- Operating Cash Flow of $106.8 million - Plant Rationalizations
Proceeding on Plan - Legislation Continues to Support Energy
Efficient Products BELOIT, Wis., Aug. 3 /PRNewswire-FirstCall/ --
Regal Beloit Corporation (NYSE:RBC) today reported financial
results for the second quarter ended June 27, 2009. Net sales of
$454.6 million decreased 25.0% as compared to the $606.3 million
reported for the second quarter of 2008. Diluted earnings per share
were $0.47 as compared to $1.11 for the second quarter of 2008.
"The second quarter proved to be better than our expectations. We
were particularly pleased with the results of our inventory
reduction efforts, which exceeded our stated goal. We also
benefited from the impact of the continued move to more energy
efficient motor products. From a cost perspective, our cost
reduction efforts are on plan and we expect to see even greater
benefits from these activities as we move into the second half of
the year. We are continuing to execute our business strategy and
concentrate on business fundamentals and we are in a terrific
position to execute on business growth opportunities as those
situations arise in the future," commented Henry Knueppel, Chairman
and Chief Executive Officer. Sales for the second quarter of 2009
were $454.6 million, a 25.0% decrease from the $606.3 million
reported for the second quarter of 2008. Second quarter 2009 sales
included $16.3 million of incremental sales related to the Hwada
and Dutchi businesses acquired in 2008 and the Custom Power
Technology acquisition completed on January 2, 2009. In the
Electrical segment, sales decreased 24.7%, including the impact of
the acquisitions noted above. Exclusive of the acquired businesses,
Electrical segment sales decreased 27.7%, largely due to global
generator sales decreasing 49.1%, commercial and industrial motors
sales in North America decreasing 33.1% and residential HVAC motor
sales decreasing 4.4%. Sales in the Mechanical segment decreased
27.5% from the prior year period. From a geographic perspective,
Asia-based sales were down 33.9% as compared to the second quarter
of 2008. In total, sales to regions outside of the United States
were 26.6% of total sales for the second quarter of 2009 in
comparison to 27.0% for the comparable period of 2008. The negative
impact of foreign currency exchange rate changes decreased total
sales by 1.7%. From an energy efficiency standpoint, sales of high
efficiency products represented 19.7% of total sales for the
quarter as compared to 13.0% for the same period of 2008. The gross
profit margin for the second quarter was 20.8% as compared to the
21.6% reported for the comparable period of 2008. The decrease was
driven primarily by the fixed cost absorption impact of lower unit
volume production, which was magnified by the inventory reduction
efforts. In addition, costs related to the ongoing plant
rationalizations increased cost of sales by approximately $1.8
million. Operating expenses were $65.2 million (14.3% of sales) in
the second quarter of 2009 versus $63.7 million (10.5% of sales) in
2008. Operating expenses included an incremental $3.8 million for
the Dutchi and Hwada businesses which were acquired in 2008 and the
CPT business acquired in 2009. Operating expense also includes
approximately $4.0 million of bad debt, legal and restructuring
expenses. Income from operations was $29.5 million versus $67.5
million in the comparable period of 2008. As a percent of sales,
income from operations was 6.5% for the second quarter versus 11.1%
in the comparable period of 2008. Net interest expense was $5.1
million versus $7.8 million in the comparable period of 2008. The
decrease was driven by lower effective interest rates in 2009
versus the comparable period of 2008. The effective tax rate for
the three months ended June 27, 2009 was 28.0% versus 35.3% for the
second quarter of 2008. The decrease in the effective tax rate
results primarily from the global distribution of taxable income.
Net income attributable to Regal Beloit Corporation for the three
months ended June 27, 2009 was $16.5 million, a decrease of 55.9%
versus the $37.3 million reported in the second quarter of 2008.
Fully diluted earnings per share was $0.47 as compared to $1.11 per
share reported in the second quarter of 2008. The secondary equity
offering of the Company's common stock completed in May 2009 added
approximately 1.75 million shares to the weighted average number of
shares outstanding for the quarter. (Note: prior year financial
results have been adjusted to reflect the impact of the change in
accounting for the Company's convertible senior subordinated notes
as prescribed in FASB Staff Position APB 14-1: Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement), which reduced
second quarter 2008 diluted earnings per share by $0.03). Cash flow
from operations was $106.8 million in the second quarter of 2009
comprised of net income of $17.5 million, non-cash expenses of
$19.6 million and a reduction of net assets of $69.7 million. This
compares to the second quarter 2008 cash flow from operations of
$81.4 million, which was comprised of the net income of $38.6
million, non-cash expenses of $17.5 million and a reduction in net
assets of $25.8 million. The Company ended the second quarter with
total gross debt of $553.1 million as compared to $587.3 million at
the end of the first quarter of 2009. Cash and cash equivalents
increased $208.5 million during the second quarter to $290.5
million. Approximately, $150.5 million of the increase was
attributable to the net proceeds of the secondary stock offering
completed in May 2009. Therefore, net of cash, debt decreased from
$510.2 million at the end of 2008 to $262.6 million at the end of
the second quarter of 2009. Subsequent to June 27, 2009, several
holders of the Company's currently convertible senior subordinated
notes submitted notices to convert their notes into cash and common
stock in accordance with the terms of the indenture. The face value
of the notes converted, approximately $27.6 million, will be paid
in cash with the premium paid in shares of the Company's common
stock. Current and previous diluted EPS calculations included an
amount estimated for the dilutive effect of the premium being paid
in shares of the Company's common stock. "We continue to expect a
difficult global sales environment as we move into the third
quarter. The impact of the cost reduction and plant rationalization
efforts will, however, improve the relative profitability of our
business," continued Henry Knueppel, Chairman and Chief Executive
Officer. "Given these factors, we are estimating third quarter
earnings per share to be in the range of $0.60 to $0.68." Regal
Beloit will be holding a conference call pertaining to this news
release at 11:00 AM CT (12:00 PM ET) on Tuesday, August 4, 2009.
