Electric Motors
Charles A. Hinrichs
John M. Perino
Vice President Chief Financial Officer
Vice President 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: our ability to timely and successfully consummate the acquisition of EPC, including the ability to satisfy all of the conditions precedent to consummation of the transaction; our ability to timely and successfully realize the potential synergies of the EPC transaction; economic changes in global markets where we do business, such as reduced demand for products we sell, weakness in the housing and commercial real estate markets, currency exchange rates, inflation rates, interest rates, recession, foreign government policies and other external factors that we cannot control; fluctuations in commodity prices and raw material costs; cyclical downturns affecting the global market for capital goods; unexpected issues, costs or liabilities arising from the acquisition and integration of EPC and other acquired companies and businesses, or the effects of purchase accounting that may be different than expected; marketplace acceptance of new and existing products including the loss of, or a decline in business from, any significant customers; the impact of capital market transactions that we may effect; the availability and effectiveness of our information technology systems; unanticipated costs associated with litigation, product warranty or product liability matters; the effects of increased international and domestic competition on sales of our energy efficient products; actions taken by our competitors, including new product introductions or technological advances, and other events affecting our industry and competitors; difficulties in staffing and managing foreign operations; other domestic and international economic and political factors unrelated to our performance, such as the current substantial weakness in economic and business conditions; and 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, 2010 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.
1
Investment Thesis Well-Positioned Business Model
Accelerating Growth Drivers
Necessary and Innovative Products
A Leader in Diverse and Growing Product Areas
Global Footprint and Technical Resources
Solid Financial Performance
Increasing Global Presence and Align with High Growth Economies
Growth and Profitability
Cash Flow
Energy Efficiency Technology Leadership
Balance Sheet Strength
Strong Growth Profile Relative to Peer Group
Industry Innovator
RBC Operating System Drives Results
Energy Efficiency Supported by Legislation
Successful Acquirer and Integrator
Transformed Operations Positioned for Growth
Sustainable Technological Leadership 2
Necessary and Innovative Products Products
Solutions
Motors
Innovative Technology
EonTM Motor
Air Flow MagnaSmart Generator
Controls Gear Drives
Blowers
Speed and Torque
imPower Pool Motor High Efficient Right Angle Gear Drive
CRP® Crank Rod Pump
Arktic 59TM ECM
Generators SyMAX Permanent Magnet Motor
3
Leading Positions in Diverse and Growing Markets
Key Product Offerings
2009 Sales by End Market
North America – – – –
Electric Motors Electric Generators Worm and Bevel Gears Hydraulic Pump Drives and Valve Actuators
Asia – Electric Motors – Electric Generators
Europe – Marine Motors – Commercial Refrigeration Motors – Valve Actuators
Defense
Process
Transport
Water
2%
1%
1%
1% Food Products
5% HVAC
2%
Constr/Mining 2%
Other
Replacement 24%
Agriculture 2%
19.7%
Other Industrial
Standby Pow er
Equipment /
42.7%
3% Refrigeration
Machinery 13%
3%
37.7%
Non-Res. Constr
Pumps/Fans/
3%
Compressor HVAC New
Comm HVAC
11%
12% Material Handling
5% Pump/Pool/
4%
Water Heater 5% ___________________________ Source: Management estimates based on individual business segment sales.
