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Regal-Beloit Corporation
Regal-Beloit Corporation
10/29/2012 | Press release
Regal Beloit Corporation Annouces Third Quarter Earnings...
distributed by noodls on 10/30/2012 03:43
FOR RELEASE ON OR AFTER: October 29, 2012
CONTACT: John Perino, VP Investor Relations
608-361-7501 john.perino@regalbeloit.com
Regal Beloit Corporation Announces Third Quarter 2012 Financial Results
• Record Third Quarter Sales and Earnings
• Another Quarter of Strong Free Cash Flow
BELOIT, WI - Regal Beloit Corporation (NYSE: RBC) today reported financial results for the third quarter ended September 29, 2012. Net sales of $779.5 million increased 5.8% compared to $736.9 million for the third quarter of 2011. Diluted earnings per share were $1.29 for the third quarter of 2012 compared to diluted earnings per share of $1.13 for the third quarter of 2011.
"Despite challenging global economic conditions, Regal delivered another strong operating performance in the third quarter, in line with our earlier guidance" commented Mr. Mark Gliebe, Chairman and Chief Executive Officer. "We experienced slight growth in our residential HVAC business however most of our other businesses around the world saw slowing demand. We made substantial progress during the quarter on our previously announced restructuring plans to rationalize our manufacturing operations, reduce our global footprint and produce synergy savings. Further, we have been proactively controlling our expenses during these uncertain times. Our teams did a nice job of protecting our margins in spite of softer demand and we delivered another quarter of free cash flow exceeding net income," continued Mr. Gliebe.
Adjusted diluted earnings per share* were $1.32 for the third
quarter of 2012, after adding $0.08 of restructuring charges
for announced facility closures and other restructuring
activities and subtracting
$0.05 for the prior year tax adjustment. This compares to
adjusted diluted earnings per share of $1.31 in the third
quarter of 2011 as detailed in the table below.
ADJUSTED DILUTED EARNINGS PER SHARE
Three Months Ended Nine Months Ended
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
GAAP Diluted Earnings Per Share
EPC Acquisition Costs and Purchase
$ 1.29 $
1.13 $
3.94 $
3.00
Accounting Costs - 0.28 - 0.46
2Q 2011 Warranty Expense Item - - - 0.44
Restructuring Costs 0.08 - 0.09 - Gain on Disposal of Real Estate - - (0.02) - Gain on Divestiture - (0.10) - (0.10) Prior Year Tax Benefit (0.05) - (0.05) -
Adjusted Diluted Earnings Per Share
$ 1.32 $
1.31 $
3.96 $
3.80
* This earnings release includes non-GAAP financial measures. Schedules that reconcile these non- GAAP financial measures to the most comparable GAAP figures are included with this earnings release.
NET SALES
(In millions)
Three Months Ended Nine Months Ended
September 29, October 1, % September 29, October 1, %
2012 2011 Change 2012 2011 Change
Net Sales
$ 779.5
$ 736.9
5.8% $
2,451.3
$ 2,081.3
17.8%
Net Sales by Segment:
Electrical segment 708.3 667.5 6.1% 2,223.3 1,873.0 18.7% Mechanical segment 71.2 69.4 2.6% 228.0 208.3 9.5%
Electrical segment net sales in the third quarter 2012
included $179.4 million from the businesses acquired within
the last twelve months ("acquired businesses"). Excluding the
acquired businesses, Electrical segment net sales declined
9.2% as a result of declining net sales in the Commercial and
Industrial and Asian businesses. North American residential
HVAC motor net sales increased 0.4% for the third quarter
2012 compared to the third quarter 2011. North American
commercial and industrial motor net sales decreased 6.4% for
the third quarter 2012 compared to the third quarter of 2011,
adjusting for the divested business.
Mechanical segment net sales for the third quarter 2012
included $11.1 million from the acquired businesses.
Excluding the impact of the acquired and divested businesses,
Mechanical segment sales in North America decreased 0.9%.
Third quarter 2012 net sales to regions outside the United
States decreased 9.4% compared to third quarter 2011 and
represented 31.4% of total net sales. Sales of high
efficiency products were 21.8% of net sales in the third
quarter 2012. Excluding acquired businesses, the impact of
foreign currency exchange rates decreased total net sales by
1.7% for the third quarter 2012 compared to the third
quarter
2011.
