10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended          June 29,2005

o TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                          to                                         

Commission File Number: 001-07283

REGAL-BELOIT CORPORATION

(Exact name of registrant as specified in its charter)

Wisconsin	39-0875718
(State or other jurisdiction of
incorporation or organization)	(IRS Employer Identification Number)

200 State Street, Beloit, Wisconsin   53511-6254

(Address of principal executive offices)

(608) 364-8800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

     YES þ NO o

Indicate the number of shares outstanding of each of the issuers’ classes of common stock as of the latest practicable date.

29,087,432 Shares, Common Stock, $.01 Par Value (as of July 31, 2005)

REGAL—BELOIT CORPORATION

FORM 10-Q
For Quarter Ended June 29, 2005

INDEX

	Page No.
PART I — FINANCIAL INFORMATION
Item 1 — Financial Statements
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Income	4
Condensed Consolidated Statements of Cash Flows	5
Notes to Condensed Consolidated Financial Statements	6 – 10
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	11 - 14
Item 3 — Quantitative and Qualitative Disclosures about Market Risk	14
Item 4 — Controls and Procedures	14
PART II — OTHER INFORMATION
Item 1 — Legal Proceedings	15
Item 4 — Submission of Matters to a Vote of Security Holders	16
Item 6 — Exhibits	16
Signature	16
Bylaws of the Registrant
Certification of CEO
Certification of CFO
Certification of CEO/CFO

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 Quarterly Report on Form 10-Q or incorporated by reference 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,” “should,” “plan,” “expect,” “anticipate,” “estimate,” “believe,” “predict,” “intend,” “potential” or continue” or the negative of these terms or other words of similar import, although some forward-looking statements are expressed differently. We cannot guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors, including:

• Unexpected issues and costs arising from the integration of acquired companies and businesses, such as our recent acquisitions of the HVAC motors and capacitors businesses and the Commercial AC motors business from General Electric Company (“GE”), including any effect the acquired businesses may have on our ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002;

• Marketplace acceptance of our recent acquisitions, including the loss of, or a decline in business from any significant customers;

• Unanticipated fluctuations in commodity prices and raw material costs and issues affecting our ability to pass increased costs on to our customers;

• Cyclical downturns affecting the markets for capital goods;

• Substantial increases in interest rates that impact the cost of our outstanding debt;

• The impact of capital market transactions that the company may effect;

• Unanticipated costs associated with litigation matters;

• The success of our management in increasing sales and maintaining or improving the operating margins of our businesses;

• Actions taken by our competitors;

• Difficulties in staffing and managing foreign operations;

• Our ability to satisfy various covenant requirements under our credit facility; and

• Other risks and uncertainties described 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 Form 10-Q are made only as of the date of this filing, and we undertake no obligation to update these statements to reflect subsequent events or circumstances.

2

PART I
FINANCIAL INFORMATION
REGAL-BELOIT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)

Item I. Financial Statements

				(From Audited
	(Unaudited)			Statements)
	June 29, 2005			Dec. 31, 2004
ASSETS
Current Assets:
Cash and Cash Equivalents	$	29,066		$	31,275
Receivables, less Allowance for Doubtful Accounts of $2,742 in 2005 and $2,376 in 2004		200,178			176,941
Deferred Income Taxes		4,148			6,493
Inventories		234,642			246,816
Prepaid Expenses and Other Current Assets		30,549			13,394
Total Current Assets		498,583			474,919
Property, Plant and Equipment:
Land and Improvements		17,204			19,026
Buildings and Improvements		102,443			104,460
Machinery and Equipment		335,004			335,307
Property, Plant and Equipment, at Cost		454,651			458,793
Less — Accumulated Depreciation		(204,780	)		(205,120	)
Net Property, Plant and Equipment		249,871			253,673
Goodwill		554,038			544,440
Purchased Intangible Assets, net of Amortization		48,866			52,058
Other Noncurrent Assets		23,925			26,962
Total Assets	$	1,375,283		$	1,352,052
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
Current Liabilities:
Accounts Payable	$	82,116		$	106,374
Dividends Payable		3,781			3,483
Accrued Compensation and Employee Benefits		39,284			30,256
Other Accrued Expenses		54,477			44,094
Income Taxes Payable		19,313			10,731
Current Maturities of Long-Term Debt		476			271
Total Current Liabilities		199,447			195,209
Long-Term Debt		536,895			547,350
Deferred Income Taxes		48,653			48,663
Other Noncurrent Liabilities		19,901			17,359
Minority Interest in Consolidated Subsidiaries		5,115			5,292
Shareholders’ Investment:
Common Stock, $.01 par value, 50,000,000 shares authorized, 29,860,022 issued in 2005 and 29,798,188 issued in 2004		299			298
Additional Paid-In Capital		265,826			263,790
Less – Treasury Stock, at cost 774,100 shares in 2005 and 2004		(15,228	)		(15,228	)
Retained Earnings		312,302			288,837
Unearned Compensation		(844	)		(224	)
Accumulated Other Comprehensive Income		2,917			706
Total Shareholders’ Investment		565,272			538,179
Total Liabilities and Shareholders’ Investment	$	1,375,283		$	1,352,052

See accompanying notes.

3

REGAL-BELOIT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands of Dollars, Except Per Share Data)

	(Unaudited)
	Three Months Ended				Six Months Ended
	June 29,		June 29,		June 29,		June 29,
	2005		2004		2005		2004
Net Sales	$	368,768	$	177,652	$	706,591	$	340,736
Cost of Sales		288,950		136,811		558,329		261,708
Gross Profit		79,818		40,841		148,262		79,028
Operating Expenses		44,007		26,667		86,586		52,322
Income From Operations		35,811		14,174		61,676		26,706
Interest Expense		5,894		1,509		11,348		2,836
Interest Income		28		29		76		32
Income Before Taxes & Minority Interest		29,945		12,694		50,404		23,902
Provision For Income Taxes		10,996		4,558		18,638		8,594
Income Before Minority Interest		18,949		8,136		31,766		15,308
Minority Interest in Income, Net of Tax		504		507		1,035		819
Net Income	$	18,445	$	7,629	$	30,731	$	14,489
Per Share of Common Stock:
Earnings Per Share – Basic	$	.63	$	.31	$	1.06	$	.59
Earnings Per Share – Assuming Dilution	$	.62	$	.31	$	1.03	$	.58
Cash Dividends Declared	$	.13	$	.12	$	.25	$	.24
Average Number of Shares Outstanding - Basic		29,064,518		24,450,391		29,049,209		24,744,342
Average Number of Shares Outstanding - Assuming Dilution		29,720,400		24,677,155		29,982,397		24,977,674

See accompanying notes.

4

REGAL-BELOIT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of Dollars)

	(Unaudited)
	Six Months Ended
	June 29,			June 29,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	30,731		$	14,489
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		18,845			11,031
Gain on sale of assets		(101	)		—
Change in assets and liabilities		(15,718	)		(9,209	)
Net cash provided by operating activities		33,757			16,311
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment		(15,549	)		(6,699	)
Business acquisitions, net of cash acquired		(5,490	)		—
Sale of property, plant and equipment		4,156			1,169
Other, net		(344	)		(2,828	)
Net cash used in investing activities		(17,227	)		(8,358	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payment of) long-term debt		(11,018	)		18,976
Repurchase of common stock		—			(12,499	)
Dividends paid to shareholders		(6,968	)		(6,011	)
Dividends paid to minority partners		(1,315	)		—
Stock issued under option plans		1,146			553
Capitalized financing fees		—			(3,801	)
Net cash used in financing activities		(18,155	)		(2,782	)
EFFECT OF EXCHANGE RATE ON CASH		(584	)		12
Net (decrease) increase in cash and cash equivalents		(2,209	)		5,159
Cash and cash equivalents at beginning of period		31,275			9,100
Cash and cash equivalents at end of period	$	29,066		$	14,259
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	10,628		$	2,234
Income taxes	$	5,497		$	5,559

See accompanying notes.

5

REGAL-BELOIT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 29, 2005
(Unaudited)

1. BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of REGAL-BELOIT Corporation and its wholly owned subsidiaries and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. All adjustments which management believes are necessary for a fair presentation of the results for the interim periods presented have been reflected and are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (the “2004 Annual Report”).

