EX-99.1 2 exhibit99.htm NEWS RELEASE OF REGAL BELOIT CORPORATION, DATED 7-31-2007 exhibit99.htm
 
NEWS RELEASE
FOR RELEASE ON OR AFTER:   July 31, 2007
FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
 
David A. Barta
Vice President,
Chief Financial Officer
608-361-7412
 
Page 1


REGAL BELOIT REPORTS RECORD RESULTS
ON STRENGTH OF INDUSTRIAL BUSINESS

July 31, 2007 (Beloit, WI):  Regal Beloit Corporation (NYSE:RBC) today reported record financial results for the second quarter ended June 30, 2007.  This performance was lead by the strong performance of our industrial businesses, dampened by the impact of a continuing weak residential HVAC market and commodity inflation.  The Company’s initiatives continued to have a significant impact on our performance. New products and acquisition growth fueled sales, while Lean Six Sigma and productivity projects contributed to operating margins.

Net sales increased 5.6% to $459.8 million from $435.3 million in the second quarter of 2006.  In the Electrical Segment, sales increased 6.1% as non-HVAC motor and generator sales increases of 9.7% and 22.3% respectively, partially offset by a 10.7% decline in residential HVAC revenues. Segment sales growth was also aided by $11.4 million of acquired sales attributed to the Sinya motor business that was purchased on May 1, 2006.  Sales in the Mechanical Segment increased 2.1% from the prior year period; however, second quarter 2006 sales also included $1.7 million of sales related to the Company’s cutting tool business.  Substantially, all of the assets of the Company’s cutting tools business were sold in May, 2006.

The gross profit margin for the second quarter of 2007 was 22.6% as compared to the 23.9% reported for the second quarter of 2006. The reduction was a result of continued increases in material costs and the fixed overhead absorption impact of a $25.5 million reduction in finished goods inventory.  These factors were partially offset by higher selling prices and productivity improvements.

Income from operations was $60.1 million or 13.1% of sales, a 3.8% increase over the $57.9 million or 13.3% of sales reported for the second quarter of 2006.  The results for the second quarter of 2006 included, on a pretax basis, a $1.6 million gain from the sale of excess property.  Costs for the restructuring activities in the Electrical Segment were consistent with the prior year levels.

Net income in the second quarter of 2007 was $36.3 million, an 8.8% increase from $33.3 million reported in the second quarter of 2006.  Diluted earnings per share increased 7.1% to $1.06 as compared to $0.99 for the second quarter of 2006.

“We are pleased to report record results for the second quarter despite a continuation of a challenging residential HVAC market and significant raw material inflation,” commented Henry W. Knueppel, Chairman and CEO, “The strength of the industrial and power generation business coupled with the impact of our strategic initiatives led to this performance.”
 
 
 
 
 
Regal Beloit Corporation
News Release
Page 2
 
“We continue to be very encouraged about the future for our Company.” Knueppel added.“The impact of our global capabilities, energy efficiency oriented new products and other strategic initiatives position us well to continue to provide high levels of return to shareholders.  As we look specifically at the third quarter, we expect continued strength in the industrial and power generation businesses, but little improvement in the residential HVAC market.  The headwind on commodities will actually get worse as the current spike in prices combine with higher hedge prices.  While we are taking pricing actions they will not offset this cost push for the quarter.  We have also embedded in our current estimate a one time pretax charge of $1.8 million or $.033  per share due to the expected settlement of the Enron lawsuit.  As such, we expect earnings per share in the third quarter to be in the range of $.87 to $.93.”

Regal Beloit will be holding a conference call to discuss second quarter financial results at 1:30 PM CT (2:30 PM EDT) today.  Interested parties should call 877-209-9920.  A replay of the call will be available through August 15, 2007 at 800-475-6701, access code 881234.

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.


CAUTIONARY STATEMENT

This news 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:

·  
unanticipated fluctuations in commodity prices and raw material costs;
·  
cyclical downturns affecting the global market for capital goods;
·  
economic changes in global markets where we do business, such as currency exchange rates, inflation rates, interest rates, recession, foreign government policies and other external factors that we cannot control;
·  
unexpected issues and costs arising from the integration of acquired companies and businesses;
·  
actions taken by our competitors;
·  
unanticipated costs associated with litigation matters;
·  
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;
·  
difficulties in staffing and managing foreign operations;
·  
the availability and effectiveness of our information technology systems;
·  
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 February 28, 2007 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 news release are made only as of their respective dates, and weundertake 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 February 28, 2007.
 
 
 
 
Regal Beloit Corporation
News Release
Page 3
STATEMENTS OF INCOME
In Thousands of Dollars
 

   
      (Unaudited)
  
   
Three Months Ended
    
Six Months Ended 
  
     
June 30, 
      
July 1, 
      
June 30, 
      
July 1, 
  
     
2007 
      
2006 
      
2007 
      
2006 
  
Net Sales  
   $
459,795
     $
435,269
     $
878,441
     $
833,595
  
                                 
Cost of Sales 
    
355,919
      
331,244
      
677,338
      
636,290
  
                                 
Gross Profit 
    
103,876
      
104,025
      
201,103
      
197,305
  
                                 
Operating Expenses  
    
43,821
      
46,159
      
93,717
      
95,821
  
                                 
Income From Operations  
    
60,055
      
57,866
      
107,386
      
101,484
  
                                 
Interest Expense  
    
4,425
      
5,454
      
9,491
      
10,249
  
                                 
Interest Income 
    
241
      
140
      
330
      
260
  
                                 
Income Before Taxes & Minority Interest
   
55,871
      
52,552
      
98,225
      
91,495
  
                                 
Provision For Income Taxes
   
18,973
      
18,847
      
33,663
      
33,189
  
                                 
Income Before Minority Interest
   
36,898
      
33,705
      
64,562
      
58,306
  
                                 
Minority Interest in Income, Net of Tax
   
645
      
396
      
1,496
      
1,209
  
                                 
    Net Income
  $
36,253
     $
33,309
     $
63,066
     $
57,097
  
                                 
Earnings Per Share of Common Stock:
                                