4
Global Footprint and Technical Resources Enhance Sales in High Growth Economies Expand to Meet Global Customer Needs
326 Engineers
Utilize 24 Hour Technical Resources Optimize Cost Structure
240 Engineers
5
Regal Beloit Operating System
Operating Rigor Driving the Roll Up Values and Initiatives
Integrating the Acquisitions Responsible for Operating Improvements RBC Operating System Drives Results
6
Successful Acquirer and Integrator Consistent acquirer
2010
- 6 in 2010 - 10 in last 36 months
Rigorous evaluation and integration process drives return on investment Leveraging our size behind the brands
2005 – 2009
Accretive to earnings CMT
New / expanded geographies and technologies Pipeline continues to be strong – Timing improving - TTM Alignment – Balance Sheet Strength – Technology, Geography, Synergy
1997 – 2004
7
Overview of Regal Beloit’s Proposed Acquisition of EPC
Target
Electrical Products Company (“EPC”) of A.O. Smith Corporation
$875 million
Consideration
– $700 million of cash – $175 million of RBC stock – 2,834,026 shares based on the
price of $61.7496
Projected Synergies and Tax Benefit Projected Earnings Impact
10-day volume weighted share
Targeted synergies of $30 million to $40 million achieved over 3 to
4 years Tax benefits expected to be at least $45 million to $55 million
Accretive in the first full year following the acquisition excluding
one-time transaction-related expenses and purchase accounting adjustments
8
Proposed Acquisition In Line with Strategic Objectives
Objective Increase revenues by 15% annually
Materially increases RBC top line Additional channels to drive energy efficient technology Broader Product Offering
$30 million to $40 million of projected synergies Provides meaningfully greater scale EPC has improved profitability over the last two years
Objective Improve profitability
Objective Improve customer experience
Allows RBC to offer a more complete suite of products and technologies to its customers Combined energy efficient technology provides ability to deliver additional value to customers
The Acquisition Of EPC Consistent With Regal Beloit’s Strategy 9
Investment Thesis Well-Positioned Business Model
Accelerating Growth Drivers
Necessary and Innovative Products
A Leader in Diverse and Growing Product Areas
Global Footprint and Technical Resources
Solid Financial Performance
Increasing Global Presence and Align with High Growth Economies
Growth and Profitability
Cash Flow
Energy Efficiency Technology Leadership
Balance Sheet Strength
Strong Growth Profile Relative to Peer Group
Industry Innovator
RBC Operating System Drives Results
Energy Efficiency Supported by Legislation
Successful Acquirer and Integrator
Transformed Operations Positioned for Growth
Sustainable Technological Leadership 10
Increasing Global Presence 2000
2010
2005
Rest of World 5%
Rest of World 12%
United States 95%
United States 64%
Rest of World 36%
United States 88%
Expanding in Higher Growth Regions
Europe 3%
Canada 4%
ROW 2%
Asia 5%
2005 Sales
United States 87%
Europe 7%
Canada 4%
ROW 2% United States 64%
Asia 21% 2010 Sales
11
Technology Leader Evolving End User Needs
New Product Responses
High Efficiency
More Effective Use of Power
Variable Speed
Broad Variation of Speed During Use
Embedded Intelligence
Electronic “Smarts” Built Into Products
Lower Operating Costs
Reduced Lifetime Costs to Operate
ECM 460V Eon Motor Arktic SSC HERA – High Efficiency Right Angle Gear Drive Arktic 142 HEB High Efficiency Blower Impower High Efficiency IEC Motors Arktic 59 Medium Voltage Industrial Motors 1040 FR Generator Deep Sea Actuator Impulse Fanless 80+ NEMA Premium Motors Magnasmart Generators
