Regal Beloit Reports Fourth Quarter and Full Year 2011 Financial Results
BELOIT, Wis., Feb. 6, 2012 /PRNewswire/ — Regal Beloit Corporation (NYSE: RBC) today reported financial results for the fourth quarter and fiscal year ended December 31, 2011. Net sales for the fourth quarter were $727.0 million, a 30.8% increase compared to fourth quarter 2010 net sales of $555.7 million. Adjusted diluted earnings per share for the fourth quarter 2011 were $0.93 compared to $0.65 for the fourth quarter 2010. Net sales for fiscal 2011 were $2,808.3 million, a 25.5% increase compared fiscal 2010 net sales of $2,238.0 million. Adjusted diluted earnings per share for fiscal 2011 were $4.71 compared to $3.84 for fiscal 2010.
“Our performance in the fourth quarter is another indicator that the diversification of our end markets and our ability to be a consistent and successful acquirer allow us to perform well through difficult cycles. A number of our key business units performed well. Revenues in our commercial and industrial motors business, our mechanical businesses and Unico remained strong, offsetting continued weakness in HVAC. The EPC integration remains on track, and the performance of the business helped the Company exceed our guidance for the quarter. EPC is now a key positive contributor to the Company,” commented Mr. Mark Gliebe, Chairman and Chief Executive Officer.
Fiscal 2011 results included the following items:
- In connection with the acquisition of the Electrical Products Company of A. O. Smith Corporation (“EPC”), the Company incurred $15.5 million of acquisition related expenses, which were recorded in operating expenses. In addition, in the third and fourth quarters, the Company’s results were impacted by inventory purchase accounting adjustments of $10.3 million and $15.5 million, respectively, related to the EPC acquisition, which were recorded in cost of sales.
- In the second quarter, the Company incurred an incremental warranty expense of $28.0 million related to a manufacturing quality problem. In the fourth quarter, the Company reduced the expense by $15.4 million to reflect its revised estimate of future costs. The net $12.6 million expense was recorded in cost of sales.
- In the third quarter, the Company divested its pool and spa motor business resulting in a gain of $6.5 million. The gain was recorded in operating expenses.
- In the fourth quarter, the Company recognized $5.8 million of restructuring costs related to facility closures and production line transfers, aimed at improving operational efficiencies at its Australian and European businesses. The expenses were recorded in operating expenses.
*This earnings release includes non-GAAP financial measures. Schedules that reconcile these non-GAAP financial measures to the most comparable GAAP figures are included with this earnings release.
The following table summarizes the items listed above and the impact on the Company’s adjusted diluted earnings per share for 2011:
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
2011 Diluted
Earnings Per
Share (GAAP) $0.99 $0.88 $1.13 $0.80 $3.79
EPC Acquisition
and Purchase 0.12 0.06 0.28 0.26 0.73
Accounting Costs
Incremental Warranty Expense 0.44 (0.23) 0.19
Gain on Divestiture (0.10) (0.10)
Restructuring Costs 0.10 0.10
---- ----
2011 Adjusted
Diluted Earnings $1.11 $1.38 $1.31 $0.93 $4.71
Per Share (Non-
GAAP) ===== ===== ===== ===== =====
2010 Diluted
Earnings Per
Share $0.98 $1.07 $1.14 $0.65 $3.84
(GAAP) ===== ===== ===== ===== =====
Note: 2011 results include the effect of the increasing weighted
average number of shares outstanding.
NET SALES (Dollars in millions)
--------- ---------------------
Fourth Quarter Fiscal Year
-------------- -----------
2011 2010 % Change 2011 2010 % Change
---- ---- -------- ---- ---- --------
Net Sales $727.0 $555.7 30.8% $2,808.3 $2,238.0 25.5%
Net Sales by
Segment:
------------
Electrical
segment $660.3 $494.2 33.6% $2,533.3 $2,002.0 26.5%
Mechanical
segment $66.7 $61.5 8.5% $275.0 $236.0 16.5%
Net sales for the fourth quarter 2011 increased $171.3 million compared to the fourth quarter 2010, including $198.5 million of incremental net sales from the businesses acquired within the last twelve months (the “acquired businesses”). Fiscal 2011 net sales increased $570.3 million, including $494.3 million of incremental net sales from the acquired businesses.