GROSS PROFIT
(In millions)
Three Months Ended Nine Months Ended
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
Gross Profit
$ 192.6
$ 179.6 $
610.3
$ 495.1
As a percentage of net sales 24.7% 24.4% 24.9% 23.8%
Gross Profit
|
Electrical segment |
$ 173.2 |
$ 160.0 |
$ 549.3 |
$ 436.0 |
|
As a percentage of net sales |
24.5% |
24.0% |
24.7% |
23.3% |
|
Mechanical segment |
$ 19.4 |
19.6 |
$ 61.0 |
$ 59.1 |
|
As a percentage of net sales |
27.2% |
28.2% |
26.8% |
28.4% |
Third quarter 2012 gross profit included $2.8 million of restructuring expenses, reported in the Electrical segment cost of sales. Third quarter 2011 gross profit included EPC purchase accounting inventory adjustments of $10.3 million, reflected in the Electrical segment cost of sales.
OPERATING EX PENSES
(In millions)
Three Months Ended Nine Months Ended
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
Operating Expenses
$ 109.3
$ 101.5 $
344.6
$ 298.0
As a percentage of net sales 14.0% 13.8% 14.1% 14.3% Operating Expens es by Segment:
Electrical segment operating expenses for the third quarter
2012 included $18.5 million from the acquired businesses,
restructuring expenses of $2.4 million, and minimal
acquisition related expenses. In the third quarter 2011,
Electrical segment operating expenses included EPC operating
expenses of $10.0 million,
a gain of $6.5 million on the divested business, and
acquisition related expenses of $5.9 million. Mechanical
segment operating expenses for the third quarter included an
incremental $1.0 million from the acquired businesses.
INCOME FROM OPERATIONS
(In millions)
Three Months Ended Nine Months Ended
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
Income from Operations
$ 83.3 $
78.1 $
265.7
$ 197.1
As a percentage of net sales 10.7% 10.6% 10.8% 9.5%
Inc ome from Operations by Segment:
|
Electrical segment |
$ 73.2 |
$ 69.3 |
$ 234.1 |
$ 169.8 |
|
As a percentage of net sales |
10.3% |
10.4% |
10.5% |
9.1% |
|
Mechanical segment |
$ 10.1 |
$ 8.8 |
$ 31.6 |
$ 27.3 |
|
As a percentage of net sales |
14.2% |
12.7% |
13.9% |
13.1% |
The effective tax rate for the third quarter 2012 was 24.5%
compared to 30.3% for the third quarter 2011 driven primarily
by the qualification in China of a high technology tax
incentive for two of our facilities that resulted in a
retroactive benefit of $2.3 million and additional future
benefits. Interest expense was flat compared to third quarter
2011.
Net cash provided by operating activities was $71.8 million,
an increase of $5.1 million from the prior year. Cash flow
from operations was used to fund capital expenditures, pay
dividends and reduce debt. Capital expenditures in the third
quarter 2012 were $21.3 million including the completion of
two factories in China, partially offset by $4.7 million of
government grants.
"Since the latter half of the third quarter, we've seen further economic weakening and increased uncertainty. These conditions are impacting our business in most areas of the world," Gliebe said. "For the fourth quarter, we are anticipating our typical seasonal sales declines with modest year-over-year growth in our residential HVAC business. However, the overall slowing demand in our other markets will put pressure on our operating performance. We will focus on executing on our restructuring plans and simplifying the Company which should keep us nimble and generate future savings."
"Including $0.09 of anticipated expense from these restructuring activities, our earnings guidance for the fourth quarter of 2012 is $0.58 to $0.66 per share. Excluding the $0.09 of restructuring expense, our adjusted EPS guidance is $0.67 to $0.75," continued Mr. Gliebe.
Regal will hold a conference call at 9:00 AM CDT (10:00 AM EDT) on Tuesday, October 30, 2012, to discuss the earnings release. To listen to the call and view the presentation slides via the internet, please go to http://www.regalbeloit.com/ or at: http://www.videonewswire.com/event.asp?id=89749. Individuals who would like to participate by phone should dial 800-860-2442, referencing Regal. International callers should dial 412-858-4600, referencing Regal.
Regal Beloit Corporation is a leading manufacturer of
electric motors, mechanical and electrical motion controls
and power generation products serving markets throughout the
world. Regal Beloit is headquartered in Beloit, Wisconsin,
and has manufacturing, sales and service facilities
throughout the United States, Canada, Mexico, Europe and
Asia. Regal Beloit's common stock is a component of the S&P
Mid Cap 400 Index and the Russell 2000 Index.
