Regal Beloit Reports Second Quarter Financial Results

BELOIT, Wis., Aug. 2 /PRNewswire-FirstCall/ -- Regal Beloit Corporation (NYSE: RBC) today reported financial results for the second quarter ended July 3, 2010.  Net sales of $584.2 million increased 28.5% as compared to the $454.5 million reported for the second quarter of 2009.  Diluted earnings per share were $1.07 as compared to $0.47 for the second quarter of 2009.  

"While we remain cautious about the state of the economy, we are pleased to report strong sales and earnings for the second quarter," commented Henry Knueppel, Chairman and Chief Executive Officer.  "We continued to face strong headwinds in material costs for the quarter, but the 2009 plant rationalizations and continued productivity programs offset the materials issue and allowed us to leverage our earnings."

Sales for the three months ended July 3, 2010 included $28.7 million of incremental sales from the CMG business acquired in April 2010. The impact of foreign currency exchange rates increased total sales by .6% for the three months ended July 3, 2010 as compared to the prior year period.  Excluding the impact of the acquired business and foreign currency exchange rate fluctuations, organic sales increased 21.6% for the second quarter ended July 3, 2010 as compared to the second quarter of 2009.  Second quarter sales of high efficiency products were 18.3% of total sales as compared to 19.7% for the second quarter 2009.

Electrical segment sales for the quarter ended July 3, 2010 as compared to the second quarter 2009 are as follows:

• sales for the residential HVAC motor business increased 21.1%
• commercial and industrial motor sales in North America increased 19.7%, and
• global generator sales increased 22.2%.

Excluding $20.9 million of CMG sales, the Electrical segment sales increased 23.2% over the second quarter of 2009.

Excluding $7.8 million of CMG sales, the Mechanical segment sales for the second quarter increased 13.3% over the second quarter of 2009.

From a geographic perspective, excluding the impact of CMG, Asia Pacific sales for the second quarter increased 42.5% as compared to the same quarter for 2009. In total, sales to regions outside of the United States were 31.7% of total sales for the three months ended July 3, 2010 as compared to 26.6% in 2009.  Excluding the impact of the CMG acquisition, sales to regions outside the United States would have been 28.2% for the second quarter of 2010.  

Electrical segment margins, for the three months ended July 3, 2010, improved due to the 2009 plant rationalizations, cost reduction efforts, and sales volume leverage.  These benefits were reduced by the negative impact of material inflation that was only partially offset with price increases. Also during the second quarter, supply chain disruptions caused difficulties in meeting order demand. In an effort to mitigate some of the impact on customers, the Electrical segment incurred incremental costs including expedited transportation costs and overtime premiums. The Mechanical segment gross margin improvements were driven by sales volume leverage and productivity improvements.

Key drivers of the increased spending were an incremental $6.4 million of operating expenses related to the CMG businesses, higher variable selling costs, and an incremental $2.0 million of acquisition related costs which are now expensed as incurred.  Excluding the impact of the acquired business, operating expenses were 12.4% of sales for the second quarter for the Electrical segment and 15.3% of second quarter sales for the Mechanical segment.

Income from operations improved, driven by sales volume leverage and productivity, but was partially offset by material inflation in excess of price increases, acquisition expenses and inefficiencies articulated above.  

Net interest expense for the three months ended July 3, 2010 was $4.0 million versus $5.1 million for the three months ended June 27, 2009.  The effective tax rate for the three months ended July 3, 2010 was 31.9% compared to 28.0% in the prior year period.  The increase in the effective tax rate is driven by changes in the global distribution of income.

Net Income Attributable to Regal Beloit Corporation for the three months ended July 3, 2010 was $41.7 million, an increase of 153.6% versus the $16.5 million reported in 2009.  Fully diluted earnings per share was $1.07 as compared to $0.47 reported for the three months ended June 27, 2009.  The average number of diluted shares was 38,954,418 during the three months ended July 3, 2010 as compared to 35,105,383 during the three months ended June 27, 2009.

Cash flow from operations was $55.4 million for the three months ended July 3, 2010 as compared to $106.9 million for the second quarter of 2009.  The comparison to the prior year is heavily influenced by the steep reduction of inventory due to the market conditions experienced in the second quarter of 2009.  In spite of the strong sales environment, working capital excluding cash, investments and the acquired assets of CMG, declined in the quarter ended July 3, 2010.  

"As we look forward to the third quarter," continued Mr. Knueppel, "we continue to be encouraged by current order trends, but cautious about the overall economic recovery. While we will not experience some of the commodity tailwinds of a year ago, and we will continue to incur costs due to supplier shortages and the related inefficiencies, volume improvements across all businesses and continued strong productivity improvements allow us to project third quarter earnings in the range of $1.12 to $1.18 per share."

Regal Beloit will be holding a conference call pertaining to this news release at 10:00 AM CDT (11:00 AM EDT) on Tuesday, August 3, 2010.  To listen to the call via the internet, please go to http://www.regalbeloit.com/ or at: http://www.videonewswire.com/event.asp?id=70862 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 November 3, 2010 at 877-344-7529, conference ID 442741. 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=70862.

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

This Press Release 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:

• 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;
• unanticipated fluctuations in commodity prices and raw material costs;
• cyclical downturns affecting the global market for capital goods;
• unexpected issues and costs arising from the integration of acquired companies and businesses;
• 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 matters;
• 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.

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 press release are made only as of their respective dates, and we undertake no obligation to update these statements to reflect subsequent events or circumstances.  See also Item 1A - Risk Factors in the Company's Annual Report on Form 10-K filed on March 2, 2010.

SOURCE Regal Beloit Corporation