UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
_______________________
Date of Report
(Date of earliest event reported): February 16, 2015
Regal-Beloit Corporation
(Exact name of registrant as specified in its charter)
|
| | |
Wisconsin | 1-7283 | 39-0875718 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
200 State Street, Beloit, Wisconsin 53511-6254
(Address of principal executive offices, including Zip code)
(608) 364-8800
(Registrant's telephone number)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
_______________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On February 16, 2015, Regal Beloit Corporation (the “Company”) issued a news release reporting the financial results of the Company for the financial period ended January 3, 2015. A copy of the Company's news release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 7.01 Regulation FD Disclosure.
On February 17, 2015, the Company held a conference call to discuss its financial results for the financial period ended January 3, 2015 and provided a presentation in connection therewith. A copy of the Company's conference call presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
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(d) | Exhibits. The following exhibits are being furnished herewith: |
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99.1 | News Release of Regal Beloit Corporation, dated February 16, 2015. |
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99.2 | Regal Beloit Corporation Presentation of February 17, 2015. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
REGAL BELOIT CORPORATION
Date: February 17, 2015 By: /s/ Peter C. Underwood
Peter C. Underwood
Vice President, General Counsel and Secretary
REGAL BELOIT CORPORATION
Exhibit Index to Report on Form 8-K
Dated February 16, 2015
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| | |
Exhibit Number | | Exhibit Description |
99.1 | | News Release of Regal Beloit Corporation, dated February 16, 2015. |
99.2 | | Regal Beloit Corporation Presentation of February 17, 2015. |
FOR RELEASE ON OR AFTER: February 16, 2015
CONTACT: John Perino, VP Investor Relations
608-361-7501
john.perino@regalbeloit.com
Regal Beloit Corporation Announces Fourth Quarter 2014 Financial Results
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• | 2014 Sales up 5% to a Record $3.3 Billion |
| |
• | Announced Acquisition of Emerson Power Transmission Solutions Business |
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• | 2015 Guidance Represents ~25%-35% Adjusted EPS Growth over 2014 |
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• | Goodwill and Long-Lived Asset Impairment of $146 Million, Net of Tax |
BELOIT, WI - Regal Beloit Corporation (NYSE: RBC) today reported a fourth quarter 2014 diluted loss per share of ($2.61), which included a charge of $3.27 per share for goodwill and long-lived asset impairments. Fourth quarter adjusted diluted earnings per share* were $0.82, which included (i) a negative $0.22 per share impact from a charge to accounts receivable related to the Company’s Venezuela operations, partially offset by (ii) an $0.11 per share net benefit of LIFO and other inventory reserves. The net effect of these two items was an adverse impact of $0.11 per share.
Key highlights for the fourth quarter 2014 financial results versus the year-ago period include:
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• | Total net sales grew 7% to $776 million driven by organic growth of 3%, acquisition growth of 5% and a foreign currency translation decline of 1%. |
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• | Adjusted operating profit margin was relatively flat at 7.8%. |
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• | Net cash provided by operating activities increased 7%. |
Fourth quarter segment highlights versus the year-ago period include:
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• | Power Transmission net sales increased 13% to $68 million driven by strength in North America partially offset by weakness in EMEA. Adjusted operating profit margins increased from 11.0% to 12.3% primarily driven by leverage on higher volumes. |
| |
• | Commercial and Industrial Systems net sales increased 5% to $451 million. Acquisition growth of 8% was partially offset by a 2% decrease from foreign currency translation. North American motor sales grew mid-single digits but were offset by weakness in oil and gas and Asia Pacific. Adjusted operating profit margins decreased from 7.8% to 4.7% due primarily to the charge to accounts receivable related to our Venezuela operations. |
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• | Climate Solutions net sales increased 9% to $256 million due to positive market conditions and the SEER 13 pre-build. Adjusted operating profit margins increased from 7.2% to 11.9% due to leverage on higher volumes, net favorable LIFO and other inventory reserve adjustments and improvements from the simplification initiative. |
*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.
“Recent changes in the global environment resulting from rapidly declining oil prices led us to further reduce our exposure in Venezuela, clouding what was otherwise a quarter operationally in line with our guidance,” said Regal Chairman and CEO Mark Gliebe. “We experienced strong organic growth in key end markets and we started to see benefits from our simplification initiative. At the end of the year, we announced the transformational acquisition of Emerson’s PTS business which will significantly contribute to 2015 earnings. Two weeks ago, we closed on the acquisition and quickly began our integration."
2015 Outlook
"We are executing on the three-year plan we laid out for investors in December 2014. Current business conditions give us confidence in our North American operations but unfavorable currency translation, uncertainty in Europe and a decline in oil and gas investments will be headwinds in 2015. Despite these challenges, we continue to expect our margin improvement initiatives will enable us to achieve the first year targets for our legacy businesses that we communicated in December. We expect 2015 adjusted diluted earnings per share to be in the range of $5.45 to $5.85, which includes accretion from the PTS acquisition,” continued Mr. Gliebe.
Conference Call
Management will hold a conference call to discuss the earnings release at 9:00 AM CST (10:00 AM EST) on Tuesday, February 17, 2015. Individuals who would like to participate by phone should dial 888-317-6003 and enter 3880424 when prompted. International callers should dial 412-317-6061 and enter 3880424 when prompted. To view the presentation during the call, please follow this link to Regal’s Investors page: http://investors.regalbeloit.com/phoenix.zhtml?c=116222&p=irol-presentations.
To listen to the live audio and view the presentation via the internet, please go to: http://www.videonewswire.com/event.asp?id=101366.