2. INVENTORIES

Cost for approximately 88% of the Company’s inventory is determined using the last-in, first-out (LIFO) inventory valuation method. The approximate percentage distribution between major classes of inventories is as follows:

	June 29, 2005			December 31, 2004
Raw Material		14	%		13	%
Work-in Process		25	%		25	%
Finished Goods		61	%		62	%

3. COMPREHENSIVE INCOME

The Company’s comprehensive income for the second quarter and six months of 2005 and 2004 is as follows:

				(In Thousands of Dollars)
	Second Quarter Ended						Six Months Ended
	June 29,			June 29,			June 29,			June 29,
	2005			2004			2005			2004
Net income as reported	$	18,445		$	7,629		$	30,731		$	14,489
Comprehensive income (expense) from:
Cumulative translation adjustments		(729	)		(592	)		(1,978	)		(615	)
Changes in fair value of hedging activities, net of tax		2,409			(91	)		5,108			190
Hedging activities reclassified into earnings from accumulated other comprehensive income (“AOCI”), net of tax		(73	)		(49	)		(1,178	)		(180	)
		1,607			(732	)		1,952			(605	)
Comprehensive income	$	20,052		$	6,897		$	32,683		$	13,884

4. WARRANTY COSTS

The Company recognizes the cost associated with its standard warranty on its products at the time of sale. The amount recognized is based on historical experience. The following is a reconciliation of the changes in accrued warranty costs for the second quarter and six months of 2005 and 2004:

	(In Thousands of Dollars)
	Second Quarter Ended						Six Months Ended
	June 29,			June 29,			June 29,			June 29,
	2005			2004			2005			2004
Beginning balance	$	5,237		$	2,966		$	5,007		$	2,953
Deduct: Payments		(1,149	)		(1,104	)		(2,805	)		(2,220	)
Add: Provision		1,527			1,161			3,413			2,290
Ending balance	$	5,615		$	3,023		$	5,615		$	3,023

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5. BUSINESS SEGMENTS

The Company operates two strategic businesses that are reportable segments: Mechanical and Electrical.

	(In Thousands of Dollars)
				Mechanical Segment												Electrical Segment
	Second Quarter						Six Months						Second Quarter						Six Months
	June 29,			June 29,			June 29,			June 29,			June 29,			June 29,			June 29,			June 29,
	2005			2004			2005			2004			2005			2004			2005			2004
Net Sales	$	51,546		$	51,142		$	100,147		$	98,040		$	317,222		$	126,510		$	606,444		$	242,696
Income from Operations	$	3,139		$	3,889		$	5,876		$	6,634		$	32,672		$	10,285		$	55,800		$	20,072
-% of Net Sales		6.1	%		7.6	%		5.9	%		6.8	%		10.3	%		8.1	%		9.2	%		8.3	%
Goodwill at end of period	$	530		$	530		$	530		$	530		$	553,508		$	310,686		$	553,508		$	310,686

6. GOODWILL AND OTHER INTANGIBLES

Changes in the carrying amount of goodwill for the six months ended June 29, 2005 are as follows (in millions):

	Electrical		Mechanical
	Segment		Segment		Total
Balance as of December 31, 2004	$	543.9	$	0.5	$	544.4
GE HVAC acquisition adjustments		5.4		—		5.4
GE HVAC and CAC acquisition costs		3.3		—		3.3
Acquisition of Changzhou Modern Technologies		.9		—		.9
Balance as of June 29, 2005	$	553.5	$	0.5	$	554.0

Preliminary appraisals by an independent valuation firm have been made of the tangible and intangible assets purchased with the GE HVAC Motors and Capacitors businesses and the GE Commercial AC Motors business in 2004. The preliminary adjustments result from management’s review and valuation of acquired assets of the businesses. For the six months ended June 29, 2005, the above adjustments result primarily from the adjustment of finished goods inventory to fair market value.

Other intangible assets consisted of the following (in millions):

	December 31, 2004
	Weighted –		Carrying		Accumulated
	Average Life (yrs)		Amount		Amortization		Net
Amortized intangible assets:
Non-Compete Agreements		5.0	$	2.5	$	0.0	$	2.5
Trademarks		4.0		4.9		0.4		4.5
Patents		10.0		15.4		0.0		15.4
Engineering Drawings		10.0		1.2		0.0		1.2
Customer Relationships		10.0		28.6		0.2		28.4
Total		9.2	$	52.6	$	0.6	$	52.0

	June 29, 2005
	Weighted –		Carrying		Accumulated
	Average Life (yrs)		Amount		Amortization		Net
Amortized intangible assets:
Non-Compete Agreements		5.0	$	2.5	$	0.3	$	2.2
Trademarks		4.0		4.9		1.1		3.8
Patents		10.0		15.4		0.8		14.6
Engineering Drawings		10.0		1.2		0.1		1.1
Customer Relationships		10.0		28.6		1.4		27.2
Total		9.2	$	52.6	$	3.7	$	48.9

7

Amortization expense recorded for the six months ended June 29, 2005 was $3.2 million. Estimated amortization expense is $6.4 million in each of 2005, 2006, and 2007, $5.2 million in 2008 and 2009, and $22.5 million thereafter. We perform an annual evaluation of our goodwill and intangible assets in the fourth quarter of each fiscal year for impairment as required by SFAS 142, “Goodwill and Other Intangible Assets”.

7. STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation plans under the intrinsic value method in accordance with the recognition and measurement principles of Accounting Principles Board Opinion No. 23, “Accounting for Stock Issued to Employees”, and related Interpretations. For stock options, no compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying stock. Had compensation cost for these plans been determined consistent with FASB Statement No. 123 “Accounting for Stock-Based Compensation”, the Company’s net income and earnings per share (“EPS”) would have been reduced to the following pro-forma amounts:

	(In Thousands of Dollars)
	Second Quarter						Six Months Ended
	June 29,			June 29,			June 29,			June 29,
	2005			2004			2005			2004
Net Income:
As reported	$	18,445		$	7,629		$	30,731		$	14,489
Deduct: Total stock-based employee compensation expense, net of related tax effects		(415	)		(229	)		(882	)		(368	)
Add: Total stock-based employee compensation included in net income, net of related tax effects		102			32			262			49
Pro-forma	$	18,132		$	7,432		$	30,111		$	14,170
Earnings per share – basic:
As reported	$	.63		$	.31		$	1.06		$	.59
Pro-forma	$	.62		$	.30		$	1.04		$	.57
Earnings per share – assuming dilution:
As reported	$	.62		$	.31		$	1.03		$	.58
Pro-forma	$	.61		$	.30		$	1.01		$	.57

The fair value of each stock option is estimated using the Black-Scholes pricing model. The compensation expense included in net income is primarily for restricted stock.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (SFAS) No. 123(R), “Share-Based Payment”, which requires companies to expense the value of employee stock options and similar awards. This Statement is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation”. This Statement supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS No. 123(R) will be effective beginning January 1, 2006. Management is currently assessing the impact of adopting SFAS No. 123(R).

8. PENSION PLANS

The Company accounts for its defined benefit pension plans under the provisions of SFAS No. 87, “Employers’ Accounting for Pensions”. The Company’s net periodic pension cost is comprised of the following components:

	(In Thousands of Dollars)
	Second Quarter						Six Months Ended
	June 29,			June 29,			June 29,			June 29,
	2005			2004			2005			2004
Service cost	$	651		$	366		$	1,302		$	731
Interest cost		886			902			1,772			1,804
Expected return on plan assets		(1,123	)		(1,073	)		(2,246	)		(2,147	)
Amortization of prior service cost		32			25			64			50
Amortization of net loss		244			240			488			480
Net periodic benefit cost	$	690		$	460		$	1,380		$	918

8

In the second quarter and six months of 2005, the Company contributed $110,000 to defined benefit pension plans. In the comparable periods of 2004, the Company contributed $279,000 and $348,000, respectively, to defined benefit pension plans. The Company expects to contribute an additional $220,000 over the balance of 2005, for a total of $330,000 in 2005 contributions. The assumptions used in the valuation of the Company’s pension plans and in the target investment allocation have remained the same as those disclosed in the Company’s 2004 Annual Report.

9. EARNINGS PER SHARE (EPS)

The numerator for the calculation of basic and diluted earnings per share is net income. The denominator is computed as follows (in thousands):

	Second Quarter Ended				Six Months Ended
	June 29,		June 29,		June 29,		June 29,
	2005		2004		2005		2004
Denominator for basic EPS – weighted average shares		29,065		24,450		29,049		24,744
Effect of dilutive securities		655		227		933		234
Denominator for diluted EPS		29,720		24,677		29,982		24,978

The increase from June 29, 2004 in dilutive securities in the quarter and six months ended June 29, 2005, was due primarily to the effect of shares attributable to the Company’s convertible senior subordinated debt. Options for common shares where the exercise price was above the market price at June 29, totaling 376,000 and 917,000 shares in 2005 and 2004, respectively, have been excluded from the calculation of the effect of dilutive securities, the effect of such options being anti-dilutive.