                                 
Basic  
   $
1.15
     $
1.08
     $
2.02
     $
1.86
  
                                 
Assuming Dilution  
   $
1.06
     $
0.99
     $
1.86
     $
1.71
  
                                 
Cash Dividends Declared  
   $
0.15
     $
0.14
     $
0.29
     $
0.27
  
                                 
Weighted Average Number of Shares Outstanding:
                                
                                 
Basic
   
31,546,970
      
30,816,156
      
31,180,641
      
30,759,004
  
                                 
Assuming Dilution  
    
34,177,529
      
33,644,909
      
33,862,524
      
33,301,719
  
                                 
 
 
 
 
 
Regal Beloit Corporation
News Release
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CONDENSED BALANCE SHEETS
In Thousands of Dollars
 
ASSETS
  
(Unaudited)
    
(Audited)
  
Current Assets:
  
June 30,
2007
    
December 30, 2006
  
             
    Cash and Cash Equivalents  
   $
53,136
     $
36,520
  
                 
    Receivables and Other Current Assets   
    
325,833
      
263,470
  
                 
    Inventories  
    
235,848
      
275,138
  
                 
Total Current Assets   
    
614,817
      
575,128
  
                 
Net Property, Plant and Equipment  
    
274,078
      
268,880
  
                 
Goodwill  
    
546,251
      
546,152
  
                 
Other Noncurrent Assets
   
50,890
      
53,359
  
                 
                           Total Assets
   $
1,486,036
     $
1,443,519
  
                 
Liabilities and Shareholders’ Investment
                
                 
Accounts Payable   
   $
133,592
     $
108,050
  
                 
Commercial Paper Borrowings
   
9,650
      
49,000
  
                 
Other Current Liabilities
    
118,269
      
101,491
  
                 
Long-Term Debt
    
292,103
      
323,946
  
                 
Other Noncurrent Liabilities
   
117,370
      
111,057
  
                 
Shareholders’ Investment
   
815,052
      
749,975
  
                 
                          Total Liabilities and Shareholders’ Investment
   $
1,486,036
     $
1,437,519
  
 
SEGMENT INFORMATION
In Thousands of Dollars
 
     
(Unaudited)
  
     
Mechanical Segment
      
Electrical Segment
  
     
Second Quarter Ending
      
Six Months Ending
      
Second Quarter Ending
      
Six Months Ending
  
     
June 30, 
      
July 1, 
      
June 30, 
      
July 1, 
      
June 30, 
      
July 1, 
      
June 30, 
      
July 1, 
  
     
2007 
      
2006 
      
2007 
      
2006 
      
2007 
      
2006 
      
2007 
      
2006 
  
Net Sales
   $
54,136
     $
53,042
     $
105,982
     $
106,003
     $
405,659
     $
382,227
     $
772,459
     $
727,592
  
Income from Operations
    
8,954
      
7,134
      
15,280
      
10,841
      
51,101
      
50,732
      
92,106
      
90,643
  

 
 
 
Regal Beloit Corporation
News Release
Page 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands of Dollars
 
   
 (Unaudited)     
  
   
 Six Months Ended
  
CASH FLOWS FROM OPERATING ACTIVITIES:  
 June 30, 2007
    
 July 1, 2006
  
Net income
   $
63,066
     $
57,097
  
Adjustments to reconcile net income to net cash provided
                
by operating activities; net of effect of acquisitions
                
Depreciation and amortization
    
20,367
      
16,826
  
Minority interest
    
1,496
      
1,209
  
Excess tax benefit from stock-based compensation
     (6,590 )     (1,750 )
Loss (gain) on sale of assets
    
51
       (1,850 )
Stock-based compensation expense
    
1,871
      
1,725
  
Change in assets and liabilities, net
    
19,849
       (37,027 )
Net cash provided by operating activities
    
100,110
      
36,230
  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Additions to property, plant and equipment
     (17,863 )     (17,873 )
Purchases of short-term investments, net
    
-
       (10,263 )
Business acquisitions, net of cash acquired
     (2,425 )     (10,962 )
Sale of property, plant and equipment
    
-
      
15,541
  
Net cash used in investing activities
     (20,288 )     (23,557 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Net proceeds from short-term borrowing
    
8,200
      
-
  
Payments of long-term debt
     (278 )     (241 )
Net repayments under revolving credit facility
     (31,600 )     (38,600 )
Net (repayments) proceeds from commercial paper borrowings
     (39,350 )    
20,000
  
Dividends paid to shareholders
     (8,709 )     (7,980 )
Proceeds from the exercise of stock options
    
1,403
      
4,239
  
Excess tax benefits from stock-based compensation
    
6,590
      
1,750
  
Distributions to minority partners
     (106 )    
-
  
Financing fees paid
     (551 )    
-
  
Net cash used in financing activities
     (64,401 )     (20,832 )
                 
EFFECT OF EXCHANGE RATE ON CASH
    
1,195
       (18 )
                 
Net increase (decrease) in cash and cash equivalents
    
16,616
       (8,177 )
Cash and cash equivalents at beginning of period
    
36,520
      
32,747
  
Cash and cash equivalents at end of period
   $
53,136
     $
24,570