- Energy Efficient Products Continue to Gain Traction - Plant
Rationalizations Completed on Plan - Operating Cash Flow of $110.1
million BELOIT, Wis., Nov. 1 /PRNewswire-FirstCall/ -- Regal Beloit
Corporation (NYSE:RBC) today reported financial results for the
third quarter ended September 26, 2009. Net sales of $465.2 million
decreased 25.0% as compared to the $620.6 million reported for the
third quarter of 2008. Diluted earnings per share were $0.82 as
compared to $1.07 for the third quarter of 2008. "We are pleased to
report another sequential improvement in earnings and cash flow,"
commented Henry Knueppel, Chairman and Chief Executive Officer.
"These improvements were driven primarily by continued penetration
of our new energy efficiency products and execution of our
previously announced plant rationalizations and productivity
efforts. We also benefited from temporary tail winds in commodity
costs and tax settlements." Sales for the three months ended
September 26, 2009 were $465.2 million, a 25.0% decrease from the
$620.6 million reported for the three months ended September 27,
2008. Third quarter 2009 sales included $11.7 million of
incremental sales related to the fourth quarter 2008 Dutchi
acquisition and the first quarter 2009 CPT acquisition. Sales of
high efficiency products were 19.3% of total sales. In the
Electrical segment, sales decreased 24.2% from the prior year third
quarter, including the impact of the acquisitions noted above.
Exclusive of the acquired businesses, Electrical segment sales
decreased 26.3%, largely due to global generator sales decreasing
55.2%, commercial and industrial motors sales in North America
decreasing 29.6%, and residential HVAC motor sales decreasing 8.3%.
Sales in the Mechanical segment decreased 32.6% from the prior year
third quarter. From a geographic perspective, Asia-based sales
decreased 28.3% as compared to the third quarter of 2008. In total,
sales to regions outside of the United States were 25.6% of total
sales for the three months ended September 26, 2009 in comparison
to 26.8% for the comparable period of 2008. The negative impact of
foreign currency exchange rates decreased total sales by 1.1%. The
gross profit margin for the three months ended September 26, 2009
was 24.5% as compared to the 21.4% reported for the comparable
period of 2008. The gross profit margin for the Electrical segment
was 24.6% for the three months ended September 26, 2009 versus
20.6% in the comparable period of 2008. This increase is driven by
the mix benefit from high efficiency products, lower material costs
and cost reduction efforts, including the benefit from the recent
plant closures. The benefit from favorable raw material costs are
temporary in nature and are not expected to repeat to the same
degree in future quarters. The Mechanical segment gross profit was
23.3% in the three months ended September 26, 2009 versus 28.0% in
the comparable period of 2008. The Mechanical segment decrease was
primarily driven by the negative fixed cost absorption impact of
lower production volumes. Operating expenses were $65.6 million
(14.1% of sales) in the three months ended September 26, 2009
versus $67.1 million (10.8% of sales) in the comparable period of
2008. Operating expenses included an incremental amount of
approximately $4.0 million related to the Dutchi and CPT businesses
offset by reductions in variable expenses, such as sales
commissions, and the impact of cost reduction activities. Other
operating expense increases included increased bad debt, legal, and
restructuring expense. Electrical segment operating expenses were
13.7% of sales for the three months ended September 26, 2009 versus
10.5% in the comparable period of 2008. Mechanical operating
expenses were 17.8% and 13.8% of sales for the three months ended
September 26, 2009 and September 27, 2008, respectively. Income
from operations was $48.3 million for the three months ended
September 26, 2009 versus $65.7 million in the comparable period of
2008. As a percent of sales, income from operations was 10.4% for
the three months ended September 26, 2009 versus 10.6% in the
comparable period of 2008. As a percent of sales, Electrical
segment operating profit was 10.9% in the third quarter of 2009
versus 10.2% in the comparable period of 2008. Mechanical segment
operating profit was 5.6% of sales in the third quarter of 2009
versus 14.3% in the comparable period of 2008. Net interest expense
was $5.0 million for the three months ended September 26, 2009
versus $7.9 million in the comparable period of 2008. The decrease
is driven primarily by lower effective interest rates in 2009
versus the comparable period of 2008, and lower average debt
outstanding. The effective tax rate for the three months ended
September 26, 2009 was 26.9% versus 36.0% in the prior year period.