10. CONTINGENCIES

An action was filed on June 4, 2004, and amended in September 2004, against one of the Company’s subsidiaries, Marathon Electric Manufacturing Corporation (“Marathon”), by Enron Wind Energy Systems, LLC, Enron Wind Contractors, LLC and Zond Minnesota Construction Company, LLC (collectively, “Enron Wind”). The action was filed in the United States Bankruptcy Court for the Southern District of New York where each of the Enron Wind entities has consolidated its Chapter 11 bankruptcy petition as part of the Enron Corporation bankruptcy proceedings. In the action against Marathon, Enron Wind has asserted various claims relating to the alleged failures and/or degradations of performance of about 564 generators sold by Marathon to Enron Wind from 1997 to 1999. In January 2001, Enron Wind and Marathon entered into a “Generator Warranty and Settlement Agreement and Release of All Claims” (“Warranty Agreement”). This Warranty Agreement resolved various issues related to past performance of the generators, provided a limited warranty related to the generators going forward, and contained a release by all parties of any claims related to the generators other than those arising out of the obligations contained in the Warranty Agreement.

Enron Wind is seeking to recover the purchase price of the generators and transportation costs totaling about $21 million. In addition, although the Warranty Agreement contains a waiver of consequential, incidental, and punitive damages, Enron Wind claims that this limitation is unenforceable and seeks recovery of consequential, incidental and punitive damages incurred by it and by its customers, totaling an additional $100 million. Enron Wind has asserted claims of breach of contract, breach of the implied covenant of good faith and fair dealing, promissory fraud, and intentional interference with contractual relations. Marathon has filed a motion with the court seeking to have many of Enron Wind’s claims dismissed. Enron Wind recently has filed a motion with the court seeking a declaration that Marathon had an obligation under the Warranty Agreement to repair or replace the generators in the first instance regardless of whether an actual breach of warranty had occurred. The court has held hearings on both motions, but has not yet ruled.

The Company believes that this action is without merit and that it has meritorious defenses to the action. The Company intends to defend vigorously all of the asserted claims. The litigation is in an early discovery phase and it is difficult for the Company to predict the impact the litigation may ultimately have on the Company’s results of operations or financial condition, including the expenses the Company may incur to defend against the action. As of June 29, 2005, the Company had recorded a reserve in its financial statements solely related to a portion of the anticipated costs in defending against this matter.

The Company is, from time to time, party to other lawsuits arising from its normal business operations. It is believed that the outcome of these lawsuits will have no material effect on the Company’s financial position or its results of operations.

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11. RELATED PARTY TRANSACTIONS

As part of the consideration paid for the acquisition of the HVAC Motors and Capacitors business on December 31, 2004, the Company issued to GE 4,559,048 shares of common stock (approximately 15% of the Company’s common stock issued). In connection with the GE acquisitions, the Company and GE entered into various supply, transition services, and sales agreements. Included in accounts payable on June 29, 2005 was $13.8 million consisting of amounts payable to GE related to trade payables, transition services fees payable, and other payables of the businesses acquired from GE in 2004. The amount paid to GE during the second quarter and first six months of 2005 for these items and other liabilities arising at closing was $28.4 million and $85.0 million, respectively. The amount expensed in the second quarter and first half of 2005 for transition services was $4.7 million and $8.4 million, respectively, which was recorded in operating expenses.

12. DERIVATIVE INSTRUMENTS

The Company has entered into certain commodity forward contracts and options in connection with the management of its exposure to fluctuations in certain raw material commodity pricing. These derivative instruments have been designated as cash flow hedges. The Company has also entered into foreign currency forward contracts to reduce the exposure to the risks of changes in the exchange rates of the U.S. dollar, where the Company has operations where the functional currency is the local currency.

These contracts are recorded on the balance sheet at fair value and are accounted for as cash flow hedges, with changes in fair value recorded in accumulated other comprehensive income (“AOCI”) in each accounting period. An ineffective portion of a hedge’s change in fair value, if any, is recorded in earnings in the period of change. The impact of ineffectiveness was immaterial in the second quarter and first six months of 2005.

In the second quarter and six months of 2005, $2.3 million and $3.9 million, respectively, of net increased fair market value of derivative instruments was recorded in AOCI. At June 29, 2005, the Company had a balance of $4.7 million in other current assets and a corresponding net after tax gain of $2.9 million in AOCI. Of the total other current assets and AOCI related to derivative instruments, $1.7 million and $1.0 million, respectively, were related to currency hedges, with the balance relating to commodity hedges. The Company estimates that $3.7 million of gains will be reclassified from AOCI to earnings within the next 12 months, based on valuations at June 29, 2005.

13. ACQUISITIONS

On February 7, 2005 the Company acquired 95% ownership of Changzhou Modern Technologies Co., LTD. (“CMT”). CMT is located in Changzhou, P.R. of China and will produce fractional electric motors. The purchase price was $3.23 million which the Company will pay over a three-year period.

14. ANNOUNCEMENT OF STOCK OFFERING

On July 27, 2005, the Company announced a proposed offering of 4,750,000 shares of its common stock that is expected to include 1,330,714 primary shares being offered by the Company and 3,419,286 secondary shares being offered by one selling shareholder, GE. The Company and GE expect to grant the underwriters an option to sell up to an additional 712,500 shares on a pro-rata basis to satisfy over-allotments. The shares are being offered pursuant to an effective shelf registration statement that was previously filed with the U.S. Securities and Exchange Commission.

Based on an assumed offering price of $29.56 per share (the last reported sale price on July 26, 2005), the Company estimates that the net proceeds of the primary shares of the common stock (assuming no exercise of the underwriter’s over-allotment option), after deducting the underwriting discount and estimated offering expenses payable by the Company, will be approximately $37.1 million. The Company expects to also receive approximately $4.8 million from GE’s net proceeds of the shares GE is offering to sell, pursuant to the terms of the shareholder agreement between GE and the Company. The referenced shareholder agreement was filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated January 6, 2005. The Company plans to use the net proceeds to reduce the outstanding long-term debt of the Company.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context requires otherwise, references in this Item 2 to “we”, “us”, “our” or the “Company” refer collectively to REGAL-BELOIT Corporation and its subsidiaries.

RESULTS OF OPERATIONS

Sales for the second quarter of 2005 were $368.8 million, which is a 107.5% increase over $177.7 million in the second quarter of 2004. Included in the sales were $177.5 million of sales from the Commercial AC Motors and HVAC Motors and Capacitors businesses acquired in 2004. Sales in our Electrical segment increased 150.7% including the sales attributable to the acquired businesses. Approximately 93% of the sales increase is attributable to the sales from the acquired businesses. Sales in our Mechanical segment, which reflect the impact of the sale of the Illinois Gear business in May 2005, increased .8%. The sale of the Illinois Gear business reduced segment sales by approximately $1.5 million for the second quarter.

Our sales in the first six months of 2005 were $706.6 million, compared to $340.7 million in comparable 2004, an increase of 107.4%. Included in the $706.6 million were $332.6 million of sales from the businesses we acquired from GE. Electrical segment 2005 six months sales were $606.4 million, including the sales from the acquired businesses. This compared to the 2004 first half sales of $242.7 million for our Electrical segment. For the six months of 2005, Mechanical segment sales were $100.1 million as compared to $98.0 million in comparable 2004.

Our gross margin for the second quarter of 2005 was 21.6%, compared to the 23.0% reported in the second quarter of 2004 and 20.3% reported for the first quarter of 2005. Gross margins continued to be impacted by raw material cost increases which were, however, mostly offset by price increases we instituted and productivity improvements we achieved. Additionally, the gross margin of the acquired businesses reduced our margins in total, due primarily to our operations in certain higher cost facilities retained by GE, from which we are transitioning our operations. Our gross margin for the first half of 2005 was 21.0%, compared to 23.2% in the comparable period of 2004.

Operating expenses for the second quarter of 2005 were 11.9% of sales versus 15.0% in the second quarter of 2004, reflecting the volume leveraging of fixed costs and the impact of the acquired GE businesses, which have lower operating expenses as a percent of sales compared to the remainder of our businesses. Operating expenses in the first half of 2005 were 12.3% of sales versus 15.4% in the comparable period of 2004.

Income from operations in 2005’s second quarter was $35.8 million versus $14.2 million in the second quarter of 2004, an increase of 152.7%. As a percent of sales, income from operations was 9.7% versus 8.0% in the second quarter 2004. Income from operations for the first half of 2005 was $61.7 million, a 130.9% increase from the $26.7 million reported in the comparable period of 2004. As a percent of sales, income from operations was 8.7% versus 7.8% reported for the first six months of 2004.

Interest expense was $5.9 million in the second quarter of 2005 versus $1.5 million in comparable 2004. This increase was driven by our higher level of debt outstanding resulting primarily from the funds borrowed for the cash portion of the 2004 acquisitions. Interest expense in the six months of 2005 was $11.3 million versus $2.8 million for the same period of 2004. Our effective tax rate in the second quarter of 2005 was 36.7% as compared to 35.9% in the second quarter of 2004.

