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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*

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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

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