The decrease in the effective rate is driven primarily by the
resolution of certain tax matters and the global distribution of
income. Net income attributable to Regal Beloit Corporation for the
three months ended September 26, 2009 was $31.2 million, a decrease
of 13.8% versus the $36.1 million reported in the comparable period
of 2008. Fully diluted earnings per share was $0.82 as compared to
$1.07 per share reported in the third quarter of 2008. (Note: prior
year financial results have been restated to reflect the impact of
the change in accounting for the Company's convertible senior
subordinated notes as required by recent accounting guidance.) The
average number of diluted shares was 38,183,014 during the three
months ended September 26, 2009 was as compared to 33,715,881
during the comparable period of 2008. Due to the weighting of both
our earnings and the weighted average number of shares outstanding
as impacted by our stock offering completed in the second quarter,
the sum of the three quarters' earnings per share does not equal
the year to date earnings per share. Cash flow from operations was
$110.1 million for the three months ended September 26, 2009,
comprised of net income of $31.7 million, non-cash expenses of
$18.3 million and a reduction of net assets of $60.1 million. This
compares to the cash flow from operations of $42.3 million in the
comparable prior year period, which was comprised of the net income
of $37.0 million, non-cash expenses of $16.5 million and an
increase in net assets of $11.2 million. The Company ended the
third quarter with total debt of $530.6 million as compared to
$553.1 million at the end of the second quarter of 2009. Cash and
cash equivalents increased $63.8 million during the third quarter
to $354.3 million. Subsequent to September 26, 2009 several
additional holders of the Company's currently convertible senior
subordinated notes submitted notices to convert their notes into
cash and common stock in accordance with the terms of the
indenture. The face value of the notes, approximately $47.5
million, will be paid in cash with the premium paid in shares of
the Company's common stock. The current diluted earnings per share
calculation includes an amount estimated for the dilutive effect of
the premium. "Looking forward to the fourth quarter, ending January
2, 2010, we are expecting the normal seasonal slowing in terms of
revenues," continued Mr. Knueppel. "We are expecting to see the
continued benefits from our cost reduction efforts, plant
rationalizations and sales of energy efficient products. We are
projecting earnings for the fourth quarter to be nearly equal to
2008 and in range of $.59 to $.66 per share." Regal Beloit will be
holding a conference call pertaining to this news release at 1:00
PM CT (2:00 PM ET) on Monday November 2, 2009. Interested parties
should call 866-394-7807, referencing Regal Beloit conference ID
38452997. International callers should call 763-488-9117 using the
same conference ID. A replay of the call will be available through
December 2, 2009 at 800-642-1687, conference ID 38452997.
International callers should call 706-645-9291 using the same
conference ID. Regal Beloit Corporation is a leading manufacturer
of mechanical and electrical motion control and power generation
products serving markets throughout the world. Regal Beloit
Corporation is headquartered in Beloit, Wisconsin, and has
manufacturing, sales, and service facilities throughout the United
States, Canada, Mexico, Europe and Asia. CAUTIONARY STATEMENT This
Press Release contains "forward-looking statements" as defined in
the Private Securities Litigation Reform Act of 1995.
Forward-looking statements represent our management's judgment
regarding future events. In many cases, you can identify
forward-looking statements by terminology such as "may," "will,"
"plan," "expect," "anticipate," "estimate," "believe," or
"continue" or the negative of these terms or other similar words.