Our net income for the second quarter of 2005 was $18.4 million, an increase of 141.8% versus the $7.6 million reported in the second quarter of 2004. Fully diluted earnings per share were $.62 which was an increase of 100.0% versus $.31 in the second quarter of 2004. The average number of diluted shares in the second quarter of 2005 was 29,720,400, versus 24,677,155 shares in comparable 2004. The increase in the average number of shares outstanding versus the second quarter of 2004 resulted primarily from the shares issued to GE as part of the consideration paid for the HVAC motors and capacitors businesses we acquired on December 31, 2004. Net income was $30.7 million in the first half of 2005 versus $14.5 million reported in comparable 2004. Fully diluted earnings per share were $1.03, which was an increase of 77.6% versus $.58 for the same period of 2004. The average number of diluted shares was 29,982,397 for the six months of 2005, versus 24,977,674 shares in comparable 2004.

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LIQUIDITY AND CAPITAL RESOURCES

At June 29, 2005, our working capital (current assets minus current liabilities) was $299.1 million, $19.4 million above the $279.7 million at December 31, 2004. Higher accounts receivable and reduced accounts payable were the most significant factors in the increase. The ratio of our current assets to our current liabilities (“current ratio”) of 2.5:1 at June 29, 2005 rose from 2.4:1 at year-end 2004.

Our cash flow from operations was $34.6 million in the second quarter of 2005, a $23.0 million increase from $11.6 million in the comparable quarter of 2004. The combination of a $10.8 million (142%) increase in net income and a $4.1 million (72%) increase in depreciation and amortization in the second quarter of 2005 versus the comparable period of 2004 accounted for most of the increase in cash flow. At June 29, 2005, accounts receivable were $23.2 million higher than at December 31, 2004, all of the increase occurring in the first quarter of 2005. The increase in accounts receivable, due to our improved sales volume, partially offset our higher net income and depreciation and amortization, resulting in first half 2005 operating cash flow of $33.8 million, a $17.5 million (107%) increase from $16.3 million in the first six months of 2004.

Net cash used in investing activities was $4.1 million during the second quarter of 2005 and was $17.2 million for the first half of 2005. While capital spending of $8.4 million in the second quarter was higher than the $7.2 million in the first quarter of 2005, $3.6 million of cash we received from the sale of the Illinois Gear business in May reduced our net capital spending. Our capital spending in the first six months of 2005 of $15.5 million was a 133% increase from the $6.7 million spent in comparable 2004, due primarily to the impact of the acquisitions we made in August and December of 2004. Business acquisitions of $5.5 million reflected payments made in the first quarter of 2005 for the CMT acquisition and additional payments relating to the 2004 HVAC motors and capacitors acquisition.

Our cash flows used in financing activities were $29.6 million during the second quarter of 2005, due primarily to repayment of long-term debt totaling $26.8 million. For the first six months of 2005, the use of cash in financing activities was $18.2 million, which includes long-term debt repayment of $11.0 million.

Our outstanding long-term debt decreased to $536.9 million at June 29, 2005 from $563.6 million at March 31, 2005, due primarily to $32.5 million of cash provided by operating activities in the second quarter of 2005, of which an $11.0 million reduction in inventories was a significant factor. Compared to long-term debt of $547.4 million at December 31, 2004, our long-term debt at June 29, 2005 was $10.5 million lower. Of our total long-term debt, $417.5 million was outstanding under our $475 million unsecured revolving credit facility that expires on May 5, 2009 (the “Facility”). The Facility permits us to borrow at interest rates based upon a margin above the London Inter-Bank Offered Rate (“LIBOR”), which margin varies with the ratio of total funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). These interest rates also vary as LIBOR varies. LIBOR has risen a total of 2.4 percentage points since June 2004. We also pay a commitment fee on the unused amount of the $475 million Facility credit limit, which also varies with the ratio of our total debt to our EBITDA. At June 29, 2005, our margin above LIBOR was 1.5% and our commitment fee rate was .3%. The Facility requires us to maintain specified financial ratios and to satisfy certain financial condition tests. We were in compliance with all of these tests as of June 29, 2005.

In addition to the Facility, at June 29, 2005 we also had $115 million of convertible senior subordinated debt outstanding at a fixed interest rate of 2.75%. We also had outstanding an additional $4.9 million of other senior debt. At June 29, 2005, our borrowing availability was $58.8 million based on the Facility’s financial covenants.

On July 27, 2005, the Company announced a proposed offering of 4,750,000 shares of its common stock that is expected to include 1,330,714 primary shares being offered by the Company and 3,419,286 secondary shares being offered by one selling shareholder, GE. The Company and GE expect to grant the underwriters an option to sell up to an additional 712,500 shares on a pro-rata basis to satisfy over-allotments. The shares are being offered pursuant to an effective shelf registration statement that was previously filed with the U.S. Securities and Exchange Commission.

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Based on an assumed offering price of $29.56 per share (the last reported sale price on July 26, 2005), the Company estimates that the net proceeds of the primary shares of the common stock (assuming no exercise of the underwriter’s over-allotment option), after deducting the underwriting discount and estimated offering expenses payable by the Company, will be approximately $37.1 million. The Company expects to also receive approximately $4.8 million from GE’s net proceeds of the shares GE is offering to sell, pursuant to the terms of the shareholder agreement between GE and the Company. The referenced shareholder agreement was filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated January 6, 2005. The Company plans to use the net proceeds to reduce the outstanding long-term debt of the Company.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

The Company recognizes revenue upon transfer of title, which generally occurs upon shipment of the product to the customer. The pricing of products sold is generally supported by customer purchase orders, and accounts receivable collection is reasonably assured at the time of shipment. Estimated discounts and rebates are recorded as a reduction of sales in the same period revenue is recognized. Product returns and credits are estimated and recorded at the time of shipment based upon historical experience. Shipping and handling costs are recorded as revenue when billed to the customers.

Goodwill and Other Intangibles

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill is not amortized; however it is tested for impairment at least annually, with any resulting adjustment charged to the results of operations. Amortization continues to be recorded for other intangible assets with definite lives.

Retirement Plans

Approximately half of our domestic employees are covered by defined benefit pension plans with the remaining domestic employees covered by defined contribution plans. The large majority of our foreign employees are covered by mandated government programs. Our obligations under our domestic defined benefit plans are determined with the assistance of actuarial firms. The actuaries make certain assumptions regarding such factors as withdrawal rates and mortality rates. The actuaries also provide us with information and recommendations from which management makes further assumptions on such factors as the long-term expected rate of return on plan assets, the discount rate on benefit obligations and where applicable, the rate of annual compensation increases. Based upon the assumptions made, the investments made by the plans, overall conditions and movement in financial markets, particularly the stock market and how actual withdrawal rates, life-spans of benefit recipients and other factors differ from assumptions, annual expenses and recorded assets or liabilities of these defined benefit plans may change significantly from year to year. Based on our annual review of actuarial assumptions as well as historical rates of return on plan assets and existing long-term bond rates, we set the long-term rate of return on plan assets at 8.75% and the discount rate at 5.75% for our defined benefit plans as of December 31, 2004. We expect our domestic defined benefit pension expenses in 2005 to increase approximately $1.8 million from 2004, due primarily to the two acquisitions we made from GE in 2004.

Use of Estimates and Assumptions

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

New Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment”, which requires companies to expense the value of employee stock options and similar awards. This Statement is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation”. This Statement supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS No. 123R(R) has been revised to become effective beginning January 1, 2006. Management is currently assessing the impact of adopting SFAS No. 123(R).

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In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS No. 154”). This statement changes the requirements for the accounting and reporting of a change in accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, where practical to do so. This statement is applicable for fiscal years beginning after December 15, 2005. The Company does not anticipate that this standard will have a material effect on its financial position, results of operations or cash flows.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk relating to the Company’s operations due to changes in interest rates, foreign currency exchange rates and commodity prices of purchased raw materials. We manage the exposure to these risks through a combination of normal operating and financing activities and derivative financial instruments such as commodity cash flow hedges and foreign currency forward exchange contracts.

The Company is exposed to interest rate risk on certain of its short-term and long-term debt obligations used to finance our operations and acquisitions. At June 29, 2005, we had $115.9 million of fixed rate debt and $421.5 million of variable rate debt, the latter subject to interest rate risk. The variable rate debt is under a credit facility with an interest rate based on a margin above LIBOR. As a result, interest rate changes impact future earnings and cash flow assuming other factors are constant. A hypothetical 10% change in our weighted average borrowing rate on outstanding variable rate debt at June 29, 2005, would result in a change in after-tax annualized earnings of approximately $1.2 million.

The Company periodically enters into commodity futures and options hedging transactions to reduce the impact of changing copper and aluminum commodity prices. Contract terms of commodity hedge instruments generally mirror those of the hedged item, providing a high degree of risk reduction and correlation.

