Regal Beloit Reports Fourth Quarter and Full Year 2011 Financial Results

- Fourth Quarter Results Exceeded Guidance

- 2011 Record Sales of $2.8 Billion

- 2011 Record Net Income of $152.3 Million

- 2011 Free Cash Flow 136% of Net Income*

06 Feb, 2012, 19:41 ET from Regal Beloit Corporation

BELOIT, Wis., Feb. 6, 2012 /PRNewswire/ -- Regal Beloit Corporation (NYSE: RBC) today reported financial results for the fourth quarter and fiscal year ended December 31, 2011.  Net sales for the fourth quarter were $727.0 million, a 30.8% increase compared to fourth quarter 2010 net sales of $555.7 million.   Adjusted diluted earnings per share for the fourth quarter 2011 were $0.93 compared to $0.65 for the fourth quarter 2010.  Net sales for fiscal 2011 were $2,808.3 million, a 25.5% increase compared fiscal 2010 net sales of $2,238.0 million.  Adjusted diluted earnings per share for fiscal 2011 were $4.71 compared to $3.84 for fiscal 2010.  

"Our performance in the fourth quarter is another indicator that the diversification of our end markets and our ability to be a consistent and successful acquirer allow us to perform well through difficult cycles.  A number of our key business units performed well.  Revenues in our commercial and industrial motors business, our mechanical businesses and Unico remained strong, offsetting continued weakness in HVAC.  The EPC integration remains on track, and the performance of the business helped the Company exceed our guidance for the quarter.  EPC is now a key positive contributor to the Company," commented Mr. Mark Gliebe, Chairman and Chief Executive Officer.

Fiscal 2011 results included the following items:  

  • In connection with the acquisition of the Electrical Products Company of A. O. Smith Corporation ("EPC"), the Company incurred $15.5 million of acquisition related expenses, which were recorded in operating expenses.  In addition, in the third and fourth quarters, the Company's results were impacted by inventory purchase accounting adjustments of $10.3 million and $15.5 million, respectively, related to the EPC acquisition, which were recorded in cost of sales.
  • In the second quarter, the Company incurred an incremental warranty expense of $28.0 million related to a manufacturing quality problem.  In the fourth quarter, the Company reduced the expense by $15.4 million to reflect its revised estimate of future costs.  The net $12.6 million expense was recorded in cost of sales.
  • In the third quarter, the Company divested its pool and spa motor business resulting in a gain of $6.5 million.  The gain was recorded in operating expenses.
  • In the fourth quarter, the Company recognized $5.8 million of restructuring costs related to facility closures and production line transfers, aimed at improving operational efficiencies at its Australian and European businesses. The expenses were recorded in operating expenses.

*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.

The following table summarizes the items listed above and the impact on the Company's adjusted diluted earnings per share for 2011:  

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Fiscal Year

2011 Diluted Earnings Per Share (GAAP)

$             0.99

$             0.88

$             1.13

$             0.80

$             3.79

EPC Acquisition and Purchase    Accounting Costs

0.12

0.06

0.28

0.26

0.73

Incremental Warranty Expense

0.44

(0.23)

0.19

Gain on Divestiture

(0.10)

(0.10)

Restructuring Costs

0.10

0.10

2011 Adjusted Diluted Earnings   Per Share  (Non-GAAP)

$             1.11

$             1.38

$             1.31

$             0.93

$             4.71

2010 Diluted Earnings Per Share   (GAAP)

$             0.98

$             1.07

$             1.14

$             0.65

$             3.84

Note: 2011 results include the effect of the increasing weighted average number of shares outstanding.

NET SALES

(Dollars in millions)

Fourth Quarter

Fiscal Year

2011

2010

% Change

2011

2010

% Change

Net Sales

$         727.0

$           555.7

30.8%

$   2,808.3

$        2,238.0

25.5%

Net Sales by Segment:

 Electrical segment

$         660.3

$           494.2

33.6%

$   2,533.3

$        2,002.0

26.5%

 Mechanical segment

$            66.7

$             61.5

8.5%

$      275.0

$           236.0

16.5%

Net sales for the fourth quarter 2011 increased $171.3 million compared to the fourth quarter 2010, including $198.5 million of incremental net sales from the businesses acquired within the last twelve months (the "acquired businesses").  Fiscal 2011 net sales increased $570.3 million, including $494.3 million of incremental net sales from the acquired businesses.  