Actual results and events could differ materially and adversely
from those contained in the forward-looking statements due to a
number of factors, including: -- economic changes in global markets
where we do business, such as reduced demand for the products we
sell, weakness in the housing and commercial real estate markets,
currency exchange rates, inflation rates, interest rates,
recession, foreign government policies and other external factors
that we cannot control; -- unanticipated fluctuations in commodity
prices and raw material costs; -- cyclical downturns affecting the
global market for capital goods; -- unexpected issues and costs
arising from the integration of acquired companies and businesses;
-- marketplace acceptance of new and existing products including
the loss of, or a decline in business from, any significant
customers; -- the impact of capital market transactions that we may
effect; -- the availability and effectiveness of our information
technology systems; -- unanticipated costs associated with
litigation matters; -- actions taken by our competitors, including
new product introductions or technological advances, and other
events affecting our industry and competitors; -- difficulties in
staffing and managing foreign operations; -- other domestic and
international economic and political factors unrelated to our
performance, such as the current substantial weakness in economic
and business conditions and the stock markets as a whole; and --
other risks and uncertainties described from time to time in our
reports filed with the U.S. Securities and Exchange Commission, or
SEC, which are incorporated by reference. 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 press release are made
only as of their respective dates, and we undertake no obligation
to update these statements to reflect subsequent events or
circumstances. See also Item 1A - Risk Factors in the Company's
Annual Report on Form 10-K filed on February 25, 2009. CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS Unaudited In Thousands of
Dollars, Except Shares Outstanding, Dividends Declared and Per
Share Data Three Months Ended Nine Months Ended ------------------
----------------- (As Adjusted)* (As Adjusted)* September 26,
September 27, September 26, September 27, 2009 2008 2009 2008 ----
---- ---- ---- Net Sales $465,192 $620,607 $1,363,016 $1,763,266
Cost of Sales 351,323 487,810 1,063,955 1,377,193 ------- -------
--------- --------- Gross Profit 113,869 132,797 299,061 386,073
Operating Expenses 65,551 67,063 193,084 195,233 ------ ------
------- ------- Income From Operations 48,318 65,734 105,977
190,840 Interest Expense 5,360 8,341 17,980 25,111 Interest Income
359 418 869 1,333 --- --- --- ----- Income Before Taxes &
Noncontrolling Interests 43,317 57,811 88,866 167,062 Provision For
Income Taxes 11,645 20,790 25,697 59,434 ------ ------ ------
------ Net Income 31,672 37,021 63,169 107,628 Less: Net Income
Attributable to Noncontrolling Interests, net of tax 522 882 2,780
2,749 --- --- ----- ----- Net Income Attributable to Regal Beloit
Corporation $31,150 $36,139 $60,389 $104,879 ======= =======
======= ======== Earnings Per Share of Common Stock: Basic $0.86
$1.15 $1.80 $3.35 ===== ===== ===== ===== Assuming Dilution $0.82
$1.07 $1.71 $3.14 ===== ===== ===== ===== Cash Dividends Declared
$0.16 $0.16 $0.48 $0.47 ===== ===== ===== ===== Weighted Average
Number of Shares Outstanding: Basic 36,055,784 31,357,433
33,589,782 31,326,675 ========== ========== ========== ==========
Assuming Dilution 38,183,014 33,715,881 35,294,400 33,452,880
========== ========== ========== ========== *The Company adopted
new accounting guidance related to Convertible debt which requires
an adjustment to previously disclosed condensed consolidated
financial statements. The adjustment affected convertible debt,
equity and interest expense. CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited In Thousands of Dollars (As Adjusted From Audited
(Unaudited) Statements)* September 26, December 27, ASSETS 2009