12
Leading Energy Efficient Products
Sales of Energy Efficient Products
New Product Introductions 50
$ millions
$400 $350 $300 $250 $200 $150 $100 $50
R CAG % 3 2
2003 2004 2005 2006
2007 2008 2009 2010
33
22
23
2008
2009
2010
2011 E
___________________________ Source: Management estimates.
40% - 50% of all electricity generated is consumed by an electric motor 97% of the lifetime total cost of an electric motor is the electricity used
Accelerating innovation Focusing new products on energy efficiency, variable speed, embedded intelligence and cost 13
Energy Efficient Products in Commercial Refrigeration
Highlights Global Industry Sales Estimated >$500M U.S. Market Impacted by Legislation Early in the Energy Efficiency Ramp Store Owners Driven by Operating Cost RBC is a Technology Leader Morrill and Elco are Leaders in this Space
Penetrating New Applications With Existing Technology 14
Energy Efficient Products in Commercial & Industrial Applications Highlights Global Industry Sales Estimated >$1B Regenerative Blower
Pool and Spa
Refrigerated Truck
Paint Sprayer
Gate Opener
Worldwide Applications Potential Features - Efficiency - Low Noise - Smaller Profile - Lighter Weight - Variable Speed
Bathroom Fan
Penetrating New Applications With Existing Technology 15
Energy Efficient Products in Air Moving
Highlights Global Industry Sales Estimated >$1B Potential Features - Efficiency - Variable Speed - Low Noise - Smaller Profile - Lighter Weight
Boiler
Water Heater Furnace
Penetrating New Applications With Existing Technology 16
EISA Energy Legislation Impact on Industrial Motors Current Industrial Sales Mix Premium Efficiency 15%
Standard Efficiency 39%
No Standard 46%
Est. Industrial Sales Mix With New Law No Standard 27% Premium Efficiency 56%
Standard Efficiency 17%
Energy Independence and Security Act of 2007 - Effective December 2010 The Higher the Efficiency, the Higher the Average Selling Price Transition to NEMA Premium Products has Begun 17
Energy Efficiency Supported by Legislation North America
Australia/New Zealand
December 19, 2010: EISA Legislation
Motor Efficiency Legislation (MEPS) to IE2 efficiency currently required for: - three phase induction motors - refrigerated display cases - refrigerators and freezers - pool pumps currently voluntary, anticipated mandatory in 2011
Regional SEER and AFU Standards Under Consideration Efficiency Standards for Fractional HP Motors Currently Under Review by DOE Canada and Mexico to follow US EISA Standards in 2011 Europe
Asia
June 16, 2011: IE2 Efficiency Required
June 4, 2010: China Energy Efficiency and Benefit Society Project. Provide incentives to promote high efficiency IE2 and IE3 motors.
January 1, 2015: IE3 Efficiency Level Required - for sizes 7.5 kw – 375 kw January 1, 2017: IE3 Efficiency Level Required - for sizes .75 kw – 375 kw
Energy efficiency ratings required on AC equipment in both China and India. Higher ratings require energy efficient motors.
Energy Efficiency Legislation Is Worldwide
18
Transforming Operations
Lean Six Sigma Yields Productivity Annuity Capturing Acquisition Combination Benefits Driving Variable Cost Productivity Simplification – Reduced Platforms – ERP Consolidation – Shared Services
Continuous Cost Improvement 19
Investment Thesis Well-Positioned Business Model
Accelerating Growth Drivers
Necessary and Innovative Products
A Leader in Diverse and Growing Product Areas
Global Footprint and Technical Resources
Solid Financial Performance
Increasing Global Presence and Align with High Growth Economies
Growth and Profitability
Cash Flow
Energy Efficiency Technology Leadership
Balance Sheet Strength
Strong Growth Profile Relative to Peer Group
Industry Innovator
RBC Operating System Drives Results
Energy Efficiency Supported by Legislation
Successful Acquirer and Integrator
Transformed Operations Positioned for Growth
Sustainable Technological Leadership 20
Solid Financial Performance
Track Record of LongTerm Growth
Balance Sheet Strength
Strong Growth Profile Relative to Peer Group
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
1959
1957
1955
RBC Sales
21
Track Record of Long-Term Growth ($ in millions, except per share data)
5 Year Sales and EPS Growth
20 Year Sales and EPS Growth Sales
EPS
Sales
EPS
$2,400
$5.00
$2,400
$5.00
$1,800
$4.00 $1,800
$4.00
$3.00
$3.00
$1,200
$2.00
$600
$1.00
$0
$0.00 1991
1995
2000
2005
2010
$1,200
$2.00
$600
$1.00
$0
$0.00 2005
2006
2007
2008
2009
2010
Strong Growth Track Record Over 20 Years 22
Balance Sheet Strength Modest Leverage – Fiscal Year 2010
Total Debt to Cap of 23.8% Net Debt to Cap of 11.2% Total Debt to LTM EBITDA of 1.4x Net Debt to LTM EBITDA of .7x
Strong Liquidity – Fiscal Year 2010 Revolver Availability of $500 Million Cash and Cash Equivalents of $231 Million FY Operating Cash Flow of $175 Million
No Significant Debt Maturity until 2012 – Weighted Average Cost of Debt Currently 4.1% – 61% Fixed, 39% Floating ___________________________ Note: EBITDA is computed as income from operations plus depreciation and amortization.