A telephone replay of the call will be available through May 18, 2015, at 877-344-7529, conference ID 10058928. International callers should call 412-317-0088 using the same conference ID. A webcast replay will be available until May 18, 2015, and can be accessed at http://investors.regalbeloit.com/phoenix.zhtml?c=116222&p=irol-calendarPast or at
http://www.videonewswire.com/event.asp?id=101366.
Regal Beloit Corporation is a leading manufacturer of electric motors, electrical motion controls, power transmission and power generation products serving markets throughout the world. Regal is headquartered in Beloit, Wisconsin, and has manufacturing, sales and service facilities throughout the United States, Canada, Mexico, Europe and Asia. Regal’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: uncertainties regarding our ability to execute our restructuring plans within expected costs and timing; increases in our overall debt levels as a result of the acquisition of the Power Transmission Solutions (“PTS”) business from Emerson Electric Co., or otherwise and our ability to repay principal and interest on our outstanding debt; 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 such as the PTS acquisition, including the timing and impact of purchase accounting adjustments; unanticipated costs or expenses we may incur related to product warranty issues; currency devaluations, non-payment of receivables, governmental restrictions such as price and margin controls, or other difficult operating conditions relating to our doing business in Venezuela; 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; effect on earnings of any significant impairment of goodwill or intangible assets; 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 26, 2014 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.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME | | | | | | |
Unaudited | | | | | | | | |
(Amounts in Millions, Except per Share Data) | | | | | | |
| | | | | | | | |
| | Three Months Ended | | Twelve Months Ended |
| | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 |
Net Sales | | $ | 775.6 |
| | $ | 727.3 |
| | $ | 3,257.1 |
| | $ | 3,095.7 |
|
Cost of Sales | | 587.5 |
| | 549.3 |
| | 2,459.8 |
| | 2,312.5 |
|
Gross Profit | | 188.1 |
| | 178.0 |
| | 797.3 |
| | 783.2 |
|
Operating Expenses | | 140.2 |
| | 124.8 |
| | 516.3 |
| | 494.2 |
|
Goodwill Impairment | | 116.9 |
| | 76.3 |
| | 117.9 |
| | 76.3 |
|
Asset Impairments and Other, Net | | 41.6 |
| | 4.7 |
| | 41.6 |
| | 4.7 |
|
Total Operating Expenses | | 298.7 |
| | 205.8 |
| | 675.8 |
| | 575.2 |
|
Income (Loss) From Operations | | (110.6 | ) | | (27.8 | ) | | 121.5 |
| | 208.0 |
|
Interest Expense | | 8.6 |
| | 10.5 |
| | 39.1 |
| | 42.4 |
|
Interest Income | | 2.5 |
| | 1.8 |
| | 7.9 |
| | 4.9 |
|
Income (Loss) Before Taxes | | (116.7 | ) | | (36.5 | ) | | 90.3 |
| | 170.5 |
|
Provision for (Benefit from) Income Taxes | | (0.9 | ) | | (3.7 | ) | | 54.2 |
| | 44.5 |
|
Net Income (Loss) | | (115.8 | ) | | (32.8 | ) | | 36.1 |
| | 126.0 |
|
Less: Net Income Attributable to Noncontrolling
Interests | | 0.7 |
| | 0.4 |
| | 5.1 |
| | 6.0 |
|
Net Income (Loss) Attributable to Regal Beloit Corporation | | $ | (116.5 | ) | | $ | (33.2 | ) | | $ | 31.0 |
| | $ | 120.0 |
|
Earnings (Loss) Per Share Attributable to Regal Beloit Corporation: | | | | | | | | |
Basic | | $ | (2.61 | ) | | $ | (0.74 | ) | | $ | 0.69 |
| | $ | 2.66 |
|
Assuming Dilution | | $ | (2.61 | ) | | $ | (0.74 | ) | | $ | 0.69 |
| | $ | 2.64 |
|
Cash Dividends Declared | | $ | 0.22 |
| | $ | 0.20 |
| | $ | 0.86 |
| | $ | 0.79 |
|
Weighted Average Number of Shares Outstanding: | | | | | | | | |
Basic | | 44.7 |
| | 45.1 |
| | 45.0 |
| | 45.0 |
|
Assuming Dilution | | 44.7 |
| | 45.1 |
| | 45.3 |
| | 45.4 |
|
|
| | | | | | | | |
CONDENSED CONSOLIDATED BALANCE SHEETS | | | | |
Unaudited | | | | |
(Dollars in Millions) | | | | |
| | Jan 3,
2015 | | Dec 28,
2013 |
ASSETS | | | | |
Current Assets: | | | | |
Cash and Cash Equivalents | | $ | 334.1 |
| | $ | 466.0 |
|
Trade Receivables, less Allowances
of $11.6 million in 2014 and $11.5 million in 2013 | | 447.5 |
| | 463.8 |
|
Inventories | | 691.7 |
| | 618.7 |
|
Prepaid Expenses and Other Current Assets | | 109.4 |
| | 130.6 |
|
Deferred Income Tax Benefits | | 67.0 |
| | 46.8 |
|
Total Current Assets | | 1,649.7 |
| | 1,725.9 |
|
| | | | |
Net Property, Plant, Equipment and Noncurrent Assets | | 1,757.9 |
| | 1,917.6 |
|
Total Assets | | $ | 3,407.6 |
| | $ | 3,643.5 |
|
| | | | |
LIABILITIES AND EQUITY | | | | |
Current Liabilities: | | | | |
Accounts Payable | | $ | 312.2 |