In the Electrical segment, net sales for the fourth quarter 2011 increased $166.1 million compared to the fourth quarter 2010, including $198.5 million of incremental net sales from the acquired businesses.  North American residential HVAC net sales, excluding net sales from the acquired businesses, decreased 16.1% in the fourth quarter 2011 compared to the fourth quarter 2010, due to a mild winter, the effects of reduced federal tax incentives for high efficiency products,  and increased industry sales of R22 systems.  North American commercial and industrial net sales from continuing operations, excluding net sales from the acquired businesses, increased 5.1% in the fourth quarter 2011 compared to the fourth quarter 2010.  Fiscal 2011 Electrical segment net sales increased $531.3 million compared to fiscal 2010, including $484.4 million of incremental net sales from the acquired businesses.  

In the Mechanical segment, net sales for the fourth quarter 2011 increased $5.2 million compared to the fourth quarter 2010.  The increase was driven primarily by improving demand in later cycle end markets.  Fiscal 2011 Mechanical segment net sales increased $39.0 million compared to fiscal 2010, including $9.9 million of incremental net sales from the acquired businesses.  

Fourth quarter 2011 net sales to regions outside the United States increased 24.6% compared to the fourth quarter 2010.  Fiscal 2011 net sales outside the United States exceeded the one billion dollar mark and were 36.0% of total net sales, compared to 31.6% of total net sales for fiscal 2010.    

Sales of high efficiency products increased 17.7% compared to the fourth quarter of 2010.  Fourth quarter 2011 net sales of high efficiency products were 13.4% of total net sales, compared to 14.9% for the fourth quarter 2010.  

GROSS PROFIT

(Dollars in thousands)

Fourth Quarter

Fiscal Year

2011

2010

2011

2010

Gross Profit

$      170,883

$        130,267

$      665,989

$        549,350

 As a percentage of net sales

23.5%

23.4%

23.7%

24.5%

Gross Profit

 Electrical segment

$      154,975

$        115,361

$      590,933

$        486,117

   As a percentage of net sales

23.5%

23.3%

23.3%

24.3%

 Mechanical segment

$        15,908

$          14,906

$        75,056

$          63,233

   As a percentage of net sales

23.9%

24.2%

27.3%

26.8%

Gross profit was $170.9 million, or 23.5% of net sales, for the fourth quarter 2011 compared to $130.3 million, or 23.4% of net sales, for the fourth quarter 2010. Cost of sales for the fourth quarter 2011 included expenses of $15.5 million related to EPC inventory purchase accounting adjustments, offset by a $15.4 million reduction in the incremental warranty expense established in the second quarter 2011. Excluding these items, adjusted gross profit was $171.0 million or 23.5% of sales.   Fiscal 2011 cost of sales included $25.8 million of inventory purchase accounting adjustments and $12.6 million of incremental warranty expenses.  Excluding these expenses, adjusted gross profit was $704.4 million, or 25.1% of net sales for fiscal 2011.      

OPERATING EXPENSES

(Dollars in thousands)

Fourth Quarter

Fiscal Year

2011

2010

2011

2010

Operating Expenses

$      112,243

$          91,979

$      410,276

$        311,615

 As a percentage of net sales

15.4%

16.6%

14.6%

13.9%

Operating Expenses by Segment:

 Electrical segment

$      102,195

$          82,346

$      368,359

$        275,886

   As a percentage of net sales

15.5%

16.7%

14.5%

13.8%

 Mechanical segment

$        10,048

$            9,633

$        41,917

$          35,729

   As a percentage of net sales

15.1%

15.7%

15.2%

15.1%

INCOME FROM OPERATIONS

(Dollars In thousands)