23
Balance Sheet Strength 60.0%
– –
50.0%
Net Debt / Total Capital
40.0%
30.0%
20.0%
10.0%
0.0% Q1
Q2
Q3
2005
Q4
Q1
Q2
Q3
2006
Q4
Q1
Q2
Q3
2007
_____________________ Source: Capital IQ. Note: Net Debt includes long-term debt derivative instruments and short-term investments.
Q4
Q1
Q2
Q3
2008
Q4
Q1
Q2
Q3
2009
Q4
Q1
Q2
Q3
Q4
2010
24
Value Creation Profile Sales CAGR Since 2004
Operating Income CAGR Since 2004
Net Debt / LTM EBITDA (1): 0.3x NTM P/E (2): 16.1x
0.8x 16.7x
1.9x 19.4x
N/M 19.6x
0.7x 13.5x
1.9x 18.7x
0.3x 13.2x
N/A N/A
Strong Growth Profile with Modest Leverage _____________________ Source: Capital IQ. Note: CAGR represents cumulative annual growth rate for the 2004 – 2010E calendar periods. Net debt / LTM EBITDA leverage ratios as of November 4, 2010. Net debt includes long-term debt derivative instruments and shortterm investments. 2010E figures represent the median consensus Capital IQ estimate as of November 4, 2010. (1) EBITDA is computed as income from operations plus depreciation and amortization. (2) Next twelve months price-to-earnings ratio as of November 4, 2010. Earnings are normalized for non-recurring items and shares represent the fully diluted amount outstanding.
25
Thank You!
26
Appendix
Reconciliation of EBITDA FY 2010 Net Income Attributable to Regal Beloit
$149,379
Noncontrolling Interests, net of tax
5,305
Interest Income
(2,570)
Interest Expense
19,576
Provision for Income Taxes
66,045
FY 2010 Depreciation and Amortization
72,869
EBITDA
$310,604
27
John M. Perino
Vice President Chief Financial Officer
Vice President 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: our ability to timely and successfully consummate the acquisition of EPC, including the ability to satisfy all of the conditions precedent to consummation of the transaction; our ability to timely and successfully realize the potential synergies of the EPC transaction; economic changes in global markets where we do business, such as reduced demand for products we sell, weakness in the housing and commercial real estate markets, currency exchange rates, inflation rates, interest rates, recession, foreign government policies and other external factors that we cannot control; fluctuations in commodity prices and raw material costs; cyclical downturns affecting the global market for capital goods; unexpected issues, costs or liabilities arising from the acquisition and integration of EPC and other acquired companies and businesses, or the effects of purchase accounting that may be different than expected; marketplace acceptance of new and existing products including the loss of, or a decline in business from, any significant customers; the impact of capital market transactions that we may effect; the availability and effectiveness of our information technology systems; unanticipated costs associated with litigation, product warranty or product liability matters; the effects of increased international and domestic competition on sales of our energy efficient products; actions taken by our competitors, including new product introductions or technological advances, and other events affecting our industry and competitors; difficulties in staffing and managing foreign operations; other domestic and international economic and political factors unrelated to our performance, such as the current substantial weakness in economic and business conditions; and 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, 2010 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.