2008 ---- ---- Current Assets: Cash and Cash Equivalents $354,311
$65,250 Trade Receivables and Other Current Assets 400,242 436,094
Inventories 259,863 359,918 ------- ------- Total Current Assets
1,014,416 861,262 Net Property, Plant and Equipment 345,156 358,372
Other Noncurrent Assets 801,454 803,862 ------- ------- Total
Assets $2,161,026 $2,023,496 ========== ========== LIABILITIES AND
EQUITY Accounts Payable $175,278 $202,456 Other Current Liabilities
215,140 228,546 Long-Term Debt 473,270 560,127 Deferred Income
Taxes 88,840 72,119 Other Noncurrent Liabilities 82,516 122,607
------ ------- Total Liabilities $1,035,044 $1,185,855 Equity
1,125,982 837,641 --------- ------- Total Liabilities and Equity
$2,161,026 $2,023,496 ========== ========== *The Company adopted
new accounting guidance related to Convertible debt which requires
an adjustment to previously disclosed condensed consolidated
financial statements. The adjustment affected convertible debt,
equity and interest expense. SEGMENT INFORMATION Unaudited In
Thousands of Dollars Mechanical Segment Electrical Segment
------------------ ------------------ Three Months Ending Three
Months Ending ------------------- ------------------- Sept 26, Sept
27, Sept 26, Sept 27, 2009 2008 2009 2008 -------- ---------
-------- -------- Net Sales $43,186 $64,078 $422,006 $556,529
Income from Operation 2,398 9,137 45,920 56,597 Nine Months Ending
Nine Months Ending ------------------ ------------------ Sept 26,
Sept 27, Sept 26, Sept 27, 2009 2008 2009 2008 -------- ---------
-------- -------- Net Sales $142,404 $191,889 $1,220,612 $1,571,377
Income from Operation 12,813 28,784 93,164 162,056 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW Unaudited In Thousands of
Dollars Nine Months Ended ----------------- (As Adjusted)*
September 26, September 27, 2009 2008 ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES: Net income $63,169 $107,628
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 50,573 45,128
Excess tax benefits from stock-based compensation (1,862) (2,463)
Loss on sale of assets, net 243 124 Stock-based compensation
expense 3,258 3,356 Non-cash convertible debt deferred financing
costs 1,063 3,662 Change in assets and liabilities, net of
acquisitions 119,124 1,148 ------- ----- Net cash provided by
operating activities 235,568 158,583 CASH FLOWS FROM INVESTING
ACTIVITIES: Additions to property, plant and equipment (25,884)
(43,947) Purchases of investment securities (10,696) - Business
acquisitions, net of cash acquired (1,500) (15,805) Sale of
property, plant and equipment 361 2,158 --- ----- Net cash used in
investing activities (37,719) (57,594) CASH FLOWS FROM FINANCING
ACTIVITIES: (5,480) (10,030) Net repayments of short-term
borrowings (152) (293) Payments of long-term debt (13,207)
(169,700) Net borrowings (repayments) under revolving credit
facility - 165,000 Net proceeds from long-term borrowings (27,609)
- Net proceeds from the sale of common stock 150,370 - Dividends
paid to shareholders (15,794) (14,404) Purchases of treasury stock
- (4,191) Proceeds from the exercise of stock options 753 2,740
Excess tax benefits from stock-based compensation 1,862 2,463
Financing fees paid - (454) --- ---- Net cash provided by (used in)
financing activities 90,743 (28,869) EFFECT OF EXCHANGE RATES ON
CASH 469 (972) --- ---- Net increase in cash and cash equivalents
289,061 71,148 Cash and cash equivalents at beginning of period
65,250 42,574 ------ ------ Cash and cash equivalents at end of
period $354,311 $113,722 ======== ======== *The Company adopted new
accounting guidance related to Convertible debt which requires an
adjustment to previously disclosed condensed consolidated financial
statements. The adjustment affected convertible debt, equity and
interest expense. DATASOURCE: Regal Beloit Corporation CONTACT:
John Perino, Vice President, Investor Relations of Regal Beloit
Corporation, +1-608-361-7501 Web Site: http://www.regal-beloit.com/
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