Fourth Quarter

Fiscal Year

2011

2010

2011

2010

Income from Operations

$        58,640

$          38,288

$      255,713

$        237,735

 As a percentage of net sales

8.1%

6.9%

9.1%

10.6%

Income from Operations by Segment:

 Electrical segment

$        52,780

$          33,016

$      222,574

$        210,231

   As a percentage of net sales

8.0%

6.7%

8.8%

10.5%

 Mechanical segment

$           5,860

$            5,272

$        33,139

$          27,504

   As a percentage of net sales

8.8%

8.6%

12.1%

11.7%

Operating expenses for the fourth quarter 2011 increased $20.3 million primarily due to $21.5 million from the acquired businesses and $5.8 million of restructuring charges. Fiscal 2011 operating expenses increased $98.7 million including $73.5 million from the acquired businesses, $15.5 million of acquisition related expenses for the EPC acquisition, and $5.8 million of restructuring charges, partially offset by the $6.5 million gain on the divested pool and spa business.  

Net income attributable to Regal Beloit Corporation for the fourth quarter 2011 was $33.5 million compared to $25.2 million for the fourth quarter 2010.  Diluted earnings per share for the fourth quarter 2011 were $0.80 compared to $0.65 for the fourth quarter 2010.   For fiscal 2011, net income attributable to Regal Beloit Corporation was $152.3 million compared to $149.4 million for fiscal 2010.  Diluted earnings per share for fiscal 2011 were $3.79 compared to $3.84 for fiscal 2010.

Net cash provided by operating activities was $89.0 million for the fourth quarter 2011 compared to $26.8 million for the fourth quarter 2010.  Capital expenditures for the fourth quarter 2011 were $13.2 million compared to $15.0 million for the fourth quarter 2010.   Fiscal 2011 free cash flow totaled $207.7 million, compared to $130.4 million for fiscal 2010.   Fiscal 2011 free cash flow represented 136% of net income attributable to Regal Beloit Corporation, compared to 87% for fiscal 2010.  

"Through the hard work and dedication of our employees, Regal Beloit achieved record performance in 2011.  This was achieved in spite of very challenging conditions for residential HVAC demand.  We take great pride in the results we were able to deliver.  With the integration of EPC now well under way, we have an even stronger global footprint, enhanced energy efficiency technology and a more diversified product portfolio.  Further, our recent acquisition of Milwaukee Gear strengthens our Mechanical offerings and increases our presence in the growing oil and gas space.

"As we look forward into the first quarter of fiscal 2012, we expect continued strength from our commercial and industrial motors business, our mechanical businesses and Unico, and continued softness in residential HVAC applications.  Our earnings guidance for the first quarter of 2012 is $1.07 to $1.13 per share," continued Mr. Gliebe.  

Regal Beloit will hold a conference call pertaining to this news release at 9:00 AM CST (10:00 AM EST) on Tuesday, February 7, 2012. To listen to the call and view the presentation slides via the internet, please go http://www.regalbeloit.com/ or at: http://www.videonewswire.com/event.asp?id=84548.  Individuals who would like to participate by phone should dial 866-524-3160, referencing Regal Beloit.  International callers should dial 412-317-6760, referencing Regal Beloit.  

A telephone replay of the call will be available through May 1, 2012, at 877-344-7529, conference ID 10008818.  International callers should call 412-317-0088 using the same conference ID.  A webcast replay will be available until May 1, 2012, and can be accessed at http://www.regalbeloit.com/rbceventspresentations.htm  or at http://www.videonewswire.com/event.asp?id=84548

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 fourth parties, challenges to our intellectual property, and claims of infringement by us of fourth 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 March 2, 2011 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 Thousands, Except Cash Dividends Declared and Per Share Data