In the Electrical segment, net sales for the fourth quarter 2011 increased $166.1 million compared to the fourth quarter 2010, including $198.5 million of incremental net sales from the acquired businesses. North American residential HVAC net sales, excluding net sales from the acquired businesses, decreased 16.1% in the fourth quarter 2011 compared to the fourth quarter 2010, due to a mild winter, the effects of reduced federal tax incentives for high efficiency products, and increased industry sales of R22 systems. North American commercial and industrial net sales from continuing operations, excluding net sales from the acquired businesses, increased 5.1% in the fourth quarter 2011 compared to the fourth quarter 2010. Fiscal 2011 Electrical segment net sales increased $531.3 million compared to fiscal 2010, including $484.4 million of incremental net sales from the acquired businesses.
In the Mechanical segment, net sales for the fourth quarter 2011 increased $5.2 million compared to the fourth quarter 2010. The increase was driven primarily by improving demand in later cycle end markets. Fiscal 2011 Mechanical segment net sales increased $39.0 million compared to fiscal 2010, including $9.9 million of incremental net sales from the acquired businesses.
Fourth quarter 2011 net sales to regions outside the United States increased 24.6% compared to the fourth quarter 2010. Fiscal 2011 net sales outside the United States exceeded the one billion dollar mark and were 36.0% of total net sales, compared to 31.6% of total net sales for fiscal 2010.
Sales of high efficiency products increased 17.7% compared to the fourth quarter of 2010. Fourth quarter 2011 net sales of high efficiency products were 13.4% of total net sales, compared to 14.9% for the fourth quarter 2010.
GROSS
PROFIT (Dollars in thousands)
------- ----------------------
Fourth Quarter Fiscal Year
-------------- -----------
2011 2010 2011 2010
---- ---- ---- ----
Gross
Profit $170,883 $130,267 $665,989 $549,350
As a
percentage
of net
sales 23.5% 23.4% 23.7% 24.5%
Gross
Profit
-------
Electrical
segment $154,975 $115,361 $590,933 $486,117
As a
percentage
of net
sales 23.5% 23.3% 23.3% 24.3%
Mechanical
segment $15,908 $14,906 $75,056 $63,233
As a
percentage
of net
sales 23.9% 24.2% 27.3% 26.8%
Gross profit was $170.9 million, or 23.5% of net sales, for the fourth quarter 2011 compared to $130.3 million, or 23.4% of net sales, for the fourth quarter 2010. Cost of sales for the fourth quarter 2011 included expenses of $15.5 million related to EPC inventory purchase accounting adjustments, offset by a $15.4 million reduction in the incremental warranty expense established in the second quarter 2011. Excluding these items, adjusted gross profit was $171.0 million or 23.5% of sales. Fiscal 2011 cost of sales included $25.8 million of inventory purchase accounting adjustments and $12.6 million of incremental warranty expenses. Excluding these expenses, adjusted gross profit was $704.4 million, or 25.1% of net sales for fiscal 2011.
OPERATING
EXPENSES (Dollars in thousands)
--------- ----------------------
Fourth Quarter Fiscal Year
-------------- -----------
2011 2010 2011 2010
---- ---- ---- ----
Operating
Expenses $112,243 $91,979 $410,276 $311,615
As a
percentage
of net
sales 15.4% 16.6% 14.6% 13.9%
Operating
Expenses
by
Segment:
---------
Electrical
segment $102,195 $82,346 $368,359 $275,886
As a
percentage
of net
sales 15.5% 16.7% 14.5% 13.8%
Mechanical
segment $10,048 $9,633 $41,917 $35,729
As a
percentage
of net
sales 15.1% 15.7% 15.2% 15.1%
INCOME FROM OPERATIONS (Dollars In thousands)
---------------------- ----------------------
Fourth Quarter Fiscal Year
-------------- -----------
2011 2010 2011 2010
---- ---- ---- ----
Income from Operations $58,640 $38,288 $255,713 $237,735
As a percentage of net
sales 8.1% 6.9% 9.1% 10.6%
Income from Operations by
Segment:
-------------------------
Electrical segment $52,780 $33,016 $222,574 $210,231
As a percentage of net
sales 8.0% 6.7% 8.8% 10.5%
Mechanical segment $5,860 $5,272 $33,139 $27,504
As a percentage of net
sales 8.8% 8.6% 12.1% 11.7%
Operating expenses for the fourth quarter 2011 increased $20.3 million primarily due to $21.5 million from the acquired businesses and $5.8 million of restructuring charges. Fiscal 2011 operating expenses increased $98.7 million including $73.5 million from the acquired businesses, $15.5 million of acquisition related expenses for the EPC acquisition, and $5.8 million of restructuring charges, partially offset by the $6.5 million gain on the divested pool and spa business.