1
Investment Thesis Well-Positioned Business Model
Accelerating Growth Drivers
Necessary and Innovative Products
A Leader in Diverse and Growing Product Areas
Global Footprint and Technical Resources
Solid Financial Performance
Increasing Global Presence and Align with High Growth Economies
Growth and Profitability
Cash Flow
Energy Efficiency Technology Leadership
Balance Sheet Strength
Strong Growth Profile Relative to Peer Group
Industry Innovator
RBC Operating System Drives Results
Energy Efficiency Supported by Legislation
Successful Acquirer and Integrator
Transformed Operations Positioned for Growth
Sustainable Technological Leadership 2
Necessary and Innovative Products Products
Solutions
Motors
Innovative Technology
EonTM Motor
Air Flow MagnaSmart Generator
Controls Gear Drives
Blowers
Speed and Torque
imPower Pool Motor High Efficient Right Angle Gear Drive
CRP® Crank Rod Pump
Arktic 59TM ECM
Generators SyMAX Permanent Magnet Motor
3
Leading Positions in Diverse and Growing Markets
Key Product Offerings
2009 Sales by End Market
North America – – – –
Electric Motors Electric Generators Worm and Bevel Gears Hydraulic Pump Drives and Valve Actuators
Asia – Electric Motors – Electric Generators
Europe – Marine Motors – Commercial Refrigeration Motors – Valve Actuators
Defense
Process
Transport
Water
2%
1%
1%
1% Food Products
5% HVAC
2%
Constr/Mining 2%
Other
Replacement 24%
Agriculture 2%
19.7%
Other Industrial
Standby Pow er
Equipment /
42.7%
3% Refrigeration
Machinery 13%
3%
37.7%
Non-Res. Constr
Pumps/Fans/
3%
Compressor HVAC New
Comm HVAC
11%
12% Material Handling
5% Pump/Pool/
4%
Water Heater 5% ___________________________ Source: Management estimates based on individual business segment sales.
4
Global Footprint and Technical Resources Enhance Sales in High Growth Economies Expand to Meet Global Customer Needs
326 Engineers
Utilize 24 Hour Technical Resources Optimize Cost Structure
240 Engineers
5
Regal Beloit Operating System
Operating Rigor Driving the Roll Up Values and Initiatives
Integrating the Acquisitions Responsible for Operating Improvements RBC Operating System Drives Results
6
Successful Acquirer and Integrator Consistent acquirer
2010
- 6 in 2010 - 10 in last 36 months
Rigorous evaluation and integration process drives return on investment Leveraging our size behind the brands
2005 – 2009
Accretive to earnings CMT
New / expanded geographies and technologies Pipeline continues to be strong – Timing improving - TTM Alignment – Balance Sheet Strength – Technology, Geography, Synergy
1997 – 2004
7
Overview of Regal Beloit’s Proposed Acquisition of EPC
Target
Electrical Products Company (“EPC”) of A.O. Smith Corporation
$875 million
Consideration
– $700 million of cash – $175 million of RBC stock – 2,834,026 shares based on the
price of $61.7496
Projected Synergies and Tax Benefit Projected Earnings Impact
10-day volume weighted share
Targeted synergies of $30 million to $40 million achieved over 3 to
4 years Tax benefits expected to be at least $45 million to $55 million
Accretive in the first full year following the acquisition excluding
one-time transaction-related expenses and purchase accounting adjustments
8
Proposed Acquisition In Line with Strategic Objectives
Objective Increase revenues by 15% annually
Materially increases RBC top line Additional channels to drive energy efficient technology Broader Product Offering
$30 million to $40 million of projected synergies Provides meaningfully greater scale EPC has improved profitability over the last two years
Objective Improve profitability
Objective Improve customer experience
Allows RBC to offer a more complete suite of products and technologies to its customers Combined energy efficient technology provides ability to deliver additional value to customers
The Acquisition Of EPC Consistent With Regal Beloit’s Strategy 9
Investment Thesis Well-Positioned Business Model
Accelerating Growth Drivers
Necessary and Innovative Products
A Leader in Diverse and Growing Product Areas
Global Footprint and Technical Resources
Solid Financial Performance
Increasing Global Presence and Align with High Growth Economies
Growth and Profitability
Cash Flow
Energy Efficiency Technology Leadership
Balance Sheet Strength
Strong Growth Profile Relative to Peer Group
Industry Innovator
RBC Operating System Drives Results
Energy Efficiency Supported by Legislation
Successful Acquirer and Integrator
Transformed Operations Positioned for Growth
Sustainable Technological Leadership 10
Increasing Global Presence 2000
2010
2005
Rest of World 5%
Rest of World 12%
United States 95%
United States 64%
Rest of World 36%
United States 88%
Expanding in Higher Growth Regions
Europe 3%
Canada 4%
ROW 2%
Asia 5%
2005 Sales
United States 87%
Europe 7%
Canada 4%
ROW 2% United States 64%
Asia 21% 2010 Sales
11
Technology Leader Evolving End User Needs
New Product Responses
High Efficiency
More Effective Use of Power
Variable Speed
Broad Variation of Speed During Use
Embedded Intelligence
Electronic “Smarts” Built Into Products
Lower Operating Costs
Reduced Lifetime Costs to Operate
ECM 460V Eon Motor Arktic SSC HERA – High Efficiency Right Angle Gear Drive Arktic 142 HEB High Efficiency Blower Impower High Efficiency IEC Motors Arktic 59 Medium Voltage Industrial Motors 1040 FR Generator Deep Sea Actuator Impulse Fanless 80+ NEMA Premium Motors Magnasmart Generators
