Regal Beloit Reports Fourth Quarter and Full Year Financial Results

BELOIT, Wis., Feb. 2, 2011 /PRNewswire/ -- Regal Beloit Corporation (NYSE: RBC) today reported financial results for the fourth quarter and the fiscal year ended January 1, 2011.  Net sales for the fourth quarter ended January 1, 2011 were $555.7 million, an increase of 20.0% compared to $463.3 million for the fourth quarter ended January 2, 2010.  Diluted earnings per share for the fourth quarter 2010 were $0.65 compared to $0.90 for the fourth quarter 2009.  For the full year 2010, sales were $2,238.0 million, an increase of 22.5% compared to $1,826.3 million for 2009.  Full year 2010 diluted earnings per share were $3.84 compared to $2.63 per share in 2009.

"In line with our updated guidance, HVAC sales softened in the fourth quarter," commented Mr. Henry Knueppel, Chairman and Chief Executive Officer.  "Additionally, we faced continued inflationary pressure on input costs, especially costs for copper. We implemented price increases to offset the inflation; however, they could not be implemented fast enough to prevent margin erosion given the severity of the commodity cost increase."  

"As we look at the full year we are pleased to report EPS growth of 46% to $3.84 per share," continued Mr. Knueppel.  "Sales for 2010 grew 22.5% as a result of strong organic growth combined with the benefit from the six acquisitions that closed in 2010."  

Sales for the fourth quarter 2010 included $56.8 million of incremental sales from the six businesses acquired in 2010 (the "acquired businesses").  Sales growth was driven by increased demand in nearly all end markets including strong demand for energy efficient products.  Full year 2010 included $119.5 million of incremental sales from acquired businesses.  

In the Electrical segment, sales increased 18.5% in the fourth quarter 2010 compared to the fourth quarter 2009, including $47.1 million of incremental sales from the acquired businesses.  Full year 2010 Electrical segment sales increased 22.3% compared to fiscal year 2009, including $92.6 million of incremental sales from the acquired businesses.  

Residential HVAC motor sales increased 1.3% in the fourth quarter 2010 as compared to the fourth quarter 2009.  Driven by improving end markets and higher sales in North America, commercial and industrial motor sales for the fourth quarter 2010 increased 12.5% compared to the fourth quarter 2009.  Global generator sales increased 15.7% for the fourth quarter 2010 compared to the fourth quarter 2009.

Sales in the Mechanical segment increased 33.1% in the fourth quarter 2010 compared to the fourth quarter 2009, including $9.7 million of incremental sales from the acquired businesses.  This increase was driven primarily by improvements in later cycle end markets.   Full year 2010 Mechanical segment sales increased $47.4 million, or 25.1% compared to fiscal year 2009, including $26.9 million of incremental sales from the acquired businesses.

One of the Company's key strategies is to grow international operations.  Sales to regions outside of the United States were 36.3% of total sales for the fourth quarter 2010 compared to 28.6% for the fourth quarter 2009.   For the full year 2010, sales to regions outside the United States were 31.6% compared to 26.9% for the full year 2009.  

For the fourth quarter 2010, income from operations declined 28.5% compared to the fourth quarter 2009 principally due to inflation not recovered by pricing actions and a $28.4 million change in LIFO expense.   The fourth quarter 2010 included LIFO expense of $13.4 million reflecting the continued increase in costs for commodity inputs.  By comparison, the fourth quarter 2009 included a LIFO benefit of $15.0 million from our actions to reduce inventory levels.  For the fourth quarter 2010, operating expenses increased due to an incremental $14.3 million of operating expenses related to the acquired businesses and an incremental $2.6 million of acquisition related expenses.  

For the full year 2010, income from operations improved, driven by sales volume leverage and productivity, but was substantially offset by commodity cost inflation in excess of price increases and the costs associated with supply chain disruptions in the second and third quarters of 2010.  

Net interest expense for the fourth quarter 2010 was $4.5 million, consistent with the fourth quarter 2009.  The effective tax rate for the fourth quarter 2010 was 22.7% compared to 27.7% for the fourth quarter 2009.  The decrease in the effective tax rate for the quarter was primarily driven by the global distribution of income and the retroactive reinstatement in the United States of the research and development tax credit.

Net income attributable to Regal Beloit Corporation for the fourth quarter 2010 was $25.2 million, a decrease of 27.2% compared to $34.7 million for the fourth quarter 2009.  Fully diluted earnings per share for the fourth quarter 2010 were $0.65 compared to $0.90 for the fourth quarter 2009.  For the full year ended January 1, 2011, net income attributable to Regal Beloit Corporation was $149.4 million, an increase of 57.2% compared to $95.0 million for the full year 2009.