Net income attributable to Regal Beloit Corporation for the fourth quarter 2011 was $33.5 million compared to $25.2 million for the fourth quarter 2010. Diluted earnings per share for the fourth quarter 2011 were $0.80 compared to $0.65 for the fourth quarter 2010. For fiscal 2011, net income attributable to Regal Beloit Corporation was $152.3 million compared to $149.4 million for fiscal 2010. Diluted earnings per share for fiscal 2011 were $3.79 compared to $3.84 for fiscal 2010.
Net cash provided by operating activities was $89.0 million for the fourth quarter 2011 compared to $26.8 million for the fourth quarter 2010. Capital expenditures for the fourth quarter 2011 were $13.2 million compared to $15.0 million for the fourth quarter 2010. Fiscal 2011 free cash flow totaled $207.7 million, compared to $130.4 million for fiscal 2010. Fiscal 2011 free cash flow represented 136% of net income attributable to Regal Beloit Corporation, compared to 87% for fiscal 2010.
“Through the hard work and dedication of our employees, Regal Beloit achieved record performance in 2011. This was achieved in spite of very challenging conditions for residential HVAC demand. We take great pride in the results we were able to deliver. With the integration of EPC now well under way, we have an even stronger global footprint, enhanced energy efficiency technology and a more diversified product portfolio. Further, our recent acquisition of Milwaukee Gear strengthens our Mechanical offerings and increases our presence in the growing oil and gas space.
“As we look forward into the first quarter of fiscal 2012, we expect continued strength from our commercial and industrial motors business, our mechanical businesses and Unico, and continued softness in residential HVAC applications. Our earnings guidance for the first quarter of 2012 is $1.07 to $1.13 per share,” continued Mr. Gliebe.
Regal Beloit will hold a conference call pertaining to this news release at 9:00 AM CST (10:00 AM EST) on Tuesday, February 7, 2012. To listen to the call and view the presentation slides via the internet, please go http://www.regalbeloit.com/ or at: http://www.videonewswire.com/event.asp?id=84548. Individuals who would like to participate by phone should dial 866-524-3160, referencing Regal Beloit. International callers should dial 412-317-6760, referencing Regal Beloit.
A telephone replay of the call will be available through May 1, 2012, at 877-344-7529, conference ID 10008818. International callers should call 412-317-0088 using the same conference ID. A webcast replay will be available until May 1, 2012, and can be accessed at http://www.regalbeloit.com/rbceventspresentations.htm or at http://www.videonewswire.com/event.asp?id=84548
Regal Beloit Corporation is a leading manufacturer of electric motors, mechanical and electrical motion controls and power generation products serving markets throughout the world. Regal Beloit is headquartered in Beloit, Wisconsin, and has manufacturing, sales, and service facilities throughout the United States, Canada, Mexico, Europe and Asia. Regal Beloit’s common stock is a component of the S&P Mid Cap 400 Index and the Russell 2000 Index.
