Regal Beloit Reports Fourth Quarter and Full Year 2011 Financial Results

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:  

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 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 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.

SOURCE Regal Beloit Corporation