###
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 press 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," "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: 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 filed on February 29, 2012 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.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Unaudited
(Dollars in Millions, Except Cash Dividends Declared and Per
Share Data)
Three Months Ended Nine Months Ended
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
Net Sales
$ 779.5
$ 736.9 $
2,451.3
$ 2,081.3
Cost of Sales 586.9 557.3 1,841.0 1,586.2
Gross Profit 192.6 179.6 610.3 495.1
Operating Expenses 109.3 101.5 344.6 298.0
Income From Operations 83.3 78.1 265.7 197.1
Interest Expense 10.6 10.5 33.6 20.4
Interest Income 0.4 0.5 1.2 1.2
Income Before Taxes & Noncontrolling Interests 73.1 68.1
233.3 177.9
Provision For Income Taxes 17.9 20.6 63.9 53.6
Net Income 55.2 47.5 169.4 124.3
Less: Net Income Attributable to Noncontrolling
Interests, net of tax 0.9 1.8 3.7 5.5
Net Income Attributable to Regal Beloit Corporation
$ 54.3 $
45.7 $
165.7
$ 118.8
Earnings Per Share Attributable to Regal Beloit
Corporation:
Basic
$ 1.30 $
1.14 $
3.98
$ 3.04
Assuming Dilution
Cash Dividends Declared
$ 1.29 $
$ 0.19 $
1.13 $
0.18 $
3.94
0.56
$ 3.00
$ 0.53
Weighted Average Number of Shares Outstanding (in
millions):
Basic 41.7 39.9 41.7 39.1
Assuming Dilution 42.0 40.4 42.0 39.6
SEGMENT INFORMATION
Unaudited
(Dollars in Millions)
Electrical Segment Mechanical Segment
Three Months Ended
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
Net Sales
$ 708.3
$ 667.5 $
71.2 $
69.4
Income from Operations 73.2 69.3 10.1 8.8
Electrical Segment Mechanical Segment
Nine Months Ended
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
Net Sales
$ 2,223.3
$ 1,873.0 $
228.0
$ 208.3
Income from Operations 234.1 169.8 31.6 27.3
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(Dollars in Millions)
ASSETS
Current Assets:
September 29, December 31,
2012 2011
Cash and Cash Equivalents
Trade Receivables, less Allowances
$ 185.8 $
142.6
of $12.0 million in 2012 and $13.6 million in 2011 466.5 424.2
Inventories 594.9 575.8
Prepaid Expenses and Other Current Assets 108.5 99.9
Deferred Income Tax Benefits 42.9 48.6
Total Current Assets 1,398.6 1,291.1
|
Property, Plant, Equipment and Noncurrent Assets |
2,025.1 |
1,975.4 |
|
|
Total Assets |
$ 3,423.7 |
$ 3,266.5 |
LIABILITIES AND EQUITY
Current Liabilities:
|
Accounts Payable |
$ 292.7 |
$ 249.4 |
|
|
Other Accrued Expenses |
226.4 |
265.1 |
|
|
Current Maturities of Debt |
83.8 |
10.0 |
Total Current Liabilities 602.9 524.5
|
Long-Term Debt |
781.7 |
909.2 |
|
|
Other Noncurrent Liabilities |
262.2 |
256.4 |
|
|
Equity: |
|||
|
Total Regal Beloit Corporation Shareholders' Equity |
1,735.1 |
1,535.9 |
|
|
Noncontrolling Interests |
41.8 |
40.5 |
|
|
Total Equity |
1,776.9 |
1,576.4 |
|
|
Total Liabilities and Equity |
$ 3,423.7 |
$ 3,266.5 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Unaudited
(Dollars in Millions )
CASH FLOWS FROM OPERATING ACTIVITIES:
Three Months Ended Nine Months Ended
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
Net incom e $
Adjus tm ents to reconcile net incom e and changes in as s ets and liabilities (net of acquis itions ) to net cas h provided by operating activities :
55.2
$ 47.5 $
169.4
$ 124.3
Depreciation and am ortization 31.9 26.1 95.0 69.7
Exces s tax benefits from s hare-bas ed com pens ation (0.8) - (1.7) (1.0) (Gain) los s on dis pos ition of property, net (0.3) (6.1) (1.7) (5.6) Share-bas ed com pens ation expens e 2.2 3.9 6.7 10.1