| | $ | 304.6 |
|
Other Accrued Expenses | | 240.7 |
| | 237.9 |
|
Current Maturities of Debt | | 8.4 |
| | 158.4 |
|
Total Current Liabilities | | 561.3 |
| | 700.9 |
|
| | | | |
Long-Term Debt | | 625.4 |
| | 609.0 |
|
Other Noncurrent Liabilities | | 241.6 |
| | 231.2 |
|
Equity: | | | | |
Total Regal Beloit Corporation Shareholders' Equity | | 1,934.4 |
| | 2,056.2 |
|
Noncontrolling Interests | | 44.9 |
| | 46.2 |
|
Total Equity | | 1,979.3 |
| | 2,102.4 |
|
Total Liabilities and Equity | | $ | 3,407.6 |
| | $ | 3,643.5 |
|
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| | | | | | | | | | | | | | | | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | | | | | | | | |
Unaudited | | | | | | | | |
(Dollars in Millions) | | | | | | | | |
| | Three Months Ended | | Twelve Months Ended |
| | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | |
Net income (loss) | | $ | (115.8 | ) | | $ | (32.8 | ) | | $ | 36.1 |
| | $ | 126.0 |
|
Adjustments to reconcile net income (loss) and changes in assets and liabilities (net of acquisitions) to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | 35.1 |
| | 33.4 |
| | 138.7 |
| | 128.5 |
|
Excess tax benefits from share-based compensation | | (0.1 | ) | | (0.1 | ) | | (1.3 | ) | | (0.8 | ) |
Goodwill impairment | | 116.9 |
| | 76.3 |
| | 117.9 |
| | 76.3 |
|
Asset impairment and other, net | | 41.6 |
| | 4.7 |
| | 41.6 |
| | 4.7 |
|
Loss on disposition of assets, net | | 1.4 |
| | 1.9 |
| | 1.8 |
| | 2.0 |
|
Share-based compensation expense | | 3.4 |
| | 3.1 |
| | 11.9 |
| | 11.4 |
|
Loss on sale of consolidated joint venture | | — |
| | — |
| | 1.9 |
| | — |
|
Loss on Venezuela currency devaluation | | 10.4 |
| | — |
| | 10.4 |
| | 3.6 |
|
Gain on disposal of real estate | | (11.9 | ) | | — |
| | (13.9 | ) | | — |
|
Change in operating assets and liabilities, net of acquisitions | | (9.9 | ) | | (20.0 | ) | | (46.9 | ) | | (46.7 | ) |
Net cash provided by operating activities | | 71.1 |
| | 66.5 |
| | 298.2 |
| | 305.0 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
Additions to property, plant, and equipment | | (23.1 | ) | | (17.3 | ) | | (83.6 | ) | | (82.7 | ) |
Net sales (purchases) of investment securities | | 8.0 |
| | 1.0 |
| | (1.9 | ) | | 0.7 |
|
Business acquisitions, net of cash acquired | | — |
| | (32.0 | ) | | (128.2 | ) | | (38.4 | ) |
Additions of equipment on operating leases | | (0.1 | ) | | (4.7 | ) | | (4.6 | ) | | (8.3 | ) |
Proceeds received from disposal of real estate | | 11.5 |
| | — |
| | 11.5 |
| | — |
|
Grants received for capital expenditures | | — |
| | — |
| | — |
| | 1.6 |
|
Proceeds from sale of consolidated joint venture | | 0.2 |
| | — |
| | 0.9 |
| | — |
|
Proceeds from sale of assets | | 0.9 |
| | — |
| | 1.0 |
| | 1.7 |
|
Net cash used in investing activities | | (2.6 | ) | | (53.0 | ) | | (204.9 | ) | | (125.4 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
Net (repayments) borrowings under revolving credit facility | | (43.0 | ) | | — |
| | 17.0 |
| | — |
|
Net proceeds (repayments) of short-term borrowings | | 0.5 |
| | (1.5 | ) | | 0.2 |
| | (0.5 | ) |
Repayments of long-term debt | | (0.3 | ) | | (0.1 | ) | | (150.4 | ) | | (55.9 | ) |
Dividends paid to shareholders | | (9.8 | ) | | (9.0 | ) | | (37.8 | ) | | (35.1 | ) |
Payments of contingent consideration | | (5.3 | ) | | — |
| | (13.9 | ) | | — |
|
Proceeds from the exercise of stock options | | 0.1 |
| | (0.8 | ) | | 0.9 |
| | 1.5 |
|
Excess tax benefits from share-based compensation | | 0.1 |
| | 0.1 |
| | 1.3 |
| | 0.8 |
|
Repurchase of common stock | | — |
| | — |
| | (35.0 | ) | | — |
|
Distribution to noncontrolling interest | | — |
| | — |
| | (0.3 | ) | | — |
|
Purchase of subsidiary shares from noncontrolling interest | | — |
| | — |
| | — |
| | (1.7 | ) |
Net cash used in by financing activities | | (57.7 | ) | | (11.3 | ) | | (218.0 | ) | | (90.9 | ) |
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | | (4.0 | ) | | 1.1 |
| | (7.2 | ) | | 2.0 |
|
Net increase (decrease) in cash and cash equivalents | | 6.8 |
| | 3.3 |
| | (131.9 | ) | | 90.7 |
|
Cash and cash equivalents at beginning of period | | 327.3 |
| | 462.7 |
| | 466.0 |
| | 375.3 |
|
Cash and cash equivalents at end of period | | $ | 334.1 |
| | $ | 466.0 |
| | $ | 334.1 |
| | $ | 466.0 |
|
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SEGMENT INFORMATION | | | | | | | | | | | | | | |
Unaudited | | | | | | | | | | | | | | | | |
(Dollars In Millions) | | | | | | | | | | | | | | |
| | Three Months Ended |
| | Commercial & Industrial Systems | | Climate Solutions | | Power Transmission Solutions | | Total Regal |
| | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 |
Net Sales | | $ | 451.2 |
| | $ | 431.2 |
| | $ | 256.2 |
| | $ | 235.9 |
| | $ | 68.2 |
| | $ | 60.2 |
| | $ | 775.6 |
| | $ | 727.3 |
|
| | | | | | | | | | | | | | | | |
Operating Margin | | (18.7 | )% | | (8.5 | )% | | 2.8 | % | | 6.1 | % | | (49.1 | )% | | (9.1 | )% | | (14.2 | )% | | (3.8 | )% |
Adjusted Operating Margin Percentage | | 4.7 | % | | 7.8 | % | | 11.9 | % | | 7.2 | % | | 12.3 | % | | 11.0 | % | | 7.8 | % | | 7.9 | % |
| | | | | | | | | | | | | | | | |
Components of Net Sales: | | | | | | | | | | | | | | | | |
Organic Sales Growth | | (1.9 | )% | | | | 9.2 | % | | | | 14.0 | % | | | | 3.0 | % | | |
Acquisitions, Net Divestitures | | 8.1 | % | | | | — | % | | | | — | % | | | | 4.8 | % | | |
Foreign Currency Impact | | (1.6 | )% | | | | (0.6 | )% | | | | (0.6 | )% | | | | (1.2 | )% | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Twelve Months Ended |
| | Commercial & Industrial Systems | | Climate Solutions | | Power Transmission Solutions | | Total Regal |
| | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 |
Net Sales | | $ | 1,856.1 |
| | $ | 1,746.6 |
| | $ | 1,134.8 |
| | $ | 1,098.6 |
| | $ | 266.2 |
| | $ | 250.5 |
| | $ | 3,257.1 |
| | $ | 3,095.7 |
|
| | | | | | | | | | | | | | | | |
Operating Margin | | 1.8 | % | | 4.7 | % | | 8.8 | % | | 9.9 | % | | (4.4 | )% | | 6.7 | % | | 3.7 | % | | 6.7 | % |
Adjusted Operating Margin Percentage | | 7.8 | % | | 8.8 | % | | 11.7 | % | | 10.3 | % | | 11.3 | % | | 11.6 | % | | 9.4 | % | | 9.6 | % |
| | | | | | | | | | | | | | | | |
Components of Net Sales: | | | | | | | | | | | | | | | | |
Organic Sales Growth | | (0.2 | )% | | | | 3.5 | % | | | | 6.3 | % | | | | 1.6 | % | | |
Acquisitions, Net Divestitures | | 7.4 | % | | | | — | % | | | | — | % | | | | 4.2 | % | | |
Foreign Currency Impact | | (0.9 | )% | | | | (0.2 | )% | | | | — | % | | | | (0.6 | )% | | |
NON-GAAP MEASURES
Unaudited
(Dollars in Millions)
We prepare financial statements in accordance with accounting principles generally accepted in the United States (“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. 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. In addition, since our management often uses these non-GAAP financial measures to manage and evaluate our business, make operating decisions, and forecast our future results, we believe disclosing these measures helps investors evaluate our business in the same manner as management. 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 forward looking) and adjusted operating profit margin.
In addition to these non-GAAP measures, we also use the term “organic sales” to refer to GAAP sales from existing operations excluding sales from acquired businesses recorded prior to the first anniversary of the acquisition less the amount of sales attributable to any divested businesses (“acquisition sales”), and (ii) the impact of foreign currency translation. The impact of foreign currency translation is determined by translating the respective period’s sales (excluding acquisition sales) using the same 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. We use the term “acquisition growth” to refer to the increase in our sales between periods that is attributable to acquisition sales.
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| | | | | | | | | | | | | | | | |
ADJUSTED DILUTED EARNINGS PER SHARE | | | | | | | | |
| | | | | | | | |
| | Three Months Ended | | Twelve Months Ended |
| | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 |
GAAP Diluted Earnings (Loss) Per Share | | $ | (2.61 | ) | | $ | (0.74 | ) | | $ | 0.69 |
| | $ | 2.64 |
|
Goodwill Impairment1 | | 2.56 |
| | 1.55 |
| | 2.55 |
| | 1.55 |
|
Asset Impairments and Other, Net1 | | 0.71 |
| | 0.10 |
| | 0.70 |
| | 0.10 |
|
Venezuelan Currency Devaluation2 | | 0.15 |
| | — |
| | 0.15 |
| | — |
|
Purchase Accounting and Transaction Costs | | 0.09 |
| | 0.02 |
| | 0.14 |
| | 0.02 |
|
Restructuring Costs | | 0.03 |
| | 0.04 |
| | 0.18 |
| | 0.09 |
|
Gain on Disposal of Real Estate3 | | (0.20 | ) | | — |
| | (0.23 | ) | | — |
|
Loss on Divestiture Bankruptcy4 | | 0.09 |
| | — |
| | 0.09 |
| | — |
|
Loss on Sale of Joint Venture | | — |
| | — |
| | 0.04 |
| | — |
|
Tax Benefit Attributable to Prior Year | | — |
| | — |
| | — |
| | (0.04 | ) |
Adjusted Diluted Earnings Per Share | | $ | 0.82 |
| | $ | 0.97 |
| | $ | 4.31 |
| | $ | 4.36 |
|
| | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ADJUSTED OPERATING INCOME | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | Three Months Ended |
