EX-99.1 2 rbcnewsrelease2q.htm NEWS RELEASE OF REGAL BELOIT CORPORATION 2ND QTR rbcnewsrelease2q.htm
 
NEWS RELEASE
FOR RELEASE ON OR AFTER:    August 3, 2009
FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
 
 
John Perino
Vice President,
Investor Relations
608-361-7501
 
 
 

REGAL BELOIT REPORTS SECOND QUARTER RESULTS
·  
Operating Cash Flow of $106.8 million
·  
Plant Rationalizations Proceeding on Plan
·  
Legislation Continues to Support Energy Efficient Products

August 3, 2009 (Beloit, WI):  Regal Beloit Corporation (NYSE:RBC) today reported financial results for the second quarter ended June 27, 2009.  Net sales of $454.6 million decreased 25.0% as compared to the $606.3 million reported for the second quarter of 2008.  Diluted earnings per share were $0.47 as compared to $1.11 for the second quarter of 2008.

The second quarter proved to be better than our expectations.  We were particularly pleased with the results of our inventory reduction efforts, which exceeded our stated goal.  We also benefited from the impact of the continued move to more energy efficient motor products.  From a cost perspective, our cost reduction efforts are on plan and we expect to see even greater benefits from these activities as we move into the second half of the year. We are continuing to execute our business strategy and concentrate on business fundamentals and we are in a terrific position to execute on business growth opportunities as those situations arise in the future,” commented Henry Knueppel, Chairman and Chief Executive Officer.

Sales for the second quarter of 2009 were $454.6 million, a 25.0% decrease from the $606.3 million reported for the second quarter of 2008.  Second quarter 2009 sales included $16.3 million of incremental sales related to the Hwada and Dutchi businesses acquired in 2008 and  the Custom Power Technology acquisition completed on January 2, 2009.

In the Electrical segment, sales decreased 24.7%, including the impact of the acquisitions noted above.  Exclusive of the  acquired businesses, Electrical segment sales decreased 27.7%, largely due to global generator sales decreasing 49.1%, commercial and industrial motors sales in North America decreasing 33.1% and residential HVAC motor sales decreasing 4.4%.  Sales in the Mechanical segment decreased 27.5% from the prior year period.

From a geographic perspective, Asia-based sales were down 33.9% as compared to the second quarter of 2008.  In total, sales to regions outside of the United States were 26.6% of total sales for the second quarter of 2009 in comparison to 27.0% for the comparable period of 2008.  The negative impact of foreign currency exchange rate changes decreased total sales by 1.7%.   From an energy efficiency standpoint, sales of high efficiency products represented 19.7% of total sales for the quarter as compared to 13.0% for the same period of 2008.

The gross profit margin for the second quarter was 20.8% as compared to the 21.6% reported for the comparable period of 2008.  The decrease was driven primarily by the fixed cost absorption impact of lower unit volume production, which was magnified by the inventory reduction efforts.

 
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In addition, costs related to the ongoing plant rationalizations increased cost of sales by approximately $1.8 million.

Operating expenses were $65.2 million (14.3% of sales) in the second quarter of 2009 versus $63.7 million (10.5% of sales) in 2008.   Operating expenses included an incremental $3.8 million for the Dutchi and Hwada businesses which were acquired in 2008 and the CPT business acquired in 2009.  Operating expense also includes approximately $4.0 million of bad debt, legal and restructuring expenses.

Income from operations was $29.5 million versus $67.5 million in the comparable period of 2008.  As a percent of sales, income from operations was 6.5% for the second quarter versus 11.1% in the comparable period of 2008.

Net interest expense was $5.1 million versus $7.8 million in the comparable period of 2008.  The decrease was driven by lower effective interest rates in 2009 versus the comparable period of 2008.

The effective tax rate for the three months ended June 27, 2009 was 28.0% versus 35.3% for the second quarter of 2008.   The decrease in the effective tax rate results primarily from the global distribution of taxable income.

Net income attributable to Regal Beloit Corporation for the three months ended June 27, 2009 was $16.5 million, a decrease of 55.9% versus the $37.3 million reported in the second quarter of 2008. Fully diluted earnings per share was $0.47 as compared to $1.11 per share reported in the second quarter of 2008.  The secondary equity offering of the Company’s common stock completed in May 2009 added approximately 1.75 million shares to the weighted average number of shares outstanding for the quarter.  (Note: prior year financial results have been adjusted to reflect the impact of the change in accounting for the Company’s convertible senior subordinated notes as prescribed in FASB Staff Position APB 14-1: Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), which reduced second quarter 2008 diluted earnings per share by $0.03).