Net cash provided by operating activities was $26.8 million for the fourth quarter 2010 and $175.4 million for the full year 2010, in excess of net income attributable to Regal Beloit Corporation for those periods.  Cash and investments totaled $230.8 million at January 1, 2011.

"Looking back on the year, I am proud of our team's many accomplishments, along with our performance improvements. We also closed on six strategically important acquisitions and we are successfully integrating those businesses into our company," continued Mr. Knueppel.  "Looking forward into 2011, we are optimistic about our ability to continue our growth strategy by developing and producing new and innovative, energy efficient products for our customers.  Our optimism is tempered by the continued increase in commodity input costs that will pressure our operating margins.  We are also excited about closing on the purchase of the Electrical Products Company of A. O. Smith and the opportunity to welcome its employees to the Regal Beloit team.   We expect the first quarter to show seasonal improvement over the fourth quarter and to see improved contributions from our new acquisitions. Accordingly, we are projecting first quarter diluted earnings of $0.92 to $0.98 per share."

Regal Beloit will be holding a conference call pertaining to this news release at 9:00 AM CT (10:00 AM ET) on Thursday, February 3, 2011.  To listen to the call and view the presentation slides via the internet, please go to http://www.regalbeloit.com/ or at: http://www.videonewswire.com/event.asp?id=75795.  Individuals who would like to participate by phone should dial 800-860-2442, referencing Regal Beloit. International callers should dial 412-858-4600, referencing Regal Beloit.  

A telephone replay of the call will be available through May 2, 2011 at 877-344-7529, conference ID 447494. International callers should call 412-317-0088 using the same conference ID.  A webcast replay will be available for one year and can be accessed at http://www.regalbeloit.com/rbceventspresentations.htm  or at http://www.videonewswire.com/event.asp?id=75795.

Regal Beloit Corporation is a leading manufacturer of mechanical and electrical motion control and power generation products serving markets throughout the world.  Regal Beloit is headquartered in Beloit, Wisconsin, and has manufacturing, sales, and service facilities throughout the United States, Canada, Mexico, Europe and Asia.  Regal Beloit's common stock is a component of the S&P Mid Cap 400 Index and the Russell 2000 Index.

CAUTIONARY STATEMENT

Certain statements made in this press release are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are based on management's expectations, beliefs, current assumptions and projections.  When used in this press release, words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "project" or "plan" or the negative thereof or similar words are intended to identify forward-looking statements.  These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements.  Those factors include, but are not limited to:

• economic changes in global markets where we do business, such as reduced demand for the products we sell, weakness in the housing and commercial real estate markets, currency exchange rates, inflation rates, interest rates, recession, foreign government policies and other external factors that we cannot control;
• fluctuations in commodity prices and raw material costs;
• cyclical downturns affecting the global market for capital goods;
• our ability to timely and successfully consummate the acquisition of the electrical products business of A.O. Smith ("EPC"), including the ability to satisfy all of the conditions precedent to consummation of the transaction;
• our ability to timely and successfully realize the potential synergies of the EPC transaction;
• unexpected issues, costs or liabilities arising from the acquisition and integration of EPC and other acquired companies and businesses, or the effects of purchase accounting that may be different than expected;
• marketplace acceptance of new and existing products including the loss of, or a decline in business from, any significant customers;
• the impact of capital market transactions that we may effect;
• the availability and effectiveness of our information technology systems;
• unanticipated costs associated with litigation, product warranty or product liability matters;  
• the effects of increased international and domestic competition on sales of our energy efficient products;
• actions taken by our competitors, including new product introductions or technological advances, and other events affecting our industry and competitors;
• difficulties in staffing and managing foreign operations;
• other domestic and international economic and political factors unrelated to our performance, such as the current substantial weakness in economic and business conditions and the stock markets as a whole; and
• other risks and uncertainties described from time to time in our reports filed with the U.S. Securities and Exchange Commission, or SEC, which are incorporated by reference.

Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this press release are made only as of the date of this press release, and we undertake no obligation to update these statements to reflect subsequent events or circumstances.  Additional information regarding these and other risks and factors is included in Item 1A - Risk Factors in our Annual Report on Form 10-K filed with the SEC on March 2, 2010.

SOURCE Regal Beloit Corporation