We are also exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of foreign subsidiaries, intercompany loans with foreign subsidiaries and transactions denominated in foreign currencies. Our objective is to minimize our exposure to these risks through a combination of normal operating activities and the utilization of foreign currency contracts to manage our exposure on the transactions denominated in currencies other than the applicable functional currency. Due to our two acquisitions in August and December 2004, we have significantly increased our manufacturing operations outside the United States. In the first half of 2005, we began to enter into contracts to hedge foreign-currency denominated forecasted transactions. Contracts are executed with creditworthy banks and are denominated in currencies of major industrial countries. It is our policy not to enter into derivative financial instruments for speculative purposes.

We do not hedge our exposure to the translation of reported results of foreign subsidiaries from local currency to United States dollars.

All hedges are recorded on the balance sheet at fair value and are accounted for as cash flow hedges, with changes in fair value recorded in accumulated other comprehensive income (“AOCI”) in each accounting period. An ineffective portion of the hedge’s change in fair value, if any, is recorded in earnings in the period of change. The impact due to ineffectiveness was immaterial for all periods included in this report.

In the second quarter and six months of 2005, $2.3 million and $3.9 million, respectively, of net increased hedge value was recorded in AOCI. At June 29, 2005, we had a balance of $4.7 million in other current assets and a corresponding net after tax gain of $2.9 million in AOCI, representing the fair market value of cash flow commodity and foreign currency hedges. Of the total other current assets and AOCI values, $1.7 and $1.0 million, respectively, related to currency hedges, with the balance relating to commodity hedges and translation adjustments.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing,

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summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

Internal Control Over Financial Reporting. There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings

An action was filed on June 4, 2004, and amended in September 2004, against one of the Company’s subsidiaries, Marathon Electric Manufacturing Corporation (“Marathon”), by Enron Wind Energy Systems, LLC, Enron Wind Contractors, LLC and Zond Minnesota Construction Company, LLC (collectively, “Enron Wind”). The action was filed in the United States Bankruptcy Court for the Southern District of New York where each of the Enron Wind entities has consolidated its Chapter 11 bankruptcy petition as part of the Enron Corporation bankruptcy proceedings. In the action against Marathon, Enron Wind has asserted various claims relating to the alleged failures and/or degradations of performance of about 564 generators sold by Marathon to Enron Wind from 1997 to 1999. In January 2001, Enron Wind and Marathon entered into a “Generator Warranty and Settlement Agreement and Release of All Claims” (“Warranty Agreement”). This Warranty Agreement resolved various issues related to past performance of the generators, provided a limited warranty related to the generators going forward, and contained a release by all parties of any claims related to the generators other than those arising out of the obligations contained in the Warranty Agreement.

Enron Wind is seeking to recover the purchase price of the generators and transportation costs totaling about $21 million. In addition, although the Warranty Agreement contains a waiver of consequential, incidental, and punitive damages, Enron Wind claims that this limitation is unenforceable and seeks recovery of consequential, incidental and punitive damages incurred by it and by its customers, totaling an additional $100 million. Enron Wind has asserted claims of breach of contract, breach of the implied covenant of good faith and fair dealing, promissory fraud, and intentional interference with contractual relations. Marathon has filed a motion with the court seeking to have many of Enron Wind’s claims dismissed. Enron Wind recently has filed a motion with the court seeking a declaration that Marathon had an obligation under the Warranty Agreement to repair or replace the generators in the first instance regardless of whether an actual breach of warranty had occurred. The court has held hearings on both motions, but has not yet ruled.

The Company believes that this action is without merit and that it has meritorious defenses to the action. The Company intends to defend vigorously all of the asserted claims. The litigation is in an early discovery phase and it is difficult for the Company to predict the impact the litigation may ultimately have on the Company’s results of operations or financial condition, including the expenses the Company may incur to defend against the action. As of June 29, 2005, the Company had recorded a reserve in its financial statements solely related to a portion of the anticipated costs in defending against this matter.

The Company is, from time to time, party to other lawsuits arising from its normal business operations. It is believed that the outcome of these lawsuits will have no material effect on the Company’s financial position or its results of operations.

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Item 4. Submission of Matters to a Vote of Security Holders

a) The Annual Meeting of Shareholders of REGAL-BELOIT Corporation was held on April 22, 2005.

b) The terms of Directors Christopher L. Doerr, G. Frederick Kasten, Henry W. Knueppel, John A. McKay and James L. Packard
    were continued.

c) Matters voted on at the Annual Meeting and the results of each vote were as follows:

     1. Elect three Class C Directors for a term of three years.

Name	For		Withheld
J. Reed Coleman		23,629,004		1,214,644
Stephen N. Graff		23,960,534		883,114
Thomas J. Fischer		24,033,157		810,491

Item 6. Exhibits

Exhibit Number	Exhibit Description
3.1	Bylaws of the Registrant, as amended on April 22, 2005, filed herewith.
3.2	Amendments to the Bylaws of the Registrant [Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated April 28, 2005 (file #001-07283)].
4.1	Letter agreement, dated as of May 31, 2005, between REGAL-BELOIT Corporation and General Electric Company [Incorporated by reference to Exhibit 4.1 of REGAL-BELOIT Corporation’s Current Report on Form 8-K dated June 6, 2005 (file #001-07283)].
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	REGAL-BELOIT CORPORATION
	(Registrant)
	/S/ David A. Barta
	David A. Barta
	Vice President — Chief Financial Officer
	(Principal Accounting and Financial Officer)
DATE: August 8, 2005

Index to Exhibits

Exhibit Number	Exhibit Description
3.1	Bylaws of the Registrant, as amended on April 22, 2005, filed herewith.
3.2	Amendments to the Bylaws of the Registrant [Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated April 28, 2005 (file #001-07283)].
4.1	Letter agreement, dated as of May 31, 2005, between REGAL-BELOIT Corporation and General Electric Company [Incorporated by reference to Exhibit 4.1 of REGAL-BELOIT Corporation’s Current Report on Form 8-K dated June 6, 2005 (file #001-07283)].
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-3.1

Exhibit 3.1

BYLAWS OF REGAL-BELOIT CORPORATION

ARTICLE I — OFFICES

1.01 Principal and Business Office. The Corporation may have such principal and other business offices, either within or without the State of Wisconsin, as the Board of Directors may designate or as the business of the Corporation may require from time to time.

1.02 Registered Office. The registered office of the Corporation required by the Wisconsin Business Corporation Law to be maintained in the State of Wisconsin may be, but need not be, identical with the principal office in the State of Wisconsin. The address of the registered office may be changed from time to time by any Officer or by the registered agent. The office of the registered agent of the Corporation shall be identical to such registered office.

1.03 Corporate Records. The following documents and records shall be kept at the Corporation’s principal office or at such other reasonable location as may be specified by the Corporation:

(a)	Minutes of shareholders’ and Board of Directors’ meetings, any written notices thereof, any written waivers of such notices and written consents by shareholders or directors for actions without a meeting.
(b)	Records of actions taken by the shareholders or directors without a meeting.
(c)	Records of actions taken by committees of the Board of Directors in place of the Board of Directors and on behalf of the Corporation.
(d)	Accounting records.
(e)	A record of its shareholders.
(f)	Current Bylaws.
(g)	Voting trust agreements (if any).
(h)	Stock transfer agreements to which the Corporation is a part or of which it has notice (if any).

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ARTICLE II — SHAREHOLDERS

2.01 Annual Meeting. The annual meeting of the shareholders of the Corporation (“Annual Meeting”) shall be held at such time and date as may be fixed by or under the authority of the Board of Directors, for the purpose of electing Directors and for the transaction of such other business as may properly come before the annual meeting. If the election of Directors shall not be held on the day fixed as herein provided for any annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of shareholders (“Special Meeting”) as soon thereafter as conveniently may be. In fixing a meeting date for any annual meeting, the Board of Directors may consider such factors as it deems relevant within the good faith exercise of its business judgment.

2.02 Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board, the President or a majority of the Board of Directors. If, and as required by the Wisconsin Business Corporation Law, a special meeting shall be called upon written demand describing one or more purposes for which it is to be held by holders of shares with at least ten percent (10%) of the votes entitled to be cast on any issue proposed to be considered at the meeting. The purpose or purposes of any special meeting shall be described in the notice required by Section 2.04 of these ByLaws.

2.03 Place of Meeting. The Board of Directors may designate any place, either within or without the State of Wisconsin, as a place of meeting for any annual meeting or any special meeting. If no designation is made, the place of meeting shall be the principal office of the Corporation, but any meeting may be adjourned to reconvene at any place designated by vote of a majority of the shares represented thereafter.

2.04 Notice to Shareholders.

(a) Required notice. Written notice stating the place, day and hour of the meeting and, in case of a special meeting; the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) days, not more than sixty (60) days before the date of the meeting (unless a different time is provided by law or the Articles of Incorporation), by or at the direction of the Chairman of the Board, if there is one, the President or the Secretary, to each shareholder entitled to vote at such meeting. If mailed, such notice is effective when deposited in the United States mail, and shall be addressed to the shareholder’s address shown in the current record of shareholders of the Corporation, with postage thereon prepaid. At least twenty (20) days’ notice shall be provided if the purpose, or one of the purposes, of the meeting is to consider a plan of merger or share exchange for which shareholder approval is required by law, or the sale, lease, exchange or other disposition of all or substantially all of the Corporation’s property, with or with out goodwill, otherwise than in the usual and regular course of business.