| | Commercial & Industrial Systems | | Climate Solutions | | Power Transmission Solutions | | Total Regal |
| | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 |
GAAP Income (Loss) from Operations | | $ | (84.2 | ) | | $ | (36.7 | ) | | $ | 7.1 |
| | $ | 14.4 |
| | $ | (33.5 | ) | | $ | (5.5 | ) | | $ | (110.6 | ) | | $ | (27.8 | ) |
Goodwill Impairment1 | | 99.7 |
| | 64.2 |
| | 6.1 |
| | — |
| | 11.1 |
| | 12.1 |
| | 116.9 |
| | 76.3 |
|
Asset Impairments and Other, Net1 | | — |
| | 4.7 |
| | 15.4 |
| | — |
| | 26.2 |
| | — |
| | 41.6 |
| | 4.7 |
|
Venezuelan Currency Devaluation2 | | 10.4 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 10.4 |
| | — |
|
Purchase Accounting and Transaction Costs | | 0.7 |
| | 1.6 |
| | — |
| | — |
| | 4.4 |
| | — |
| | 5.1 |
| | 1.6 |
|
Restructuring Costs | | 0.4 |
| | — |
| | 1.8 |
| | 2.7 |
| | 0.2 |
| | — |
| | 2.4 |
| | 2.7 |
|
Gain on Disposal of Real Estate3 | | (11.9 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (11.9 | ) | | — |
|
Loss on Divestiture Bankruptcy4 | | 6.3 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6.3 |
| | — |
|
Adjusted Income from Operations | | $ | 21.4 |
| | $ | 33.8 |
| | $ | 30.4 |
| | $ | 17.1 |
| | $ | 8.4 |
| | $ | 6.6 |
| | $ | 60.2 |
| | $ | 57.5 |
|
|
| | | | | | | | | | | | | | | | | | |
GAAP Operating Margin % | | (18.7)% | | (8.5)% | | 2.8% | | 6.1% | | (49.1)% | | (9.1)% | | (14.2 | )% | | (3.8 | )% |
Adjusted Operating Margin % | | 4.7% | | 7.8% | | 11.9% | | 7.2% | | 12.3% | | 11.0% | | 7.8 | % | | 7.9 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ADJUSTED OPERATING INCOME | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | Twelve Months Ended |
| | Commercial & Industrial Systems | | Climate Solutions | | Power Transmission Solutions | | Total Regal |
| | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 | | Jan 3,
2015 | | Dec 28,
2013 |
GAAP Income (Loss) from Operations | | $ | 33.6 |
| | $ | 81.9 |
| | $ | 99.6 |
| | $ | 109.2 |
| | $ | (11.7 | ) | | $ | 16.9 |
| | $ | 121.5 |
| | $ | 208.0 |
|
Goodwill Impairment1 | | 100.7 |
| | 64.2 |
| | 6.1 |
| | — |
| | 11.1 |
| | 12.1 |
| | 117.9 |
| | 76.3 |
|
Asset Impairments and Other, Net1 | | — |
| | 4.7 |
| | 15.4 |
| | — |
| | 26.2 |
| | — |
| | 41.6 |
| | 4.7 |
|
Venezuelan Currency Devaluation2 | | 10.4 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 10.4 |
| | — |
|
Purchase Accounting and Transaction Costs | | 4.0 |
| | 1.6 |
| | — |
| | — |
| | 4.4 |
| | — |
| | 8.4 |
| | 1.6 |
|
Restructuring Costs | | 1.6 |
| | 2.2 |
| | 11.4 |
| | 4.0 |
| | 0.2 |
| | — |
| | 13.2 |
| | 6.2 |
|
Gain on Disposal of Real Estate3 | | (13.9 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (13.9 | ) | | — |
|
Loss on Divestiture Bankruptcy4 | | 6.3 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6.3 |
| | — |
|
Loss on Sale of Joint Venture | | 1.9 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1.9 |
| | — |
|
Adjusted Income from Operations | | $ | 144.6 |
| | $ | 154.6 |
| | $ | 132.5 |
| | $ | 113.2 |
| | $ | 30.2 |
| | $ | 29.0 |
| | $ | 307.3 |
| | $ | 296.8 |
|
|
| | | | | | | | | | | | | | | | | | |
GAAP Operating Margin % | | 1.8% | | 4.7% | | 8.8% | | 9.9% | | (4.4)% | | 6.7% | | 3.7 | % | | 6.7 | % |
Adjusted Operating Margin % | | 7.8% | | 8.8% | | 11.7% | | 10.3% | | 11.3% | | 11.6% | | 9.4 | % | | 9.6 | % |
_______________________________
1 In the course of conducting its annual goodwill impairment analysis for 2014, management concluded that impairment expenses of $116.9 million for goodwill and $41.6 million for long-lived assets were required in the fourth quarter due primarily to the sharp decline in the price of oil and other commodities. The after-tax impact was $3.27 per share. These amounts are subject to finalization.
2 Effective January 3, 2015, the Company changed the exchange rate it applies to Bolivar denominated transactions from 6.3 to 51.0 per U.S. dollar, which is in line with the SICAD II exchange rate resulting in a $10.4 million devaluation charge. Management believes that this devalued rate best represents the economics of the Company’s business activity in Venezuela as of that date.
3 Represents gain on the sale of a facility in China that was recently relocated to a new plant in Wuxi.
4 In the fourth quarter of 2014, the company that purchased the divested pool and spa motor business from the Company in 2011 filed for bankruptcy resulting in accounts receivable and inventory write offs totaling $6.3 million, of which $1.5 million was recorded in cost of goods sold and $4.8 million was recorded in operating expense.