Fourth Quarter

Fiscal Year

2011

2010

2011

2010

Net Sales

$      727,007

$         555,678

$   2,808,332

$       2,237,978

Cost of Sales

556,124

425,411

2,142,343

1,688,628

Gross Profit

170,883

130,267

665,989

549,350

Operating Expenses

112,243

91,979

410,276

311,615

Income From Operations

58,640

38,288

255,713

237,735

Interest Expense

10,729

5,218

31,116

19,576

Interest Income

554

770

1,740

2,570

Income Before Taxes & Noncontrolling Interests

48,465

33,840

226,337

220,729

Provision For Income Taxes

14,747

7,679

68,317

66,045

Net Income

33,718

26,161

158,020

154,684

Less: Net Income Attributable to Noncontrolling   Interests, net of tax

266

918

5,730

5,305

Net Income Attributable to Regal Beloit Corporation

$        33,452

$           25,243

$      152,290

$          149,379

Earnings Per Share of Common Stock:

Basic

$             0.81

$               0.65

$             3.84

$                3.91

Assuming Dilution

$             0.80

$               0.65

$             3.79

$                3.84

Cash Dividends Declared

$             0.18

$               0.17

$             0.71

$                0.67

Weighted Average Number of Shares Outstanding:

Basic

41,524,882

38,607,128

39,687,559

38,236,168

Assuming Dilution

41,947,761

39,052,195

40,144,481

38,921,699

SEGMENT INFORMATION

Unaudited

Dollars in Thousands

Mechanical Segment

Electrical Segment

Fourth Quarter

Fourth Quarter

2011

2010

2011

2010

Net Sales

$               66,698

$                 61,513

$             660,309

$               494,165

Income from Operations

5,860

5,272

52,780

33,016

Mechanical Segment

Electrical Segment

Fiscal Year

Fiscal Year

2011

2010

2011

2010

Net Sales

$             274,969

$               235,989

$          2,533,363

$            2,001,989

Income from Operations

33,139

27,504

222,574

210,231

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in Thousands

(Unaudited)

ASSETS

December 31, 2011

January 1, 2011

Current Assets:

Cash and Investments

$          142,627

$           230,858

Trade Receivables, less Allowances   of $13,631 in 2011 and $10,637 in 2010

424,185

331,017

Inventories

575,785

390,587

Prepaid Expenses and Other Current Assets

138,237

135,589

Total Current Assets

1,280,834

1,088,051

Property, Plant, Equipment and Noncurrent Assets

1,986,620

1,361,085

Total Assets

$       3,267,454

$        2,449,136

LIABILITIES AND  EQUITY

Current Liabilities:

Accounts Payable

$          247,035

$           231,705

Other Accrued Expenses

262,612

159,000

Current Maturities of Debt

10,030

8,637

Total Current Liabilities

519,677

399,342

Long-Term Debt

909,159

428,256

Other Noncurrent Liabilities

257,379

224,376

Equity:

Total Regal Beloit Corporation Shareholders' Equity

1,540,771

1,361,960

       Noncontrolling Interests

40,468

35,202

Total Equity

1,581,239

1,397,162

Total Liabilities and Equity

$       3,267,454

$        2,449,136

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

Unaudited

Dollars in Thousands

Fourth Quarter

Fiscal Year

2011

2010

2011

2010

CASH FLOWS FROM OPERATING ACTIVITIES:

 Net income

$      33,718

$      26,161

$    158,020

$    154,684

 Adjustments to reconcile net income to net cash  provided by operating activities (net of acquisitions):

     Depreciation and amortization

28,528

18,580

98,238

72,869

     Excess tax benefits from stock-based compensation

(369)

(154)

(1,409)

(1,735)

      (Gains) Loss on disposition of property, net

(250)

208

(5,863)

4,659

     Share-based compensation expense

4,116

1,779

14,284

6,747

     Change in assets and liabilities

23,287

(19,773)

2,026

(61,836)

     Net cash provided by operating activities

89,030

26,801

265,296

175,388

CASH FLOWS FROM INVESTING ACTIVITIES:

 Additions to property, plant and equipment

(13,232)

(15,005)

(57,621)

(44,994)

 Purchases of investment securities

-

(103,628)

(416,797)

 Sales of investment securities

-

240,762

55,998

477,514

 Business acquisitions, net of cash acquired

(1,020)

