Regal Beloit Corporation Investor Relations Presentation August 11, - PowerPoint PPT Presentation

Regal Beloit Corporation Investor Relations Presentation August 11, 2014 Mark J. Gliebe Chuck Hinrichs John Perino Jonathan Schlemmer President Vice President Vice President Chief Operating Officer Chief Executive Officer Chief Financial Officer Investor Relations

Safe Harbor Statement This presentation contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our management’s judgment regarding future events. In many cases, you can identify forward-looking statements by terminology such as “may,” “will,” “plan,” “expect,” “anticipate,” “estimate,” “believe,” or “continue” or the negative of these terms or other similar words. Actual results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors, including: uncertainties regarding our ability to execute our restructuring plans within expected costs and timing; actions taken by our competitors and our ability to effectively compete in the increasingly competitive global electric motor, power generation and mechanical motion control industries; our ability to develop new products based on technological innovation and the marketplace acceptance of new and existing products; fluctuations in commodity prices and raw material costs; our dependence on significant customers; issues and costs arising from the integration of acquired companies and businesses, including the timing and impact of purchase accounting adjustments; unanticipated costs or expenses we may incur related to product warranty issues; our dependence on key suppliers and the potential effects of supply disruptions; infringement of our intellectual property by third parties, challenges to our intellectual property, and claims of infringement by us of third party technologies; increases in our overall debt levels as a result of acquisitions or otherwise and our ability to repay principal and interest on our outstanding debt; product liability and other litigation, or the failure of our products to perform as anticipated, particularly in high volume applications; economic changes in global markets where we do business, such as reduced demand for the products we sell, currency exchange rates, inflation rates, interest rates, recession, foreign government policies and other external factors that we cannot control; unanticipated liabilities of acquired businesses; cyclical downturns affecting the global market for capital goods; difficulties associated with managing foreign operations; and other risks and uncertainties including but not limited to those described in Item 1A-Risk Factors of the Company’s Annual Report on Form 10-K filed on February 26, 2014 and from time to time in our reports filed with U.S. Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. The forward-looking statements included in this presentation are made only as of their respective dates, and we undertake no obligation to update these statements to reflect subsequent events or circumstances. p 2

Non-GAAP Financial Measures We prepare financial statements in accordance with accounting principles generally accepted in the United States (GAAP). We also disclose adjusted diluted earnings per share (EPS), adjusted gross profit, adjusted gross profit as a percentage of net sales, adjusted income from operations, organic growth, free cash flow and free cash flow as a percentage of net income attributable to Regal Beloit Corporation (collectively, “non-GAAP financial measures”). We use these measures in our internal performance reporting and for reports to the Board of Directors. We also periodically disclose certain of these measures in our quarterly earnings releases, on investor conference calls, and in investor presentations and similar events. We believe that these non-GAAP financial measures are useful measures for providing investors with additional insight into our operating performance. This additional information is not meant to be considered in isolation or as a substitute for our results of operations prepared and presented in accordance with GAAP. Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment adjusted for grants received for capital expenditures. p 3

Overview  Getting to Know Regal  Best in Class Industrial Performance  Growth Catalysts  Financial Performance Building a Premier Global Enterprise p 4

Overview  Getting to Know Regal  Best in Class Industrial Performance  Growth Catalysts  Financial Performance Building a Premier Global Enterprise p 5

Company Overview Percentage of Sales Sales by Product/Platform Founded 1955 Beloit, WI Other Mech- anical Revenues Residential Pwr Industrial $3.1B Gen HVAC 39% 34% Revenue Growth Other 7-Year CAGR C&I Resi 9.7% Motors 27% 2011, 2012, 2013 Commercial Free Cash Flow Exceeds Adj. Net Income Sales by Geography Sales by Channel Dividends Canada Raised 9 out of Mexico End last 10 years RoW User Europe Management USA Dist. OEM Experienced, Credible, Asia Stable p 6 p 6

Necessary and Innovative Products Electric Motors Power Generation Electronic Controls Mechanical p 7

Diverse Applications p 8

Global Foot Print Able to Meet Customer Demands Anywhere In the World Aligning with Faster Growing Economies p 9