|
| | | | | | | | |
RECONCILIATION OF 2015 ADJUSTED ANNUAL GUIDANCE | | Minimum | | Maximum |
2015 GAAP EPS Annual Guidance | | $ | 4.91 |
| | $ | 5.31 |
|
Restructuring | | 0.21 |
| | 0.21 |
|
Purchase Accounting and Transaction Costs | | 0.33 |
| | 0.33 |
|
2015 Adjusted EPS Annual Guidance | | $ | 5.45 |
| | $ | 5.85 |
|
Regal Beloit Corporation Fourth Quarter 2014 Earnings Conference Call February 17, 2015 Mark Gliebe Chairman and Chief Executive Officer Jon Schlemmer Chief Operating Officer Chuck Hinrichs Vice President Chief Financial Officer John Perino Vice President Investor Relations
Safe Harbor Statement This presentation 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: : uncertainties regarding our ability to execute our restructuring plans within expected costs and timing; increases in our overall debt levels as a result of the acquisition of the Power Transmission Solutions (“PTS”) business from Emerson Electric Co., or otherwise and our ability to repay principal and interest on our outstanding debt; 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 such as the PTS acquisition, including the timing and impact of purchase accounting adjustments; unanticipated costs or expenses we may incur related to product warranty issues; currency devaluations, non-payment of receivables, governmental restrictions such as price and margin controls, or other difficult operating conditions relating to our doing business in Venezuela; 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; affect on earnings of any significant impairment of goodwill or intangible assets; 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 26, 2014 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. p 2
Non-GAAP Financial Measures We prepare financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). We also periodically disclose certain financial measures that may be considered “non- GAAP” financial measures. 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. 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 operating profit margin, free cash flow, free cash flow as a percentage of adjusted net income, and EBITDA. In addition to these non-GAAP measures, we also use the term “organic sales” to refer to GAAP sales from existing operations excluding sales from acquired businesses recorded prior to the first anniversary of the acquisition less the amount of sales attributable to any divested businesses (“acquisition sales”), and (ii) the impact of foreign currency translation. The impact of foreign currency no translation is determined by translating the respective period’s sales (excluding acquisition sales) using the same 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. We use the term “acquisition growth” to refer to the increase in our sales between periods that is attributable to acquisition sales. p 3
Agenda Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Operations Update Jon Schlemmer Summary Mark Gliebe Q&A All p 4
> Actions to Reduce Risk in Venezuela Clouded Solid Operational Quarter $0.82 Adjusted EPS includes $0.11 benefit for LIFO and other inventory reserves and ($0.22) charge for Venezuela accounts receivable > Revenues up 7%, Including 3% Organic Growth 13% in Power Transmission Solutions 5% in C&I Systems 9% in Climate Solutions > Operating Margins Impacted Primarily by the Venezuelan A/R Charge > Full Year 2014 Free Cash Flow* of 120% of Adjusted Net Income; 4th Year in a Row Exceeding 100% > Goodwill and Long-Lived Asset Impairments Recorded in Quarter * Non-GAAP Financial Measurement, See Appendix for Reconciliation Opening Comments – 4th Quarter Results p 5
PTS “Day One” Celebrations p 6
Goals ˃ Deliver on Financial Pro Forma, Including Synergies ˃ No Customer Interruptions ˃ Leverage Strong Talent Tony Pajk Power Transmission Solutions p 7 PTS Integration Starting a Successful Integration to “One Regal”
Capital Allocation Priorities Target: 2.5% - 3.0% of Sales Dividends Target: 18% – 22% Payout Ratio Acquisitions Target Accretive Bolt-on and Transformative Transactions to Drive Growth and Shareholder Value Share Repurchase Utilize Remaining Share Repurchase Authorization However Remain Flexible for Acquisitions Strong Balance Sheet Target Debt/EBITDA Ratio: 1.5 – 3.5 Capital Expenditures p 8 Disciplined Approach to Drive Long-Term Shareholder Value
> Shifted from Quarterly Guidance to Annual Guidance > Focus for 2015 Deliver on Margin Improvement Plans Execute on Integration of PTS > Near Term North American Market Conditions Robust > Projected Headwinds SEER 13 Pre-Build Oil & Gas End Markets Strengthening US Dollar / Currency Translation 2015 Outlook p 9 Expect 2015 Adjusted Diluted EPS to Grow by ~25% to 35%
> Sales of $776 Million, Up 7% from Prior Year – Organic Growth of 3% – Acquisition Growth of 5% – Foreign Currency Translation Decline of 1% > Adjusted Operating Profit Margin* of 7.8% > Unusual Items in 4Q 2014 – Negatively Impacted by $0.22 per Share ($10 Million) Charge to Accounts Receivable Related to Sales to Venezuela – Reflects $0.11 per Share ($8 Million) Benefit from LIFO and Other Inventory Reserves > Adjusted Diluted Earnings per Share* of $0.82 4th Quarter Financial Results * Non-GAAP Financial Measurement, See Appendix for Reconciliation p 10