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(b)	Adjourned meetings. Except as provided in the next sentence, if any annual meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, and place, if the new date, time, and place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed, then notice must be given pursuant to the requirements of (a) of this Section 2.04, to those persons who are shareholders as of the new record date.
(c)	Waiver of Notice. A shareholder may waive notice in accordance with Article VI of these Bylaws.
(d)	Contents of Notice. The notice of each special shareholder meeting shall include a description of the purpose or purposes for which the meeting is called. Except as otherwise provided in Section 2.02 of these Bylaws, in the Articles of Incorporation, or in the Wisconsin Business Corporation Law, the notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called.
(e)	Fundamental Transactions. If a purpose of any special shareholder meeting is to consider: (1) a proposed amendment to the Articles of Incorporation (including any restated articles); (2) a plan of merger or share exchange for which shareholder approval is required by law; (3) the sale, lease, exchange or other disposition of all or substantially all of the Corporation’s property, with or without goodwill, otherwise than in the usual and regular course of business; (4) the dissolution of the Corporation; or (5) the removal of a director, the notice must so state and in cases (1), (2) and (3) above must be accompanied by, respectively, a copy or summary of the: (1) proposed articles of amendment or a copy of the restated articles that identifies an amendment or other change; (2) proposed plan of merger or share exchange; or (3) proposed transaction for disposition of all or substantially all of the Corporation’s property. If the proposed corporate action creates dissenters’ rights, the notice must state that shareholders and beneficial shareholders are or may be entitled to assert dissenters’ rights, and must be accompanied by a copy of Sections 180.1301 to 180.1331 of the Wisconsin Business Corporation Law.

2.05 Fixing of Record Date. The Board of Directors may fix in advance a date not less than ten (10) days and not more than seventy (70) days prior to the date of any annual meeting or special meeting as the record date for the determination of shareholders entitled to notice of, or to vote at such meeting (the “Meeting Record Date”). If no record date is fixed for the determination of shareholders entitled to demand a special shareholder meeting or to notice of or to vote at a meeting of shareholders, (a) the close of business on the day before the Corporation receives the first written demand for a special shareholder meeting, or (b) the close of business on the day before the first notice of the meeting is mailed or otherwise delivered to shareholders, as the case may be, shall be the record date for the determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall be applied to any adjournment thereof unless the Board of Directors fixes a new record date and except

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as otherwise required by law. A new record date must be set if a meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting.

2.06 Quorum. Except as otherwise provided in the Articles of Incorporation or in the Wisconsin Business Corporation Law, a majority of the votes entitled to be cast by shares entitled to vote as a separate voting group on a matter, represented in person or by proxy, shall constitute a quorum of that voting group for action on that matter at a meeting of shareholders. Once a share is represented for any purpose at a meeting, other than for the purpose of objecting to holding the meeting or transacting business at the meeting, it is considered present for purposes of determining whether a quorum exists for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that meeting.

2.07 Conduct of Meeting. The Chairman of the Board, or in his or her absence, the President, and in the President’s absence, any Officer or Director chosen by the shareholders present or represented by proxy shall call the meeting of the shareholders to order and shall act as Chairman of the meeting, and the Secretary shall act as Secretary of all meetings of the shareholders, but in the absence of the Secretary, the presiding Officer may appoint any other person to act as Secretary of the meeting.

2.08 Voting of Shares. Each outstanding share shall be entitled to one (1) vote on each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares are enlarged, limited or denied by the Articles of Incorporation or the Wisconsin Business Corporation Law.

2.09 Shareholder List. The officer or agent having charge of the stock transfer books for shares of the Corporation shall, before each meeting of shareholders, make a complete record of the shareholders entitled to notice of such meeting, arranged by class or series of shares and showing the address of and the number of shares held by each shareholder. The shareholder list shall be available at the meeting and may be inspected by any shareholder or his or her agent or attorney at any time during the meeting or an adjournment. Any shareholder or his or her agent or attorney may inspect the shareholder list beginning two (2) business days after the notice of the meeting is given and continuing to the date of the meeting, at the Corporation’s principal office or at a place identified in the meeting notice in the city where the meeting will be held, and, subject to Section 180.1602 (2)(b) 3 to 5 of the Wisconsin Business Corporation Law, may copy the list. during regular business hours and at his or her expense, during the period that it is available for inspection hereunder. The original stock transfer books and nominee certificates on file with the Corporation (if any) shall be prima facie evidence as to the shareholders entitled to inspect the shareholder list or to vote at any meeting of shareholders. Refusal or failure to comply with the requirements of this Section 2.09 shall not affect the validity of any action taken at such meeting.

2.10 Proxies. At all meetings of shareholders, a shareholder entitled to vote may vote in person or by proxy appointed in writing by the shareholder or by his or her duly authorized attorney-in-fact. All proxy appointment forms shall be filed with the Secretary or other officer or agent of the Corporation authorized to tabulate votes before or at the time of the meeting. Unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. a proxy appointment may be revoked at any time.

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The presence of a shareholder who has filed a proxy appointment shall not of itself constitute a revocation. No proxy appointment shall be valid after eleven months from the date of its execution, unless otherwise expressly provided in the appointment form. The Board of Directors shall have the power and authority to make rules that are not inconsistent with the Wisconsin Business Corporation Law as to the validity and sufficiency of proxy appointments.

ARTICLE III — BOARD OF DIRECTORS

3.01 General Powers. All corporate powers shall be exercised by or under the authority of, and the business affairs of the Corporation shall be managed under the direction of, its Board of Directors.

3.02 Resignations and Qualifications. A Director may resign at any time by delivering a written resignation to the Board of Directors, to the Chairman of the Board (if there is one), or to the Corporation through the Secretary or otherwise. Directors need not be residents of the State of Wisconsin or shareholders of the Corporation. Anything in the section notwithstanding, the term of office of any person serving as a Director shall terminate on the day and hour of the Annual Shareholders Meeting next following the attainment of age 72. The vacancy created as a result of a sitting Director being disqualified by age shall be filled in accordance with Article V(c) of the Articles of Incorporation.^{(1) (2)}

3.03 Regular Meetings. A regular meeting of the Board of Directors shall be held, without other notice than this ByLaw, immediately after the annual meeting of shareholders, and each adjourned session thereof. The place of such regular meeting shall be the same as the place of the meeting of shareholders which precedes it, or such other suitable place as may be announced at such meeting of shareholders. The Board of Directors and any committee may provide, by resolution, the time and place, either within or without the State of Wisconsin, for the holding of additional regular meetings without other notice than such resolution.

3.04 Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the President or any two (2) Directors. Special meetings of any committee may be called by or at the request of any of the foregoing persons or the Chairman of the committee. The persons calling any special meeting of the Board of Directors or committee may fix any place, either within or without the State of Wisconsin, as the place for holding any special meeting called by them, and if no other place is fixed, the place of meeting shall be the principal office of the Corporation in the State of Wisconsin.

3.05 Meetings by Telephone or other Communication Technology.

(a) Any or all Directors may participate in a regular or special meeting or in a committee meeting of the Board of Directors by, or conduct the meeting through the use of, telephone or any other means of communication by which either: (i) all participating Directors may simultaneously hear each other during the meeting or (ii) all communications during the meeting are immediately transmitted to each participating Director, and each participating

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	Director is able to immediately send messages to all other participating Directors.
(b)	If a meeting will be conducted through the use of any means described in paragraph (a), all participating Directors shall be informed that a meeting is taking place at which official business may be transacted. A Director participating in a meeting by any means described in paragraph (a) is deemed to be present in person at the meeting.

3.06 Notice of Meetings. Except as otherwise provided in the Articles of Incorporation or the Wisconsin Business Corporation Law. notice of the date, time and place of any special meeting of the Board of Directors and of any special meeting of a committee of the board shall be given orally or in writing to each Director or committee member at least forty-eight (48) hours prior to the meeting, except that notice by mail shall be given at least seventy-two (72) hours prior to the meeting. The notice need not describe the purpose of the meeting. Notice may be communicated in person, by telephone, telegraph or facsimile, by mail or private carrier. Oral notice is effective when communicated. Written notice is effective as follows: if delivered in person, when received; if delivered by mail, when deposited. postage prepaid, in the United States mail addressed to the Director at his or her business or home address (or such other address as the Director may have designated in writing filed with the Secretary); if given by facsimile, at the time transmitted to a facsimile number at any address designated above; if given by private carrier, when delivered to the private carrier, addressed to the Director at his or her business or home address (or such other address as the Director may have designated in writing filed with the Secretary); and if given by telegraph, when delivered to the telegraph company.