Overview  Getting to Know Regal  Best in Class Industrial Performance  Growth Catalysts  Financial Performance Building a Premier Global Enterprise p 10

Total Shareholder Returns Five Year History 150% 106.3% Regal Beloit 104.6% S&P 500 88.9% DJIA 130% Total 5-YR Cumulative Shareholder Return 110% 90% 70% 50% 30% 10% (10%) (30%) (50%) 12/31/08 12/31/09 12/31/10 12/31/11 12/30/12 12/30/13 Source: Capital IQ p 11

Regal Compass Operating System Lean Six Sigma Tools Leadership Tools  Quality  Talent Management  Cost  Long Range Plans  Delivery  Compliance/Safety  Cap Ex  Risk Management  Cash Cycle  Customer Care  Integrations  New Products Near Term Income Long Term Statement Growth p 12

Overview  Getting to Know Regal  Best in Class Industrial Performance  Growth Catalysts  Financial Performance Building a Premier Global Enterprise p 13

Energy Efficiency Mega-Trend Energy Efficient Product Sales* $700 $600 $500 $400 $300 $200 $100 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Regional SEER Update US Small Motor Standard Update  APGA/HARDI & DOE settled  Effective March 9, 2015  Effective 1/1/15, 13 SEER in North, 14  Applies to Commercial and Industrial SEER in South, 14 SEER and 12 EER Motors Between .25 HP - 3 HP in SW  2 year Allowance for Agency Approved  18 Mo. Sell Through Provision for designs (3/9/17) Inventory Mfg. Prior to 12/31/14 p 14 * Management Estimate

New Products New Product Introductions 71 70 60 Variable Speed 60 Pool Motor 50 DEC Star 50 40 30 22 20 10 2008 2011 2012 2013 SyMAX-I™ HERA-MAX Gear Motor Develop New Products with Focus on Energy Efficiency p 15

Successful Acquirer and Integrator 2014  Rigorous Evaluation and 2013 Integration Process Drives Return On Investment 2012  Aligning Footprint with Faster Growing End 2011 Markets and Economies PTY. HARGIL LTD. DYNAMICS  Acquisition Pipeline 2010 Continues to Be Active Consistent and Successful Acquirer p 16

Successful Acquirer and Integrator Evaluating Acquisition Opportunities that Meet our Strategic and Financial Requirements Strategic Goals Financial Goals  Technology and Energy  EPS Accretive in First Year Efficiency  Cash Flow Positive in First  Expand Geographic Footprint Year  Margin Improvement  Clear Path to Exceed ROIC Hurdle Rate within Three Years Acquisitions Driving Growth p 17

Simplification Initiative Reduction Targets 2011 2012 2013 Next 3 Years 3 2 ~ 4 ERPs 3 ~ 5 Factories 2 4 1 6 3 ~ 7 Warehouses 0 2 2 ~ 6 Design Platforms 2 20 19 ~ 20 Entities 10 120 100 ~ 400 Suppliers 50 1 ~ 10 Brands 2 2 Improve Margins, Easier to do Business p 18

Design Platform Simplification Platform Description 48 Frame Fractional HVAC Motors Fractional HVACR Motors 3.3” and Blowers Worm Gear Mechanical Industrial Motors for Asia IEC (IE3) and Europe 48/56 Frame Fractional C&I Motors p 19

Footprint Simplification > Springfield, Acuna and Australia Programs – Progressing Forward, Customer Demand Creating Challenges – Expect to See Benefits in 4Q and 2015 > Announced Closure of Two Kentucky Manufacturing Facilities – Moves Motor Parts Production Closer to Motor Assembly Operations – Expect to be Completed by end of 3Q 2015 – ~$7M Restructuring Expense, ~$5M Annual Savings Total Simplification Restructuring Expense ($M) $4.3 $4.2 $3.7 $3.6 $2.9 $ 2.7 4Q13 A 1Q14 A 2Q14 A 3Q14E 4Q14E 1H15E p 20

Investing in Emerging Markets Hermetic Motors - Taicang Generators - Shanghai Visual Management Lean Production p 21