4th Quarter 2014 Financial Results p 11 ADJUSTED DILUTED EARNINGS PER SHARE Jan 3, 2015 Dec 28, 2013 GAAP Diluted Earnings Per Share (2.61)$ (0.74)$ Goodwill Impairment 2.56 1.55 Other Impairments, Net 0.71 0.10 Venezuelan Currency Devaluation 0.15 — Income from Grants Received for Relocation (0.20) — Loss on Divestiture Bankruptcy 0.09 — Purchase Accounting and Transaction Costs 0.09 0.02 Restructuring Costs 0.03 0.04 Adjusted Diluted Earnings Per Share 0.82$ 0.97$ Three Months Ended
Capital Expenditures > $23 Million in 4Q 2014 > $84 Million in FY 2014 Effective Tax Rate (ETR) (0.8%) ETR in 4Q 2014 reflecting the non-deductible impairment expense Balance Sheet at Jan. 3, 2015 > Total Debt of $634 Million > Net Debt of $300 Million > Debt to Adj. EBITDA* 1.5 x > Net Debt to Adj. EBITDA* 0.7 x Key 2014 Financial Metrics Free Cash Flow* > $215 Million in FY 2014 > 120% of Adj. Net Income in FY 2014 * Non-GAAP Financial Measurement, See Appendix for Reconciliation p 12
2015 Guidance > GAAP EPS Guidance of $4.91 to $5.31 > Adjusted EPS Guidance of $5.45 to $5.85 $0.21 of Restructuring Charges $0.33 of PTS Purchase Accounting Adjustments and Closing Costs > Key Assumptions 26% Effective Tax Rate (ETR) $105 Million Capital Expenditures PTS • Financing • Intangible Amortization p 13 Expect 2015 Adjusted Diluted EPS to Grow by ~25% to 35%
Operating Margin Improvement 2014* 2017P Legacy Regal 9.4% 11% - 12% * Adj Op Margin 2014 Actual > Progress on Footprint Simplification US, Mexico, Germany and Australia Restructuring Completed in 2H 2014 Springfield Restructuring Completed this Month Kentucky Restructuring Program on Track to be Completed Before Year End C&I Systems Restructuring > Design Simplification Programs Moving Forward > $15 Million of Restructuring Expenses Estimated in 2015 > PTS Accretive to Legacy Margin Goals p 14 2015 Guidance Reflects Progress Towards Our Goal
Power Transmission Solutions C&I Systems Power Transmission Solutions Climate Solutions Focus on PTS Integration and Achieving the Synergies > Legacy PTS Sales up ~13% in 4Q 2014 Strong Demand from a Variety of End Markets Orders Soften for Upstream Oil & Gas Products > Looking Forward Oil & Gas and Currency Headwinds Strength in North America End Markets Integration Synergies from Bringing Together Legacy PT Business with PTS p 15
Commercial & Industrial Systems C&I Systems Climate Solutions Turned the Corner in North American C&I Motors > Sales up ~5% in 4Q 2014 > Organic Sales Slightly Down in the Quarter Mid-Single Digit Growth in North America Motors Offset by Weakness in Oil & Gas, Europe, and Asia Pacific > Looking Forward Strength in North America End Markets Continued Headwinds from Oil & Gas and Foreign Currency Translation Right-Sizing Oil & Gas Exposed Businesses Power Transmission Solutions p 16
Climate Solutions C&I Systems Climate Solutions Fifth Consecutive Quarter of Year-Over-Year Growth > Sales up ~9% in 4Q 2014 with Growth in North America, India and the Middle East > North America HVAC Strength SEER 13 Pre-Build Overall Market Strength High Efficiency Product Mix > Looking Forward Strong Start, Planning for Mid-Single Digit Market Growth in North America Positive High Efficiency Mix and Strength in India and Middle East Markets Offset by SEER 13 Pre-Build and Two-Way Material Price Formulas Power Transmission Solutions p 17
> Sales Up 7% with Growth in all Segments > 4Q 2014 Operational Results in Line with Expectations > Free Cash Flow Exceeded Adjusted Net Income > PTS Integration Underway > On Track with our Margin Improvement Targets > Full Year Guidance Reflects a ~25% to 35% Increase in Adjusted EPS > Capital Allocation – Near Term Bias to Pay Down Debt Summary Comments p 18
Questions and Answers p 19
> 2014 Record Sales, Free Cash Flow Exceeded Adjusted Net Income, Doubled Normal Dividend Increase > 50 New Products > Significant Progress on Simplification > Positive Customer Feedback > Completed Two Acquisitions and Announcement of PTS > 2015 Focus – Achieve Our Margin Targets and Execute on PTS Integration Closing Comments p 20 2015 Guidance Delivers ~25% to 35% Adjusted Earnings Growth
Appendix Non-GAAP Reconciliations 1 In the course of conducting its annual goodwill impairment analysis for 2014, management concluded that impairment expenses of $116.9 million for goodwill and $41.6 million for long-lived assets were required in the fourth quarter due primarily to the sharp decline in the price of oil and other commodities. The after-tax impact was $3.27 per share. These amounts are subject to finalization. 