(104,658)

(765,882)

(211,916)

 Sale of property, plant, and equipment

250

1,388

15,363

1,496

 Net cash provided by (used in) investing activities

(14,002)

18,859

(752,142)

(194,697)

CASH FLOWS FROM FINANCING ACTIVITIES:

  Repayments of convertible debt

-

-

-

(39,198)

 Net borrowings (repayments) under revolving credit

   facility

-

-

-

(2,863)

 Borrowings under revolving credit facility

54,000

-

254,000

-

 Repayments under revolving credit facility

(73,000)

-

(245,000)

-

 Proceeds from short-term borrowings

2,616

-

24,062

-

 Repayments of short-term borrowings

(4,820)

691

(22,084)

(8,448)

 Proceeds from long-term borrowings

-

-

500,000

-

 Repayments of long-term debt

(28,023)

(46)

(28,138)

(184)

 Dividends paid to shareholders

(7,474)

(6,562)

(27,566)

(25,096)

 Proceeds from the exercise of stock options

19

214

1,875

3,759

 Excess tax benefits from stock-based compensation

369

154

1,409

1,735

 Financing fees paid

-

-

(2,776)

-

 Net cash provided by (used in) financing activities

(56,313)

(5,549)

455,782

(70,295)

EFFECT OF EXCHANGE RATES ON CASH

(502)

340

(840)

1,713

 Net increase (decrease) in cash and cash equivalents

18,213

40,451

(31,904)

(87,891)

 Cash and cash equivalents at beginning of period

124,414

134,080

174,531

262,422

 Cash and cash equivalents at end of period

$    142,627

$    174,531

$    142,627

$    174,531

NON-GAAP MEASURES

Unaudited

Dollars in Thousands, Except Per Share Data

Regal Beloit Corporation prepares financial statements in accordance with accounting principles generally accepted in the United States (GAAP).  Regal Beloit Corporation also discloses adjusted diluted earnings per share (EPS), adjusted gross profit, adjusted gross profit as a percentage of net sales, free cash flow and free cash flow as a percentage of net income attributable to Regal Beloit Corporation, (collectively, "non-GAAP financial measures"). Management uses these measures in its internal performance reporting and for reports to the Board of Directors.  Regal Beloit Corporation also discloses these measures in its quarterly earnings releases, on investor conference calls, and in investor presentations and similar events. Management believes that these non-GAAP financial measures are useful measures for providing investors with additional insight into the Company's operating performance. This additional information is not meant to be considered in isolation or as a substitute for Regal Beloit Corporation's results of operations prepared and presented in accordance with GAAP.

These non-GAAP financial measures exclude the effects of certain items that are not comparable from one period to the next.   Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment.  

Dollars in Thousands, Except Per Share Data

Fourth Quarter

Fiscal Year

2011

2011

GAAP Diluted Earnings Per Share

$             0.80

$         3.79

EPC Purchase Accounting Adjustments and Acquisition Costs

0.26

0.73

Incremental Warranty Expense

(0.23)

0.19

Gain on Divestiture

-

(0.10)

Restructuring Costs

0.10

0.10

Adjusted Diluted Earnings Per Share

$             0.93

$         4.71

GAAP Gross Profit

$       170,883

$   665,989

EPC Purchase Accounting Adjustments and Acquisition Costs

15,500

25,800

Incremental Warranty Expense

(15,400)

12,600

Adjusted Gross Profit

$       170,983

$   704,389

Adjusted Gross Profit as a Percentage of Net Sales

23.5%

25.1%

Fiscal Year

Fiscal Year

2011

2010

GAAP Net Cash Provided by Operating Activities

$       265,296

$   175,388

Additions to Property Plant and Equipment

(57,621)

(44,994)

Free Cash Flow

$       207,675

$   130,394

Free Cash Flow as a Percentage of Net Income

Attributable to Regal Beloit

136.4%

87.3%

SOURCE Regal Beloit Corporation



RELATED LINKS

http://www.regal-beloit.com