CAUTIONARY STATEMENT
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 press release 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,” “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: 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 fourth parties, challenges to our intellectual property, and claims of infringement by us of fourth 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 March 2, 2011 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.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Unaudited
Dollars in Thousands, Except Cash Dividends Declared and Per
Share Data
Fourth Quarter Fiscal Year
-------------- -----------
2011 2010 2011 2010
---- ---- ---- ----
Net Sales $727,007 $555,678 $2,808,332 $2,237,978
Cost of
Sales 556,124 425,411 2,142,343 1,688,628
------- ------- --------- ---------
Gross
Profit 170,883 130,267 665,989 549,350
Operating
Expenses 112,243 91,979 410,276 311,615
------- ------ ------- -------
Income
From
Operations 58,640 38,288 255,713 237,735
Interest
Expense 10,729 5,218 31,116 19,576
Interest
Income 554 770 1,740 2,570
--- --- ----- -----
Income
Before
Taxes &
Noncontrolling
Interests 48,465 33,840 226,337 220,729
Provision
For
Income
Taxes 14,747 7,679 68,317 66,045
------ ----- ------ ------
Net
Income 33,718 26,161 158,020 154,684
Less: Net
Income
Attributable
to
Noncontrolling 266 918 5,730 5,305
Interests,
net of
tax --- --- ----- -----
Net
Income
Attributable
to Regal
Beloit
Corporation $33,452 $25,243 $152,290 $149,379
======= ======= ======== ========
Earnings
Per
Share of
Common
Stock:
Basic $0.81 $0.65 $3.84 $3.91
===== ===== ===== =====
Assuming
Dilution $0.80 $0.65 $3.79 $3.84
===== ===== ===== =====
Cash
Dividends
Declared $0.18 $0.17 $0.71 $0.67
===== ===== ===== =====
Weighted
Average
Number
of
Shares
Outstanding:
Basic 41,524,882 38,607,128 39,687,559 38,236,168
========== ========== ========== ==========
Assuming
Dilution 41,947,761 39,052,195 40,144,481 38,921,699
========== ========== ========== ==========
SEGMENT INFORMATION
Unaudited
Dollars in Thousands
Mechanical Segment Electrical Segment
------------------ ------------------
Fourth Quarter Fourth Quarter
-------------- --------------
2011 2010 2011 2010
---- ---- ---- ----
Net Sales $66,698 $61,513 $660,309 $494,165
Income from
Operations 5,860 5,272 52,780 33,016
Mechanical Segment Electrical Segment
------------------ ------------------
Fiscal Year Fiscal Year
----------- -----------
2011 2010 2011 2010
---- ---- ---- ----
Net Sales $274,969 $235,989 $2,533,363 $2,001,989
Income from
Operations 33,139 27,504 222,574 210,231
CONDENSED CONSOLIDATED BALANCE SHEETS
Dollars in Thousands
(Unaudited)
December January 1,
ASSETS 31, 2011 2011
--------- -----------
Current Assets:
Cash and Investments $142,627 $230,858
Trade Receivables, less Allowances 424,185 331,017
of $13,631 in 2011 and $10,637 in 2010
Inventories 575,785 390,587
Prepaid Expenses and Other Current Assets 138,237 135,589
Total Current Assets 1,280,834 1,088,051
Property, Plant, Equipment and Noncurrent
Assets 1,986,620 1,361,085
--------- ---------
Total Assets $3,267,454 $2,449,136
========== ==========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable $247,035 $231,705
Other Accrued Expenses 262,612 159,000
Current Maturities of Debt 10,030 8,637
------ -----
Total Current Liabilities 519,677 399,342
Long-Term Debt 909,159 428,256
Other Noncurrent Liabilities 257,379 224,376
Equity:
Total Regal Beloit Corporation Shareholders'
Equity 1,540,771 1,361,960
Noncontrolling Interests 40,468 35,202
------ ------
Total Equity 1,581,239 1,397,162
--------- ---------
Total Liabilities and Equity $3,267,454 $2,449,136
========== ==========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Unaudited
Dollars in Thousands
Fourth Quarter Fiscal Year
-------------- -----------
2011 2010 2011 2010
---- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $33,718 $26,161 $158,020 $154,684
Adjustments to reconcile net income to net cash
provided by operating activities (net of acquisitions):
Depreciation and amortization 28,528 18,580 98,238 72,869
Excess tax benefits from stock-based compensation (369) (154) (1,409) (1,735)
(Gains) Loss on disposition of property, net (250) 208 (5,863) 4,659
