RBC RBC Bearings Incorporated

BELOIT, Wis., May 1 /PRNewswire-FirstCall/ -- Regal Beloit Corporation (NYSE:RBC) today reported financial results for the first quarter ended March 29, 2008. Continued strong performance by the global generator businesses and industrial businesses offset the weak residential HVAC market. The Company's initiatives continued to have a significant positive impact on its performance. New products, the contribution from the 2007 acquisitions and the impact of the continued globalization of commercial operations drove the sales growth, while the Lean Six Sigma and productivity efforts helped support operating margins during a period of significant raw material inflation. Net sales increased 28.1% to $536.3 million from $418.7 million in the first quarter of 2007. Included in reported sales are $111.9 million of sales from the four acquisitions completed late in 2007. In the Electrical segment, sales increased 31.2%, including the impact of the 2007 acquisitions. Exclusive of the recently acquired businesses, global generator sales increased 17.5% and industrial motors sales increased 6.8%, offsetting a 3.3% decline in residential HVAC motor sales and a 16.9% decline in commercial motor products used in residential applications. Sales in the Mechanical segment increased 1.0% from the prior year period. From a geographic perspective, China-based sales increased 33.1% as compared to the first quarter of 2007. In total, sales to regions outside of the United States were 25.6% of total sales in comparison to 19.2% for the first quarter of 2007. The gross profit margin for the first quarter of 2008 was 22.8% as compared to the 23.2% reported for the first quarter of 2007. The gross margin for the acquired businesses was 20.8%. For the legacy businesses, raw material and other inflation, net of the impact of product price increases was $7.7 million, which is within the Company's previously announced guidance of $7.0 to $9.0 million. This difference was largely offset by the impact of productivity improvements and Lean Six Sigma projects. Income from operations was $57.6 million or 10.7% of sales, a 21.8% increase over the $47.3 million or 11.3% of sales reported for the first quarter of 2007. Net income in the first quarter of 2008 was $32.2 million, a 20.1% increase from $26.8 million reported in the first quarter of 2007. Diluted earnings per share increased 21.3% to $.97 as compared to $.80 for the first quarter of 2007. Cash flow from operations increased 235.6% to $34.9 million from the $10.4 million reported for the same period in 2007. Improved working capital management and the increase in net income drove the improvement over the prior year. The cash performance allowed the Company to repay $8.2 million of debt in the first quarter. In addition to the debt pay down, the Company also purchased 110,000 shares of its common stock in open market purchases during the quarter at a total cost of $4.2 million. On April 24, the Company also announced the acquisition of Wuxi Hwada Motor Co. and Wuxi New Hwada Motor Co. (collectively Hwada) located in Wuxi, China. Hwada is a leading designer and manufacturer of Integral IEC and NEMA electric motors, which are used in various industrial applications such as compressor, pump, paper and steel processing, and power plants. The business is expected to add approximately $75.0 to $80.0 million to sales and add $.04 to $.06 to diluted earnings per share in 2008. The purchase price was $27.6 million in cash and the assumption of approximately $8.0 million in net liabilities. Additionally, under the terms of the transaction, the Company will pay to the seller up to $8.5 million received by the Company in the future upon the sale of certain real property rights owned by Hwada. The acquisition will be discussed further on today's conference call. "Given the difficult residential markets and raw material cost environments, we are quite pleased with our results for the first quarter. New products, continuous improvement in execution, and our geographic diversification are driving solid results," commented Henry W. Knueppel, Chairman and CEO. Knueppel added, "While we remain cautious due to the unprecedented inflation in raw materials and, to a lesser degree, the speculation regarding the strength of end markets, we are confident in our ability to deliver solid results. Accordingly our Board of Directors approved our fourth dividend increase in as many years and we remain committed to increasing shareholder value through the combination of acquisitions and share