Cash flow from operations was $106.8 million in the second quarter of 2009 comprised of net income of $17.5 million, non-cash expenses of $19.6 million and a reduction of net assets of $69.7 million.  This compares to the second quarter 2008 cash flow from operations of $81.4 million, which was comprised of the net income of $38.1 million, non-cash expenses of $17.5 million and a reduction in net assets of $25.8 million.

The Company ended the second quarter with total gross debt of $553.1 million as compared to $587.3 million at the end of the first quarter of 2009.  Cash and cash equivalents increased $208.5 million during the second quarter to $290.5 million.  Approximately, $150.5 million of the increase was attributable to the net proceeds of the secondary stock offering completed in May 2009. Therefore, net of cash, debt decreased from $510.2 million at the end of 2008 to $262.6 million at the end of the second quarter of 2009.

Subsequent to June 27, 2009, several holders of the Company’s currently convertible senior subordinated notes submitted notices to convert their notes into cash and common stock in accordance with the terms of the indenture.  The face value of the notes converted,

 
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approximately $27.6 million, will be paid in cash with the premium paid in shares of the Company’s common stock.  Current and previous diluted EPS calculations included an amount estimated for the dilutive effect of the premium being paid in shares of the Company’s common stock.

“We continue to expect a difficult global sales environment as we move into the third quarter.  The impact of the cost reduction and plant rationalization efforts will, however, improve the relative profitability of our business,” continued Henry Knueppel, Chairman and Chief Executive Officer.  “Given these factors, we are estimating third quarter earnings per share to be in the range of $0.60 to $0.68.”

Regal Beloit will be holding a conference call pertaining to this news release at 11:00 AM CT (12:00 PM ET) on Tuesday August 4, 2009.  Interested parties should call 866-394-7807, referencing Regal Beloit conference ID 22051374.  International callers should call 763-488-9117 using the same conference ID.  A replay of the call will be available through September 3, 2009, 2009 at 800-642-1687, conference ID 22051374.  International callers should call 706-645-9291 using the same conference ID.

Regal Beloit Corporation is a leading manufacturer of mechanical and electrical motion control and power generation products serving markets throughout the world.  Regal Beloit Corporation is headquartered in Beloit, Wisconsin, and has manufacturing, sales, and service facilities throughout the United States, Canada, Mexico, Europe and Asia.

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 February 25, 2009.

 
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Unaudited
In Thousands of Dollars, Except Shares Outstanding, Dividends Declared and Per Share Data


   
Three Months Ended
   
Six Months Ended
 
   
June 27, 2009
   
(As Adjusted)*
   
June 27, 2009
   
(As Adjusted)*
 
   
June 28, 2008
   
June 28, 2008
 
                         
Net Sales
  $ 454,550     $ 606,316     $ 897,824     $ 1,142,659  
                                 
Cost of Sales
    359,928       475,139       712,632       889,383  
                                 
Gross Profit
    94,622       131,177       185,192       253,276  
                                 
Operating Expenses
    65,155       63,683       127,533       128,170  
                                 
Income From Operations
    29,467       67,494       57,659       125,106  
 
                               
Interest Expense
    5,501       8,357       12,620       16,770  
                                 
Interest Income
    377       531       510       915  
                                 
Income Before Taxes & Noncontrolling Interests
    24,343       59,668       45,549       109,251  
                                 
Provision For Income Taxes
    6,822       21,086       14,052       38,644  
                                 
Net Income
    17,521       38,582       31,497       70,607  
                                 
Less: Net Income Attributable to Noncontrolling
                               
Interests, net of tax
    1,069       1,269       2,258       1,867  
                                 
Net Income Attributable to Regal Beloit Corporation
  $ 16,452     $ 37,313     $ 29,239     $ 68,740  
                                 
Earnings Per Share of Common Stock:
                               
                                 
Basic
  $ 0.49     $ 1.19     $ 0.90     $ 2.19  
                                 
Assuming Dilution
  $ 0.47     $ 1.11     $ 0.86     $ 2.06  
                                 
Cash Dividends Declared
  $ 0.16     $ 0.16     $ 0.32     $ 0.31  
                                 
Weighted Average Number of Shares Outstanding:
                               
                                 
Basic
    33,256,281       31,305,715       32,356,782       31,311,296  
Assuming Dilution
    35,105,383       33,525,725       33,850,093       33,321,379  
*The Company adopted Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). The adoption of FSP APB 14-1 required an adjustment of convertible debt, equity, and interest expense.