Share-based compensation expense 4,116 1,779 14,284 6,747
Change in assets and liabilities 23,287 (19,773) 2,026 (61,836)
------ ------- ----- -------
Net cash provided by operating activities 89,030 26,801 265,296 175,388
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (13,232) (15,005) (57,621) (44,994)
Purchases of investment securities - (103,628) (416,797)
Sales of investment securities - 240,762 55,998 477,514
Business acquisitions, net of cash acquired (1,020) (104,658) (765,882) (211,916)
Sale of property, plant, and equipment 250 1,388 15,363 1,496
--- ----- ------ -----
Net cash provided by (used in) investing activities (14,002) 18,859 (752,142) (194,697)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of convertible debt - - - (39,198)
Net borrowings (repayments) under revolving credit - - - (2,863)
facility
Borrowings under revolving credit facility 54,000 - 254,000 -
Repayments under revolving credit facility (73,000) - (245,000) -
Proceeds from short-term borrowings 2,616 - 24,062 -
Repayments of short-term borrowings (4,820) 691 (22,084) (8,448)
Proceeds from long-term borrowings - - 500,000 -
Repayments of long-term debt (28,023) (46) (28,138) (184)
Dividends paid to shareholders (7,474) (6,562) (27,566) (25,096)
Proceeds from the exercise of stock options 19 214 1,875 3,759
Excess tax benefits from stock-based compensation 369 154 1,409 1,735
Financing fees paid - - (2,776) -
--- --- ------ ---
Net cash provided by (used in) financing activities (56,313) (5,549) 455,782 (70,295)
EFFECT OF EXCHANGE RATES ON CASH (502) 340 (840) 1,713
---- --- ---- -----
Net increase (decrease) in cash and cash equivalents 18,213 40,451 (31,904) (87,891)
Cash and cash equivalents at beginning of period 124,414 134,080 174,531 262,422
------- ------- ------- -------
Cash and cash equivalents at end of period $142,627 $174,531 $142,627 $174,531
======== ======== ======== ========
NON-GAAP MEASURES
Unaudited
Dollars in Thousands, Except Per Share Data
Regal Beloit Corporation prepares financial statements in accordance
with accounting principles generally accepted in the United States
(GAAP). Regal Beloit Corporation also discloses adjusted diluted
earnings per share (EPS), adjusted gross profit, adjusted gross
profit as a percentage of net sales, free cash flow and free cash
flow as a percentage of net income attributable to Regal Beloit
Corporation, (collectively, "non-GAAP financial measures").
Management uses these measures in its internal performance reporting
and for reports to the Board of Directors. Regal Beloit Corporation
also discloses these measures in its quarterly earnings releases, on
investor conference calls, and in investor presentations and similar
events. Management believes that these non-GAAP financial measures
are useful measures for providing investors with additional insight
into the Company's operating performance. This additional
information is not meant to be considered in isolation or as a
substitute for Regal Beloit Corporation's results of operations
prepared and presented in accordance with GAAP.
These non-GAAP financial measures exclude the effects of certain
items that are not comparable from one period to the next. Free
cash flow is defined as net cash provided by operating activities
less additions to property, plant and equipment.
Fourth
Dollars in Thousands, Except Per Share Data Quarter Fiscal Year
2011 2011
---- ----
GAAP Diluted Earnings Per Share $0.80 $3.79
EPC Purchase Accounting Adjustments and
Acquisition Costs 0.26 0.73
Incremental Warranty Expense (0.23) 0.19
Gain on Divestiture - (0.10)
Restructuring Costs 0.10 0.10
Adjusted Diluted Earnings Per Share $0.93 $4.71
===== =====
GAAP Gross Profit $170,883 $665,989
EPC Purchase Accounting Adjustments and
Acquisition Costs 15,500 25,800
Incremental Warranty Expense (15,400) 12,600
Adjusted Gross Profit $170,983 $704,389
======== ========
Adjusted Gross Profit as a Percentage of
Net Sales 23.5% 25.1%
Fiscal Year Fiscal Year
2011 2010
---- ----
GAAP Net Cash Provided by Operating
Activities $265,296 $175,388
Additions to Property Plant and Equipment (57,621) (44,994)
Free Cash Flow $207,675 $130,394
======== ========
Free Cash Flow as a Percentage of Net
Income 136.4% 87.3%
Attributable to Regal Beloit
SOURCE Regal Beloit Corporation