12
Leading Energy Efficient Products
Sales of Energy Efficient Products
New Product Introductions 50
$ millions
$400 $350 $300 $250 $200 $150 $100 $50
R CAG % 3 2
2003 2004 2005 2006
2007 2008 2009 2010
33
22
23
2008
2009
2010
2011 E
___________________________ Source: Management estimates.
40% - 50% of all electricity generated is consumed by an electric motor 97% of the lifetime total cost of an electric motor is the electricity used
Accelerating innovation Focusing new products on energy efficiency, variable speed, embedded intelligence and cost 13
Energy Efficient Products in Commercial Refrigeration
Highlights Global Industry Sales Estimated >$500M U.S. Market Impacted by Legislation Early in the Energy Efficiency Ramp Store Owners Driven by Operating Cost RBC is a Technology Leader Morrill and Elco are Leaders in this Space
Penetrating New Applications With Existing Technology 14
Energy Efficient Products in Commercial & Industrial Applications Highlights Global Industry Sales Estimated >$1B Regenerative Blower
Pool and Spa
Refrigerated Truck
Paint Sprayer
Gate Opener
Worldwide Applications Potential Features - Efficiency - Low Noise - Smaller Profile - Lighter Weight - Variable Speed
Bathroom Fan
Penetrating New Applications With Existing Technology 15
Energy Efficient Products in Air Moving
Highlights Global Industry Sales Estimated >$1B Potential Features - Efficiency - Variable Speed - Low Noise - Smaller Profile - Lighter Weight
Boiler
Water Heater Furnace
Penetrating New Applications With Existing Technology 16
EISA Energy Legislation Impact on Industrial Motors Current Industrial Sales Mix Premium Efficiency 15%
Standard Efficiency 39%
No Standard 46%
Est. Industrial Sales Mix With New Law No Standard 27% Premium Efficiency 56%
Standard Efficiency 17%
Energy Independence and Security Act of 2007 - Effective December 2010 The Higher the Efficiency, the Higher the Average Selling Price Transition to NEMA Premium Products has Begun 17
Energy Efficiency Supported by Legislation North America
Australia/New Zealand
December 19, 2010: EISA Legislation
Motor Efficiency Legislation (MEPS) to IE2 efficiency currently required for: - three phase induction motors - refrigerated display cases - refrigerators and freezers - pool pumps currently voluntary, anticipated mandatory in 2011
Regional SEER and AFU Standards Under Consideration Efficiency Standards for Fractional HP Motors Currently Under Review by DOE Canada and Mexico to follow US EISA Standards in 2011 Europe
Asia
June 16, 2011: IE2 Efficiency Required
June 4, 2010: China Energy Efficiency and Benefit Society Project. Provide incentives to promote high efficiency IE2 and IE3 motors.
January 1, 2015: IE3 Efficiency Level Required - for sizes 7.5 kw – 375 kw January 1, 2017: IE3 Efficiency Level Required - for sizes .75 kw – 375 kw
Energy efficiency ratings required on AC equipment in both China and India. Higher ratings require energy efficient motors.