 
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CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
In Thousands of Dollars

               
(As Adjusted
 
               
From Audited Statements)*
 
ASSETS
 
June 27, 2009
         
December 27, 2008
 
Current Assets:
                 
Cash and Cash Equivalents
  $ 290,549           $ 65,250  
Trade Receivables and Other Current Assets
    408,029             436,094  
Inventories
    269,216             359,918  
Total Current Assets
    967,794             861,262  
             
       
Net Property, Plant and Equipment
    351,247             358,372  
                       
Other Noncurrent Assets
    805,536             803,862  
Total Assets
  $ 2,124,577           $ 2,023,496  
                       
                       
LIABILITIES AND EQUITY
                     
Accounts Payable
  $ 161,653           $ 202,456  
Other Current Liabilities
    156,486             228,546  
Long-Term Debt
    548,115             560,127  
Deferred Income Taxes
    85,052             72,119  
Other Noncurrent Liabilities
    92,840             122,607  
Total Liabilities
  $ 1,044,146           $ 1,185,855  
                       
Equity
    1,080,431             837,641  
Total Liabilities and Equity
  $ 2,124,577           $ 2,023,496  

*The Company adopted Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). The adoption of FSP APB 14-1 required an adjustment of convertible debt, equity, and interest expense.

SEGMENT INFORMATION
Unaudited
In Thousands of Dollars

   
Mechanical Segment
   
Electrical Segment
 
   
Three Months Ending
   
Three Months Ending
 
   
June 27, 2009
   
June 28, 2008
   
June 27, 2009
   
June 28, 2008
 
Net Sales
  $ 47,306     $ 65,261     $ 407,244     $ 541,055  
Income from Operation
    4,128       9,600       25,339       57,894  
                                 
   
Six Months Ending
   
Six Months Ending
 
   
June 27, 2009
   
June 28, 2008
   
June 27, 2009
   
June 28, 2008
 
Net Sales
  $ 99,218     $ 127,811     $ 798,606     $ 1,014,848  
Income from Operation
    10,415       19,647       47,244       105,459  


 
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Unaudited
In Thousands of Dollars

   
Six Months Ended
 
         
(As Adjusted)*
 
   
June 27, 2009
   
June 28, 2008
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 31,497     $ 70,607  
Adjustments to reconcile net income to net cash provided
               
by operating activities:
               
Depreciation and amortization
    33,793       30,211  
Excess tax benefits from stock-based compensation
    (1,767 )     (1,333 )
(Gain) loss on sale of assets, net
    (91 )     70  
Stock-based compensation expense
    1,959       1,961  
Non-cash convertible debt deferred financing costs
    1,063       2,424  
Change in assets and liabilities, net of acquisitions
    58,934       12,345  
Net cash provided by operating activities
    125,388       116,285  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Additions to property, plant and equipment
    (18,614 )     (28,134 )
Business acquisitions, net of cash acquired
    (1,500 )     (15,805 )
Sale of property, plant and equipment
    306       1,149  
Net cash used in investing activities
    (19,808 )     (42,790 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Net repayments of short-term borrowings
    (10,295 )     (92 )
Payments of long-term debt
    (108 )     (233 )
Net borrowings (repayments) under revolving credit facility
    (13,207 )     (182,700 )
Net proceeds from long-term borrowings
    -       165,000  
Net proceeds from the sale of common stock
    150,507       -  
Dividends paid to shareholders
    (10,063 )     (9,392 )
Purchases of treasury stock
    -       (4,191 )
Proceeds from the exercise of stock options
    771       1,739  
Excess tax benefits from stock-based compensation
    1,767       1,333  
Financing fees paid
    -       (418 )
Net cash provided by (used in) financing activities
    119,372       (28,954 )
                 
EFFECT OF EXCHANGE RATES ON CASH
    347       595  
                 
Net increase in cash and cash equivalents
    225,299       45,136  
Cash and cash equivalents at beginning of period
    65,250       42,574  
Cash and cash equivalents at end of period
  $ 290,549     $ 87,710  

*The Company adopted Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). The adoption of FSP APB 14-1 required an adjustment of convertible debt, equity, and interest expense.


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