3.07 Quorum. Except as otherwise provided by the Wisconsin Business Corporation Law, a majority of the number of Directors specified in accordance with the Articles of Incorporation shall constitute a quorum of the Board of Directors. Except as otherwise provided by the Wisconsin Business Corporation Law, a majority of the number of Directors appointed to serve on a committee shall constitute a quorum of the committee. A majority of the Directors present at any meeting (though less than such quorum), may adjourn the meeting from time to time without further notices.

3.08 Manner of Acting. The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of a Board of Directors, unless the act of a greater number is required by law, the Articles of Incorporation, these ByLaws or any contract or agreement to which the Corporation is a party.

3.09 The Conduct of Meeting. The Chairman of the Board, or in his or her absence, the President, and in the President’s absence, any Director chosen by the Directors present, shall call meetings of the Board of Directors to order and shall chair the meeting. The Secretary of the Corporation shall act as Secretary of all meetings of the Board of Directors, but in the absence of the Secretary, the presiding Officer may appoint any Assistant Secretary or any Director or other person present to act as Secretary of the meeting.

3.10 Vacancies. Any vacancy occurring in the Board of Directors shall be filled in the manner provided in the Articles of Incorporation.

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3.11 Compensation. The Board of Directors, irrespective of any personal interest of any of its members, may fix the compensation of Directors.

3.12 Presumption of Assent. A Director who is present and is announced as present at a meeting of the Board of Directors or a committee thereof at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless (i) the Director objects at the beginning of the meeting or promptly upon his or her arrival to holding the meeting or transacting business at the meeting, or (ii) the Director’s dissent or abstention from the action taken is entered in the minutes of the meeting, or (iii) the Director delivers his or her written dissent or abstention to the presiding Officer of the meeting before the adjournment thereof or to the Corporation immediately after the adjournment of the meeting. Such right to dissent or abstain shall not apply to a Director who voted in favor of such action.

3.13 Committees. Unless the Articles of Incorporation otherwise provide, the Board of Directors, by resolution adopted by the affirmative vote of a majority of all of the Directors then in office, may create one (1) or more committees, each committee to consist of two (2) or more Directors as members, which to the extent provided in the resolution as initially adopted, and as thereafter supplemented or amended by further resolution adopted by a like vote, may exercise the authority of the Board of Directors. Except as otherwise provided by law, each committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise such power and authority, as the Board of Directors shall specify. Without further action of the Board of Directors, these Bylaws hereby create an Audit Committee and a Compensation Committee composed of independent Directors. Each such committee shall fix its own rules (consistent with the Wisconsin Business Corporation Law, the Articles of Incorporation and these Bylaws) governing the conduct of its activities and shall make such reports to the Board of Directors of its activities as the Board of Directors may request. Unless otherwise provided by the Board of Directors in creating a committee, the committee may employ counsel, accountants and other consultants to assist it in the exercise of authority. The creation of a committee, delegation of authority to a committee or action by a committee does not relieve the Board of Directors or any of its members of any responsibility imposed on the Board of Directors or its members by law.

ARTICLE IV — OFFICERS

4.01 Appointments. The principal Officers may include a Chairman of the Board, Chief Executive Officer, an Executive Chairman, a President, one (1) or more Executive Vice Presidents or Vice Presidents (the number and designations to be determined by the Board of Directors), a Secretary, a Treasurer, and such other Officers, if any, as may be deemed necessary by the Board of Directors, each of whom shall be appointed by the Board of Directors. Any two (2) or more offices may be held by the same person.(3)

4.02 Resignation and Removal. An Officer shall hold office until he or she resigns, dies, is removed hereunder, or a different person is appointed to the office. An Officer may resign at any time by delivering an appropriate written notice to the Corporation. The resignation is effective when the notice is delivered, unless the notice specifies a later effective date and the

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Corporation accepts the later effective date. Any Officer may be removed by the Board of Directors with or without cause and notwithstanding the contract rights, if any, of the person removed. Except as provided in the preceding sentence, the resignation or removal is subject to any remedies provided by any contract between the Officer and the Corporation or otherwise provided by law. Appointment shall not of itself create contract rights.

4.03 Vacancies. A vacancy in any office because of death, resignation, removal or otherwise, may be filled by the Board of Directors. If a resignation is effective at a later date, the Board of Directors may fill the vacancy before the effective date if the Board of Directors provides that the successor may not take the office until the effective date.

4.04 Chairman of the Board/Chief Executive Officer. The Chairman of the Board shall be the Chief Executive Officer of the Corporation; he or she shall preside at all meetings of the shareholders and Board of Directors; he or she shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.

4.04A Chairman of the Board. The Chairman of the Board shall preside at all meetings of the shareholders and Board of Directors. The Chairman shall perform all the duties incident to the office of Chairman and such other duties as the Board of Directors may from time to time determine or as may be prescribed by these By Laws. In the absence of the Chief Executive Officer, the Chairman shall be the Chief Executive Officer of the Corporation. The Chairman shall not be a principal officer of the Corporation.⁽³⁾

4.04B Executive Chairman. The Executive Chairman must be a director and shall serve as the Chairman of the Board, unless a Chairman has been appointed by the Board of Directors. The Executive Chairman may also serve as a principal officer of the Corporation, but not as the Chief Executive Officer. He shall perform all the duties of the Chairman. As a principal officer of the Corporation, he shall see that all orders and resolutions of the Board of Directors are carried into effect.⁽³⁾

4.04C Chief Executive Officer. The Chief Executive Officer may also serve as the President of the Corporation. In the absence of the Chairman or Executive Chairman, or at the direction of the Board of Directors, he shall preside at all meetings of the shareholders and Board of Directors. He shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.⁽³⁾

4.04D Chief Operating Officer. The Chief Operating Officer may also serve as the President or Vice President of the Corporation. He shall supervise the day-to-day operations of the Corporation’s business. In the absence of the Chairman, Executive Chairman or Chief Executive Officer, or in the event that these offices are for any reason vacant, the Chief Operating Officer shall perform the functions of the Chairman or Executive Chairman of the Board of Directors and/or Chief Executive Officer.⁽³⁾

4.05 President. The President may also serve as the Chief Executive Officer or Chief Operating Officer of the Corporation. The President shall supervise the day-to-day operations of the Corporation’s business. In the absence of the Chairman, Executive Chairman or Chief

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Executive Officer, or in the event that these offices are for any reason vacant, the President shall perform the functions of the Chairman or Executive Chairman of the Board of Directors and/or Chief Executive Officer.

4.06 Shared Duties of Executive Chairman of the Board, Chief Executive Officer and President. The Executive Chairman of the Board, Chief Executive Officer, Chief Operating Officer and President each severally are authorized to sign, execute and acknowledge, on behalf of the Corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the Corporation’s regular business, or which shall be authorized by resolution of the Board of Directors; and except as otherwise provided by law or directed by the Board of Directors, the Executive Chairman, Chief Executive Officer, Chief Operating Officer and the President may authorize any Executive Vice President or Vice President or other Officer or agent of the Corporation to sign, execute and acknowledge such documents or instruments in his or her place and steed.

4.07 Executive Vice Presidents and Vice Presidents. Any Executive Vice President or Vice President may sign, with the Secretary, certificates for shares of the Corporation; and shall perform such other duties and have such authority as from time to time may be delegated or assigned to him or her by the President or Chairman of the Board or the Board of Directors. The execution of any instrument of the Corporation by any Executive Vice President or Vice President shall be conclusive evidence, as to third parties, of the Executive Vice President’s or Vice President’s authority to act in the steed of the President.

4.08 Secretary. The Secretary shall: (a) keep (or cause to be kept) regular minutes of all meetings of the shareholders, the Board of Directors and any Committees of the Board of Directors in one (1) or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provision of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation, if any, and see that the seal of the Corporation, if any, is affixed to all documents which are authorized to be executed on behalf of the Corporation under its seal; and (d) in general perform all duties incident to the office of Secretary and have such other duties and exercise such authority as from time to time may be delegated or assigned to him or her by the President or Chairman of the Board or by the Board of Directors.

4.09 Chief Financial Officer. The Chief Financial Officer shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation; and (b) in general perform all of the duties incident to the office of the Chief Financial Officer and have such other duties and exercise such other authority as from time to time may be delegated or assigned to him or her by the President or Chairman of the Board or by the Board of Directors.

4.10 Assistants and Acting Officers. The Board of Directors and the Chairman of the Board shall have the power to appoint any person to act as assistant to any Officer, or as agent for the Corporation in the Officer’s steed, or to perform the duties of such Officer whenever for any reason it is impractical for such Officer to act personally, and such assistant or acting Officer or other agent so appointed by the Board of Directors or Chairman of the Board shall have the power to perform all of the duties of the office to which that person is so

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appointed to be assistant, or as to which he or she is so appointed to act, except as such power may be otherwise defined or restricted by the Board of Directors or the Chairman of the Board.