Change in as s ets and liabilities (16.4) (4.7) 8.5 (21.3) Net cas h provided by operating activities 71.8 66.7 276.2 176.2
CASH FLOWS FROM INVESTING ACTIVITIES:
|
Additions to property, plant, and equipm ent |
(21.3) |
(5.9) |
(66.1) |
(44.3) |
||
|
Purchas e of inves tm ent s ecurities |
(4.7) |
- |
(4.7) |
- |
||
|
Sales of inves tm ent s ecurities |
1.5 |
- |
1.5 |
56.0 |
||
|
Bus ines s acquis itions , net of cas h acquired |
(7.7) |
(742.8) |
(103.0) |
(764.8) |
||
|
Grants received for capital expenditures |
4.7 |
- |
7.1 |
- |
||
|
Proceeds from s ale of as s ets |
- |
14.9 |
2.7 |
15.0 |
||
|
Net cas h us ed in inves ting activities |
(27.5) |
(733.8) |
(162.5) |
(738.1) |
CASH FLOWS FROM FINANCING ACTIVITIES:
|
Borrowings under revolving credit facility |
50.0 |
200.0 |
281.0 |
200.0 |
||
|
Repaym ents under revolving credit facility |
(23.0) |
(172.0) |
(263.0) |
(172.0) |
||
|
Proceeds from s hort-term borrowings |
35.6 |
0.9 |
36.4 |
21.5 |
||
|
Repaym ents of s hort-term borrowings |
(32.9) |
(1.9) |
(32.9) |
(17.3) |
||
|
Proceeds from long-term borrowings |
- |
500.0 |
- |
500.0 |
||
|
Paym ents of long-term debt |
(75.1) |
- |
(75.2) |
(0.1) |
||
|
Dividends paid to s hareholders |
(7.9) |
(6.9) |
(22.9) |
(20.1) |
||
|
Proceeds from the exercis e of s tock options |
1.4 |
0.1 |
3.5 |
1.9 |
||
|
Exces s tax benefits from s hare-bas ed com pens ation |
0.8 |
- |
1.7 |
1.0 |
||
|
Financing fee paid |
- |
(0.9) |
- |
(2.8) |
||
|
Net cas h provided by (us ed in) financing activities |
(51.1) |
519.3 |
(71.4) |
512.1 |
EFFECT OF EXCHANGE RATES ON CASH 1.7 (3.1) 0.9 (0.3)
Net (decreas e) increas e in cas h and cas h equivalents (5.1) (150.9) 43.2 (50.1) Cas h and cas h equivalents at beginning of period 190.9 275.3 142.6 174.5
Cas h and cas h equivalents at end of period
$ 185.8
$ 124.4 $
185.8
$ 124.4
NON-GAAP MEASURES
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 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.
Three Months Ended Nine Months Ended
Sep. 29, Oct. 1, Sep. 29, Oct. 1,
2012 2011 2012 2011
GAAP Diluted Earnings Per Share
$ 1.29
$ 1.13
$ 3.94
$ 3.00
EPC Acquisition Costs and Purchase Accounting Costs - 0.28 - 0.46
2Q 2011 Warranty Expense Item - - - 0.44
Restructuring Costs 0.08 - 0.09 - Gain on Disposal of Real Estate - - (0.02) - Gain on Divestiture - (0.10) - (0.10) Prior Year Tax Benefit (0.05) - (0.05) -
Adjusted Diluted Earnings Per Share
$ 1.32
$ 1.31
$ 3.96
$ 3.80
Three Months Ended Nine Months Ended
Sep. 29, Oct. 1, Sep. 29, Oct. 1,
2012 2011 2012 2011
GAAP Gross Profit
$ 192.6
$ 179.6
$ 610.3
$ 495.1
EPC Purchase Accounting Costs - 10.3 - 10.3
Restructuring Costs 2.8 - 3.3 -
2Q 2011 Warranty Expense Item - - - 28.0
Adjusted Gross Profit
$ 195.4
$ 189.9
$ 613.6
$ 533.4
Adjusted Gross Profit as a Percentage of Net Sales 25.1% 25.8% 25.0% 25.6%
Three Months Ended Nine Months Ended
Sep. 29, Oct. 1, Sep. 29, Oct. 1,
2012 2011 2012 2011
GAAP Income from Operations
$ 83.3
$ 78.1
$ 265.7
$ 197.1
EPC Acquisition Costs and Purchase Accounting Costs - 16.1 - 25.7
2Q 2011 Warranty Expense Item - - - 28.0
Restructuring Costs 5.2 - 5.7 - Gain on Disposal of Real Estate - - (1.3) - Gain on Divestiture - (6.5) - (6.5)
Adjusted Income from Operations
$ 88.5
$ 87.7
$ 270.1
$ 244.3
Three Months Ended Nine Months Ended
Sep. 29, Oct. 1, Sep. 29, Oct. 1,
2012 2011 2012 2011
GAAP Net Cash Provided by Operating Activities
$ 71.8
$ 66.7
$ 276.2
$ 176.2
Additions to Property Plant and Equipment (21.3) (5.9) (66.1) (44.3)
Grants Received for Capital Expenditures 4.7 - 7.1 -
Free Cash Flow
Free Cash Flow as a Percentage of Net Income
$ 55.2
$ 60.8
$ 217.2
$ 131.9
Attributable to Regal Beloit 101.7% 133.0% 131.1% 111.0%