Energy Efficiency Legislation Is Worldwide
18
Transforming Operations
Lean Six Sigma Yields Productivity Annuity Capturing Acquisition Combination Benefits Driving Variable Cost Productivity Simplification – Reduced Platforms – ERP Consolidation – Shared Services
Continuous Cost Improvement 19
Investment Thesis Well-Positioned Business Model
Accelerating Growth Drivers
Necessary and Innovative Products
A Leader in Diverse and Growing Product Areas
Global Footprint and Technical Resources
Solid Financial Performance
Increasing Global Presence and Align with High Growth Economies
Growth and Profitability
Cash Flow
Energy Efficiency Technology Leadership
Balance Sheet Strength
Strong Growth Profile Relative to Peer Group
Industry Innovator
RBC Operating System Drives Results
Energy Efficiency Supported by Legislation
Successful Acquirer and Integrator
Transformed Operations Positioned for Growth
Sustainable Technological Leadership 20
Solid Financial Performance
Track Record of LongTerm Growth
Balance Sheet Strength
Strong Growth Profile Relative to Peer Group
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
1959
1957
1955
RBC Sales
21
Track Record of Long-Term Growth ($ in millions, except per share data)
5 Year Sales and EPS Growth
20 Year Sales and EPS Growth Sales
EPS
Sales
EPS
$2,400
$5.00
$2,400
$5.00
$1,800
$4.00 $1,800
$4.00
$3.00
$3.00
$1,200
$2.00
$600
$1.00
$0
$0.00 1991
1995
2000
2005
2010
$1,200
$2.00
$600
$1.00
$0
$0.00 2005
2006
2007
2008
2009
2010
Strong Growth Track Record Over 20 Years 22
Balance Sheet Strength Modest Leverage – Fiscal Year 2010
Total Debt to Cap of 23.8% Net Debt to Cap of 11.2% Total Debt to LTM EBITDA of 1.4x Net Debt to LTM EBITDA of .7x
Strong Liquidity – Fiscal Year 2010 Revolver Availability of $500 Million Cash and Cash Equivalents of $231 Million FY Operating Cash Flow of $175 Million
No Significant Debt Maturity until 2012 – Weighted Average Cost of Debt Currently 4.1% – 61% Fixed, 39% Floating ___________________________ Note: EBITDA is computed as income from operations plus depreciation and amortization.
23
Balance Sheet Strength 60.0%
– –
50.0%
Net Debt / Total Capital
40.0%
30.0%
20.0%
10.0%
0.0% Q1
Q2
Q3
2005
Q4
Q1
Q2
Q3
2006
Q4
Q1
Q2
Q3
2007
_____________________ Source: Capital IQ. Note: Net Debt includes long-term debt derivative instruments and short-term investments.
Q4
Q1
Q2
Q3
2008
Q4
Q1
Q2
Q3
2009
Q4
Q1
Q2
Q3
Q4
2010
24
Value Creation Profile Sales CAGR Since 2004
Operating Income CAGR Since 2004
Net Debt / LTM EBITDA (1): 0.3x NTM P/E (2): 16.1x
0.8x 16.7x
1.9x 19.4x
N/M 19.6x
0.7x 13.5x
1.9x 18.7x
0.3x 13.2x
N/A N/A
Strong Growth Profile with Modest Leverage _____________________ Source: Capital IQ. Note: CAGR represents cumulative annual growth rate for the 2004 – 2010E calendar periods. Net debt / LTM EBITDA leverage ratios as of November 4, 2010. Net debt includes long-term debt derivative instruments and shortterm investments. 2010E figures represent the median consensus Capital IQ estimate as of November 4, 2010. (1) EBITDA is computed as income from operations plus depreciation and amortization. (2) Next twelve months price-to-earnings ratio as of November 4, 2010. Earnings are normalized for non-recurring items and shares represent the fully diluted amount outstanding.
25
Thank You!
26
Appendix
Reconciliation of EBITDA FY 2010 Net Income Attributable to Regal Beloit
$149,379
Noncontrolling Interests, net of tax
5,305
Interest Income
(2,570)
Interest Expense
19,576
Provision for Income Taxes
66,045
FY 2010 Depreciation and Amortization
72,869
EBITDA
$310,604
27
