 0.1 (1.0)
% % %
%
% % 1.0 (1.3) 0.8
%
ADJUSTED DILUTED
EARNINGS PER
SHARE Three Months Ended Nine Months Ended
---
Sep 28, Sep 29, Sep 28, Sep 29,
2019 2018 2019 2018
GAAP Diluted
Earnings Per
Share $
1.19 $
1.17 $
4.75 $
3.98
Restructuring and
Related Costs 0.14 0.03 0.24 0.09
Purchase
Accounting and
Transaction Costs 0.01 0.09
(Gain) Loss on
Businesses
Divested and
Assets to be
Exited 0.61 (0.70) 0.61
Net (Income) Loss
from Businesses
Divested/to be
Exited 0.02 (0.11) (0.08) (0.29)
CEO Transition
Costs 0.03
Impact of the New
US Tax
Legislation (0.15) (0.15)
Adjusted Diluted
Earnings Per
Share $
1.35 $
1.56 $
4.24 $
4.33
2019 ADJUSTED ANNUAL GUIDANCE Minimum Maximum
---
2019 Diluted EPS Annual Guidance $
5.85 $
5.95
Restructuring and Related Costs 0.34 0.34
Gain on Businesses Divested and Assets to be Exited (0.70) (0.70)
Net Income from Businesses Divested/to be Exited (0.08) (0.08)
CEO Transition Costs 0.04 0.04
2019 Adjusted Diluted EPS Annual Guidance $
5.45 $
5.55
ADJUSTED INCOME FROM OPERATIONS
---
Three Months Ended
Commercial & Climate Solutions
Power
Total Regal
Industrial Transmission
Systems Solutions
Sep 28, Sep 29, Sep 28,
Sep 29, Sep 28, Sep 29, Sep 28,
Sep 29,
2019 2018 2019 2018 2019 2018 2019
2018
GAAP Income from Operations $
14.3 $
35.3 $
37.6 $
6.0 $
20.9 $
28.1 $
72.8 $
69.4
Restructuring and Related
Costs 5.6 1.9 0.8 0.3 0.9 0.1 7.3 2.3
Purchase Accounting and
Transaction Costs 0.2 0.2
Loss on Businesses Divested
and Assets to be Exited 0.1 0.1 34.9 0.2 34.9
Operating Loss (Income) from
Businesses Divested/to be
Exited (5.2) 0.9 (1.5) (0.3) 0.9 (7.0)
CEO Transition Costs 0.1 0.1
Adjusted Income from
Operations $
20.1 $
32.2 $
39.4 $
39.7 $
21.8 $
27.9 $
81.3 $
99.8
GAAP Operating Margin % 4.0% 7.6% 16.3% 2.3% 11.4% 13.5% 9.4% 7.5%
Adjusted Operating Margin % 5.6% 7.7% 17.1% 16.4% 11.9% 13.8% 10.5% 11.6%
ADJUSTED INCOME FROM OPERATIONS
---
Nine Months Ended
Commercial & Climate Solutions
Power
Total Regal
Industrial Transmission
Systems Solutions
Sep 28, Sep 29, Sep 28,
Sep 29, Sep 28, Sep 29, Sep 28,
Sep 29,
2019 2018 2019 2018 2019 2018 2019 2018
GAAP Income from Operations $
87.3 $
94.9 $
128.2 $
82.3 $
73.9 $
80.0 $
289.4 $
257.2
Restructuring and Related
Costs 10.3 3.9 1.5 1.4 1.4 0.2 13.2 5.5
Purchase Accounting and
Transaction Costs 0.1 5.3 0.1 5.3
(Gain) Loss on Businesses
Divested and Assets to be
Exited (31.7) (4.7) 34.9 1.2 (35.2) 34.9
Operating Income from
Businesses Divested/to be
Exited (3.3) (12.0) (1.1) (5.2) (0.3) (0.2) (4.7) (17.4)
CEO Transition Costs 0.9 0.5 0.4 1.8
Adjusted Income from
Operations $
63.6 $
92.1 $
124.4 $
113.4 $
76.6 $
80.0 $
264.6 $
285.5
GAAP Operating Margin % 7.7% 7.1% 16.8% 10.4% 12.4% 12.8% 11.6% 9.3%
Adjusted Operating Margin % 5.7% 7.6% 16.8% 15.3% 13.0% 13.1% 10.8% 11.1%
DEBT TO EBITDA Last Twelve Months
---
Sep 28, Dec 29,
2019 2018
Net Income $
261.5 $
235.8
Interest Expense 54.8 55.2
Interest Income (4.1) (1.9)
Taxes 66.3 56.4
Depreciation and Amortization 136.5 142.4
EBITDA $
515.0 $
487.9
Restructuring and Related Costs 15.4 7.7
Purchase Accounting and Transactions Costs 0.2 5.4
Impairment and Exit Related Costs 10.0 34.9
CEO Transition Costs 5.6 3.8
Operating Income from Businesses Divested/to be Exited (11.2) (23.9)
Gain on Sale of Assets (2.2) (2.2)
Gain on Divestiture of Businesses (45.2)
Adjusted EBITDA $
487.6 $
513.6
Current Maturities of Long-Term Debt $
0.6 $
0.5
Long-Term Debt 1,200.3 1,306.6
Total Gross Debt $
1,200.9 $
1,307.1
Cash (293.0) (248.6)
Net Debt $
907.9 $
1,058.5
Gross Debt/EBITDA 2.3 2.7
Gross Debt/Adjusted EBITDA 2.5 2.5
Net Debt/EBITDA 1.8 2.2
Net Debt/Adjusted EBITDA 1.9 2.1
OPERATING LEVERAGE
Three Months Ended
---
Sep 28, Sep 29,
Change
2019 2018