4.11 Salaries. The salaries of the principal Officers shall be fixed from time to time by the Board of Directors or by a duly authorized committee thereof and no Officer shall be prevented from receiving such salary by reason of the fact that such Officer is also a Director of the Corporation.

ARTICLE V — CERTIFICATES FOR SHARES & THEIR TRANSFERS

5.01 Certificates for Shares. All shares of this Corporation shall be represented by certificates. Certificates representing shares of the Corporation shall be in such form, consistent with law, as shall be determined by the Board of Directors. At a minimum. a share certificate shall state on its face the name of the Corporation and that it is organized under the laws of the State of Wisconsin, the name of the person to whom issued, and the number and class of shares and the designation of the shares, if any, that the certificate represents. Such certificates shall be signed either manually or in facsimile, by the Chairman of the Board, the President, and Executive Vice President or a Vice President and by the Secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except as provided for in Section 5.05.

5.02 Signature by Former Officer, Transfer Agent or Registrar. In case any Officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any certificate for shares has ceased to be such Officer, transfer agent or registrar before such certificate is issued, the certificate may be issued by the Corporation with the same effect as if that person were still an Officer, transfer agent or registrar at the date of its issue.

5.03 Transfer of Shares. Prior to due presentment of a certificate for shares for registration of transfer, and unless the Corporation has established a procedure by which a beneficial owner of shares held by a nominee is to be recognized by the Corporation as the shareholder, the Corporation may treat the registered owner of such shares as the person exclusively entitled to vote, to receive notifications and otherwise to have and exercise all the rights and powers of an owner. The Corporation may require reasonable assurance that all transfer endorsements are genuine and effective and in compliance with all regulations prescribed by or under the authority of the Board of Directors.

5.04 Restrictions on Transfer. The face or reverse side of each certificate representing shares shall bear a conspicuous notation of any restriction upon the transfer of such shares imposed by the Corporation.

5.05 Lost, Destroyed or Stolen Certificates. When the owner claims that his or her certificate for shares has been lost, destroyed or wrongfully taken, a new certificate shall be

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issued in place thereof if the owner (a) so requests before the Corporation has notice that such shares have been acquired by a bona fide purchaser and (b) if required by the Corporation, files with the Corporation a sufficient indemnity bond, and (c) satisfies such other reasonable requirements as may be prescribed by or under the authority of the Board of Directors.

5.06 Consideration for Shares. The shares of the Corporation may be issued for such consideration as shall be fixed from time to time and determined to be adequate by the Board of Directors, provided that any shares having a par value shall not be issued for consideration less than the par value thereof. The consideration may consist of any tangible or intangible property or benefit to the Corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the Corporation. When the Corporation receives the consideration for which the Board of Directors authorized the issuance of shares, such shares shall be deemed to be fully paid and nonassessable by the Corporation.

5.07 Stock Regulations. The Board of Directors shall have the power and authority to make all such rules and regulations not inconsistent with the statutes of the State of Wisconsin as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation, including the appointment or designation of one (1) or more stock transfer agents and one (1) or more registrars.

ARTICLE VI — WAIVER OF NOTICE

6.01 Shareholder Written Waiver. A shareholder may waive any notice required by the Wisconsin Business Corporation Law, the Articles of Incorporation or these Bylaws before or after the date and time stated in the notice. The waiver shall be in writing and signed by the shareholder entitled to the notice and shall contain the same information that would have been required in the notice under the Wisconsin Business Corporation Law except that the time and place of meeting need not be stated, and shall be delivered to the Corporation for inclusion in the corporate records.

6.02 Shareholder Waiver by Attendance. A shareholder’s attendance at a meeting, in person or by proxy, waives objection to both of the following:

(a)	Lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting or promptly upon arrival objects to holding the meeting or transacting business at the meeting.
(b)	Consideration of a particular matter at the meeting that is not within the purpose described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.

6.03 Director Written Waiver. A Director may waive any notice required by the Wisconsin Business Corporation Law, the Articles of Incorporation or these Bylaws before or after the date and time stated in the notice. The waiver shall be in writing, signed by the Director entitled to notice and retained by the Corporation.

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6.04 Director Waiver by Attendance. A Director’s attendance at or participation in a meeting of the Board of Directors or any committee thereof waives any required notice to him or her of the meeting unless the Director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

ARTICLE VII — ACTION WITHOUT MEETINGS

7.01 Director Action Without Meeting. Unless the Articles of Incorporation provide otherwise, action required or permitted by the Wisconsin Business Corporation Law to be taken at a Board of Directors meeting or committee meeting may be taken without a meeting if the action is taken by all members of the Board or committee. The action shall be evidenced by one (1) or more written consents describing the action taken, signed by each Director and retained by the Corporation. Action taken hereunder is effective when the last Director signs the consent, unless the consent specifies a different effective date. A consent signed hereunder has the effect of a unanimous vote taken at a meeting at which all Directors or committee members were present, and may be described as such in any document.

ARTICLE VIII — INDEMNIFICATION

8.01 Provisions of Indemnification. The Corporation shall, to the fullest extent permitted or required by Section 180.0850 to Section 180.0859 inclusive, of the Wisconsin Business Corporation Law, including any amendment thereto (but, in the case of any such amendment, only to the extent such amendment permits or requires the Corporation to provide broader identification rights than prior to such amendment), indemnify its Directors and Officers against any and all Liabilities, and advance any and all reasonable Expenses, incurred hereby in any Proceedings to which any such Director or Officer is a party because he or she is or was a Director or Officer of the corporation. The Corporation shall also indemnify an employee who is not a Director or Officer, to the extent that the employee has been successful on the merits or otherwise in defense of a Proceeding, for all Expenses incurred in the Proceeding if the employee was a party because he or she is or was an employee of the Corporation. The rights to indemnification granted hereunder shall not be deemed exclusive of any other right to indemnification against Liabilities or the advancement of Expenses which a Director, Officer or employee may be entitled under any written agreement, Board of Directors resolution, vote of shareholders, the Wisconsin Business Corporation Law or otherwise. The Corporation may, but shall not be required to, supplement the foregoing rights to indemnification against Liabilities and advances of Expenses under this Section 8.01 by the purchase of insurance on behalf of any one (1) or more of such Directors, Officers or employees, whether or not the Corporation would be obligated to indemnify or advance Expenses to such Director, Officer or employee under this Section 8.01. All capitalized terms used in this Section 8.01 and not otherwise defined herein shall have the meaning set forth in Section 180.0850 of the Wisconsin Business Corporation Law.

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8.02 Written Request. A Director or Officer who seeks indemnification under Section 8.01 shall make a written request to the Corporation.

8.03 Nonduplication. The Corporation shall not indemnify a Director or Officer under Section 8.01 if the Director or Officer has previously received indemnification or allowance of expenses from any person, including the Corporation, in connection with the same proceeding. However, the Director or Officer has no duty to look to any other person for indemnification.

8.04 Liberal Construction. In order for the Corporation to obtain and retain qualified Directors, Officers and employees, the foregoing provisions shall be liberally administered in order to afford maximum indemnification of Directors, Officers, and employees. The indemnification above provided for shall be granted in all applicable cases unless to do so would clearly contravene law, controlling precedent or public policy.

ARTICLE IX — SEAL

9.01 Seal. The Board of Directors may provide a corporate seal which may be circular in form and have inscribed thereon the name of the Corporation and the state of incorporation and the words “Corporate Seal”.

ARTICLE X — AMENDMENTS

10.01 By Shareholders. These Bylaws may be amended or repealed and new Bylaws may be adopted by the shareholders by the vote provided in Article VII of the Articles of Incorporation.

10.02 By Directors. Except as the Articles of Incorporation may otherwise provide, these Bylaws may also be amended or repealed and new Bylaws may be adopted by the Board of Directors by the vote provided in Section 3.08.

Footnotes
(1)	Part of Section 3.02 was amended on January 25, 2002.
(2)	Part of Section 3.02 was amended on October 28, 2004, and is currently in effect.
(3)	Section 4.04 was amended on April 22, 2005.

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EX-31.1

Exhibit 31.1

Certifications

	I, Henry W. Knueppel, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of REGAL-BELOIT Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2005	/s/ Henry W. Knueppel
	Henry W. Knueppel
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certifications

	I, David A. Barta, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of REGAL-BELOIT Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2005	/s/ David A. Barta
	David A. Barta
	Vice President, Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATIONS of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350

     Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of REGAL-BELOIT Corporation (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 29, 2005 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Henry W. Knueppel

Henry W. Knueppel
President and Chief Executive Officer

/s/ David A. Barta

David A. Barta
Vice President, Chief Financial Officer

Date: August 8, 2005