buybacks. For the second quarter we expect earnings per share to be in the range of $1.10 to $1.18." Regal Beloit will be holding a conference call to discuss first quarter financial results at 1:00 PM CT (2:00 PM ET) today. Interested parties should call 800-288-8961. A replay of the call will be available through May 14, 2008 at 800-475-6701, access code 920700. About REGAL BELOIT CORPORATION: Regal Beloit Corporation is a leading manufacturer and marketer of branded mechanical and electrical motion control 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. CAUTIONARY STATEMENT This Quarterly Report 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 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; -- difficulties in staffing and 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 27, 2008 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 Form 10-K 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 27, 2008. STATEMENTS OF INCOME In Thousands of Dollars (Unaudited) Three Months Ended March 29, March 31, 2008 2007 Net Sales $536,343 $418,646 Cost of Sales 414,244 321,419 Gross Profit 122,099 97,227 Operating Expenses 64,487 49,896 Income From Operations 57,612 47,331 Interest Expense 7,219 5,066 Interest Income 384 89 Income Before Taxes & Minority Interest 50,777 42,354 Provision For Income Taxes 18,012 14,690 Income Before Minority Interest 32,765 27,664 Minority Interest in Income, Net of Tax 598 851 Net Income $32,167 $26,813 Earnings Per Share of Common Stock: Basic $1.03 $0.87 Assuming Dilution $0.97 $0.80 Cash Dividends Declared $0.15 $0.14 Weighted Average Number of Shares Outstanding: Basic 31,316,878 30,814,312 Assuming Dilution 33,117,034 33,547,519 CONDENSED BALANCE SHEETS In Thousands of Dollars (Unaudited) March 29, December 29, ASSETS 2008 2007 Current Assets: Cash and Cash Equivalents $50,531 $42,574 Receivables and Other Current Assets 411,728 367,717 Inventories 307,261 318,200 Total Current Assets 769,520 728,491 Net Property, Plant and Equipment 358,528 339,343 Other Noncurrent Assets 779,660 794,413 Total Assets $1,907,708 $1,862,247 LIABILITIES AND SHAREHOLDERS' INVESTMENT Accounts Payable $202,462 $183,215 Other Current Liabilities 116,625 128,705 Long-Term Debt 550,694 558,918 Deferred Income Taxes 70,210 75,055 Other Noncurrent Liabilities 61,184 47,783 Minority Interest in Consolidated 11,602 10,542 Subsidiaries Shareholders' Investment 894,931 858,029 Total Liabilities and Shareholders' Investment $1,907,708 $1,862,247 SEGMENT INFORMATION In Thousands of Dollars (Unaudited) Mechanical Segment Electrical Segment Three Months Ended Three Months Ended March 29, March 31, March 29, March 31, 2008 2007 2008 2007 Net Sales $55,114 $54,594 $481,229 $364,052 Income from Operations $8,066 $6,881 $49,546 $40,450 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS In Thousands of Dollars (Unaudited) Three Months Ended March 29, 2008 March 31, 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $32,167 $26,813 Adjustments to reconcile net income to net cash provided by operating activities; Depreciation and amortization 14,152 9,883 Minority interest 598 851 Excess tax benefit from stock-based compensation (452) (3,310) Loss (gain) on sale of assets, net 70 8 Stock-based compensation expense 882 865 Change in assets and liabilities, net (12,551) (24,703) Net cash provided by operating activities 34,866 10,407 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (13,646) (12,163) Business acquisitions, net of cash acquired 374 (565) Sale of property, plant and equipment 1,149 -- Net cash used in investing activities (12,123) (12,728) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from short-term borrowing -- 9,200 Payments of long-term debt (113) (225) Net repayments under revolving credit facility (8,200) (200) Net proceeds from commercial paper borrowings -- 125 Dividends paid to shareholders (4,700) (4,345) Purchases of treasury stock (4,191) -- Proceeds from the exercise of stock options 1,364 747 Excess tax benefits from stock-based compensation 452 3,310 Net cash (used in) provided by financing activities (15,388) 8,612 EFFECT OF EXCHANGE RATES ON CASH 602 275 Net increase in cash and cash equivalents 7,957 6,566 Cash and cash equivalents at beginning of period 42,574 36,520 Cash and cash equivalents at end of period $50,531 $43,086 DATASOURCE: Regal Beloit Corporation CONTACT: David A. Barta, Vice President, Chief Financial Officer of Regal Beloit Corporation, +1-608-361-7405 Web site: http://www.regal-beloit.com/

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