2 Effective January 3, 2015, the Company changed the exchange rate it applies to Bolivar denominated transactions from 6.3 to 51.0 per U.S. dollar, which is in line with the SICAD II exchange rate resulting in a $10.4 million devaluation charge. Management believes that this devalued rate best represents the economics of the Company’s business activity in Venezuela as of that date. 3 Represents gain on the sale of a facility in China that was recently relocated to a new plant in Wuxi. 4 In the fourth quarter of 2014, the company that purchased the divested pool and spa motor business from the Company in 2011 filed for bankruptcy resulting in accounts receivable and inventory write offs totaling $6.3 million, of which $1.5 million was recorded in cost of goods sold and $4.8 million was recorded in operating expense. ADJUSTED DILUTED EARNINGS PER SHARE* Jan 3, 2015 Dec 28, 2013 Jan 3, 2015 Dec 28, 2013 GAAP Diluted Earnings Per Share (2.61)$ (0.74)$ 0.69$ 2.64$ Goodwill Impairment 1 2.56 1.55 2.55 1.55 Other Impairments, Net 0.71 0.10 0.70 0.10 Venezuelan Currency Devaluation 2 0.15 — 0.15 — Purchase Accounting and Transaction Costs 0.09 0.02 0.14 0.02 Restructuring Costs 0.03 0.04 0.18 0.09 Income from Grants Received for Relocation 3 (0.20) — (0.23) — Loss on Divestiture Bankruptcy 4 0.09 — 0.09 — Loss on Sale of Joint Venture — — 0.04 — Tax Benefit Attributable to Prior Year — — — (0.04) Adjusted Diluted Earnings Per Share 0.82$ 0.97$ 4.31$ 4.36$ Three Months Ended Twelve Months Ended
Appendix Non-GAAP Reconciliations Dollars in Millions ADJUSTED INCOME FROM OPERATIONS Jan 3, 2015 Dec 28, 2013 Jan 3, 2015 Dec 28, 2013 Jan 3, 2015 Dec 28, 2013 GAAP Income (Loss) from Operations (84.2) (36.7) 7.1 14.4 (33.5) (5.5) Goodwill Impairment 99.7 64.2 6.1 — 11.1 12.1 Asset Impairments and Other, Net — 4.7 15.4 — 26.2 — Venezuelan Currency Devaluation 10.4 — — — — — Purchase Accounting and Transaction Costs 0.7 1.6 — — 4.4 — Restructuring Costs 0.4 — 1.8 2.7 0.2 — Income from Grants Received for Relocation (11.9) — — — — — Loss on Divestiture Bankruptcy 6.3 — — — — — Adjusted Income from Operations 21.4$ 33.8$ 30.4$ 17.1$ 8.4$ 6.6$ Three Months Ended C&I Segment Climate Segment Power Transmission Segment
Appendix Non-GAAP Reconciliations Dollars in Millions ADJUSTED INCOME FROM OPERATIONS Jan 3, 2015 Dec 28, 2013 Jan 3, 2015 Dec 28, 2013 Jan 3, 2015 Dec 28, 2013 GAAP Income (Loss) from Operations 33.6$ 81.9$ 99.6$ 109.2$ (11.7)$ 16.9$ Goodwill Impairment 100.7 64.2 6.1 — 11.1 12.1 Asset Impairments and Other, Net — 4.7 15.4 — 26.2 — Venezuelan Currency Devaluation 10.4 — — — — — Purchase Accounting and Transaction Costs 4.0 1.6 — — 4.4 — Restructuring Costs 1.6 2.2 11.4 4.0 0.2 — Income from Grants Received for Relocation (13.9) — — — — — Loss on Divestiture Bankruptcy 6.3 — — — — — Loss on Sale of Joint Venture 1.9 — — — — — Adjusted Income from Operations 144.6$ 154.6$ 132.5$ 113.2$ 30.2$ 29.0$ Twelve Months Ended Commercial & Industrial Systems Climate Solutions Power Transmission Solutions
Appendix Non-GAAP Reconciliations Dollars in Millions Dollars in Millions ADJUSTED NET INCOME Jan 3, 2015 Dec 28, 2013 Jan 3, 2015 Dec 28, 2013 GAAP Net Income (Loss) Attributable to Regal Beloit Corporation (116.5)$ (33.2)$ 31.0$ 120.0$ Goodwill Impairment 116.9 76.3 117.9 76.3 Asset Impairments and Other, Net 41.6 4.7 41.6 4.7 Tax Effect from Goodwill Impairment and Asset Impairments and Other, Net (12.3) (6.4) (12.3) (6.4) Adjusted Net Income Attributable to Regal Beloit Corporation to Exclude the Non-Cash, Net of Tax, Goodwill Impairment and Asset Impairments and Other, Net 29.7$ 41.4$ 178.2$ 194.6$ Three Months Ended Twelve Months Ended FREE CASH FLOW Jan 3, 2015 Dec 28, 2013 Jan 3, 2015 Dec 28, 2013 GAAP Net Cash Provided by Operating Activities 71.1 66.5$ 298.2 305.0$ Additions to Property Plant and Equipment (23.1) (17.3) (83.6) (82.7) Grants Received for Capital Expenditures — — — 1.6 Free Cash Flow 48.0$ 49.2$ 214.6$ 223.9$ Free Cash Flow as a Percentage of Adjusted Net Income Attributable to Regal Beloit Corporation Adjusted to Exclude the Non-Cash, Net of Tax, Goodwill Impairment and Asset Impairments and Other, Net 161.6 % 118.8 % 120.4 % 115.1 % Three Months Ended Twelve Months Ended
Appendix Non-GAAP Reconciliations EBITDA Reconciliation Dollars in Millions 1Q 2014 2Q 2014 3Q 2014 4Q 2014 FY 2014 Net Income $43.8 $56.2 $47.5 ($116.5) $31.0 Plus: Goodwill Impairment $116.9 116.9 Plus: Asset Impairment and Other Net, - 1.0 - 41.6 42.6 Plus: Minority Interest 1.2 1.9 1.3 0.7 5.1 Plus: Taxes 16.0 21.0 18.1 -0.9 54.2 Plus: Interest Expense 10.4 10.3 9.8 8.6 39.1 Less: Interest Income -1.7 -1.7 -2.0 -2.5 -7.9 Plus: Depreciation 21.5 23.0 23.8 23.7 92.0 Plus: Amortization 11.3 12.2 11.8 11.4 46.7 Adjusted EBITDA $102.5 $123.9 $110.3 $83.0 $419.7 RECONCILIATION OF 2015 ADJUSTED EPS ANNUAL GUIDANCE Minimum Maximum 2015 GAAP EPS Annual Guidance 4.91$ 5.31$ Restructuring 0.21 0.21 Purchase Accounting and Transaction Costs 0.33 0.33 2015 Adjusted EPS Annual Guidance 5.45$ 5.85$
Appendix Non-GAAP Reconciliations ORGANIC GROWTH Three Months Ended Twelve Months Ended Net Sales 775.6$ 3,257.1$ Net Sales from Businesses Acquired (38.6) (134.6) Impact from Foreign Currency Exchange Rates 8.6 19.0 Incremental Sales from Joint Venture Sold 3.5 5.0 Adjusted Net Sales 749.1$ 3,146.5$ Net Sales Three and Nine Months Ended December 28, 2013 727.3$ 3,095.7$ Organic Growth % 3.0 % 1.6 % Jan 3, 2015
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