GAAP Income from Operations $
72.8 $
69.4 $
3.4
Adjusted Income from Operations $
81.3 $
99.8 $
(18.5)
Net Sales $
772.3 $
925.4 $
(153.1)
Adjusted Net Sales $
771.4 $
860.6 $
(89.2)
GAAP Operating Leverage (2.2)
%
Adjusted Operating Leverage 20.7
%
FREE CASH FLOW Three Months Ended Nine Months Ended
---
Sep 28, Sep 29, Sep 28, Sep 29,
2019 2019
2018 2018
Net Cash Provided
by Operating
Activities $
140.6 $
106.0 $
271.2 $
250.3
Additions to
Property Plant
and Equipment (21.1) (18.7) (77.3) (59.2)
Free Cash Flow $
119.5 $
87.3 $
193.9 $
191.1
GAAP Net Income
Attributable to
Regal Beloit
Corporation $
49.7 $
51.3 $
202.2 $
175.6
(Gain) Loss on
Businesses
Divested and
Impairments 0.2 18.2 (35.2) 18.2
Tax Effect from
(Gain) Loss on
Businesses
Divested and
Impairments (4.0) 5.5 (4.0)
Adjusted Net
Income
Attributable to
Regal Beloit
Corporation(1) $
49.9 $
65.5 $
172.5 $
189.8
Free Cash Flow as
a Percentage of % %
Adjusted Net % %
Income
Attributable to
Regal Beloit
Corporation 239.5 133.3 112.4 100.7
(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
business to be exited and used
in the Free Cash Flow
Calculation.
ADJUSTED
EFFECTIVE TAX
RATE Three Months Ended Nine Months Ended
---
Sep 28, Sep 29, Sep 28, Sep 29,
2019 2019
2018 2018
Income before
Taxes $
60.7 $
56.3 $
252.5 $
216.9
Provision for
Income Taxes 9.9 3.6 47.5 37.6
Effective Tax 16.3 6.4 18.8
Rate % %
% % 17.3
Income before
Taxes $
60.7 $
56.3 $
252.5 $
216.9
(Gain) Loss on
Businesses
Divested and
Assets to be
Exited 0.2 34.9 (35.2) 34.9
Adjusted Income
before Taxes $
60.9 $
91.2 $
217.3 $
251.8
Provision for
Income Taxes $
9.9 $
3.6 $
47.5 $
37.6
Tax Effect from
(Gain) Loss on
Businesses
Divested and
Assets to be
Exited 8.2 (5.5) 8.2
Impact of the New
US Tax
Legislation 6.6 6.6
Adjusted
Provision for
Income Taxes $
9.9 $
18.4 $
42.0 $
52.4
Adjusted 16.3 20.2 19.3
Effective Tax % %
Rate % % 20.8
ORGANIC SALES
GROWTH
Three Months Ended
---
September 28, 2019
Commercial & Climate Power Total Regal
Industrial Solutions Transmission
Systems Solutions
Net Sales Three
Months Ended
Sep 28, 2019 $
358.6 $
230.9 $
182.8 $
772.3
Net Sales from
Businesses
Divested/to
be Exited (0.9) (0.9)
Impact from
Foreign
Currency
Exchange Rates 4.4 0.6 1.3 6.3
Organic Sales
Three Months
Ended Sep 28,
2019 $
363.0 $
230.6 $
184.1 $
777.7
Net Sales Three
Months Ended
Sep 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)
Adjusted Net
Sales Three
Months Ended
Sep 29, 2018 $
415.6 $
242.1 $
202.9 $
860.6
Three Months
Ended Sep 28, % % % %
2019 Organic
Sales Growth % (12.7) (4.8) (9.3) (9.6)
Three Months
Ended Sep 28, % % % %
2019 Net Sales
Growth % (22.4) (9.6) (12.0) (16.5)
ORGANIC SALES
GROWTH
Nine Months Ended
---
September 28, 2019
Commercial & Climate Power Total Regal
Industrial Solutions Transmission
Systems Solutions
Net Sales Nine
Months Ended
Sep 28, 2019 $
1,140.7 $
762.1 $
597.0 $
2,499.8
Net Sales from
Business
Acquired (31.7) (31.7)
Net Sales from
Businesses
Divested/to
be Exited (25.0) (22.0) (5.6) (52.6)
Impact from
Foreign
Currency
Exchange Rates 22.0 5.3 6.2 33.5
Organic Sales
Nine Months
Ended Sep 28,
2019 $
1,106.0 $
745.4 $
597.6 $
2,449.0
Net Sales Nine
Months Ended
Sep 29, 2018 $
1,345.3 $
792.6 $
626.0 $
2,763.9
Net Sales from
Businesses
Divested/to
be Exited (134.3) (50.5) (14.7) (199.5)
Adjusted Net
Sales Nine
Months Ended
Sep 29, 2018 $
1,211.0 $
742.1 $
611.3 $
2,564.4
Nine Months
Ended Sep 28, % % % %
2019 Organic
Sales Growth % (8.7) 0.4 (2.2) (4.5)
Nine Months
Ended Sep 28, % % % %
2019 Net Sales
Growth % (15.2) (3.8) (4.6) (9.6)
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
---
Mar 31, Jun 30, Sep 29, Dec 29, Ended Dec
2018 2018 2018 2
018 29, 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