Interested parties should call 866-394-7807, referencing Regal
Beloit conference ID 22051374. International callers should call
763-488-9117 using the same conference ID. A replay of the call
will be available through September 3, 2009, 2009 at 800-642-1687,
conference ID 22051374. International callers should call
706-645-9291 using the same conference ID. Regal Beloit Corporation
is a leading manufacturer of mechanical and electrical motion
control and power generation products serving markets throughout
the world. Regal Beloit Corporation is headquartered in Beloit,
Wisconsin, and has manufacturing, sales, and service facilities
throughout the United States, Canada, Mexico, Europe and Asia.
CAUTIONARY STATEMENT This Press Release contains "forward-looking
statements" as defined in the Private Securities Litigation Reform
Act of 1995. Forward-looking statements represent our management's
judgment regarding future events. In many cases, you can identify
forward-looking statements by terminology such as "may," "will,"
"plan," "expect," "anticipate," "estimate," "believe," or
"continue" or the negative of these terms or other similar words.
Actual results and events could differ materially and adversely
from those contained in the forward-looking statements due to a
number of factors, including: -- economic changes in global markets
where we do business, such as reduced demand for the products we
sell, weakness in the housing and commercial real estate markets,
currency exchange rates, inflation rates, interest rates,
recession, foreign government policies and other external factors
that we cannot control; -- unanticipated fluctuations in commodity
prices and raw material costs; -- cyclical downturns affecting the
global market for capital goods; -- unexpected issues and costs
arising from the integration of acquired companies and businesses;
-- marketplace acceptance of new and existing products including
the loss of, or a decline in business from, any significant
customers; -- the impact of capital market transactions that we may
effect; -- the availability and effectiveness of our information
technology systems; -- unanticipated costs associated with
litigation matters; -- actions taken by our competitors, including
new product introductions or technological advances, and other
events affecting our industry and competitors; -- difficulties in
staffing and managing foreign operations; -- other domestic and
international economic and political factors unrelated to our
performance, such as the current substantial weakness in economic
and business conditions and the stock markets as a whole; and --
other risks and uncertainties described from time to time in our
reports filed with the U.S. Securities and Exchange Commission, or
SEC, which are incorporated by reference. All subsequent written
and oral forward-looking statements attributable to us or to
persons acting on our behalf are expressly qualified in their
entirety by the applicable cautionary statements. The
forward-looking statements included in this press release are made
only as of their respective dates, and we undertake no obligation
to update these statements to reflect subsequent events or
circumstances. See also Item 1A - Risk Factors in the Company's
Annual Report on Form 10-K filed on February 25, 2009. CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS Unaudited In Thousands of
Dollars, Except Shares Outstanding, Dividends Declared and Per
Share Data Three Months Ended Six Months Ended (As (As Adjusted)*
Adjusted)* June 27, June 28, June 27, June 28, 2009 2008 2009 2008
Net Sales $454,550 $606,316 $897,824 $1,142,659 Cost of Sales
359,928 475,139 712,632 889,383 Gross Profit 94,622 131,177 185,192
253,276 Operating Expenses 65,155 63,683 127,533 128,170 Income
From Operations 29,467 67,494 57,659 125,106 Interest Expense 5,501
8,357 12,620 16,770 Interest Income 377 531 510 915 Income Before
Taxes & Noncontrolling Interests 24,343 59,668 45,549 109,251
Provision For Income Taxes 6,822 21,086 14,052 38,644 Net Income
17,521 38,582 31,497 70,607 Less: Net Income Attributable to
Noncontrolling Interests, net of tax 1,069 1,269 2,258 1,867 Net
Income Attributable to Regal Beloit Corporation $16,452 $37,313
$29,239 $68,740 Earnings Per Share of Common Stock: Basic $0.49
$1.19 $0.90 $2.19 Assuming Dilution $0.47 $1.11 $0.86 $2.06 Cash
Dividends Declared $0.16 $0.16 $0.32 $0.31 Weighted Average Number
of Shares Outstanding: Basic 33,256,281 31,305,715 32,356,782
31,311,296 Assuming Dilution 35,105,383 33,525,725 33,850,093
33,321,379 *The Company adopted Financial Accounting Standards
Board ("FASB") Staff Position ("FSP") No. APB 14-1, "Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1").
The adoption of FSP APB 14-1 required an adjustment of convertible
debt, equity, and interest expense. CONDENSED CONSOLIDATED BALANCE
SHEETS Unaudited In Thousands of Dollars (As Adjusted From Audited
Statements)* June 27, 2009 December 27, 2008 ASSETS Current Assets:
Cash and Cash Equivalents $290,549 $65,250 Trade Receivables and
Other Current Assets 408,029 436,094 Inventories 269,216 359,918
Total Current Assets 967,794 861,262 Net Property, Plant and
Equipment 351,247 358,372 Other Noncurrent Assets 805,536 803,862
Total Assets $2,124,577 $2,023,496 LIABILITIES AND EQUITY Accounts
Payable $161,653 $202,456 Other Current Liabilities 156,486 228,546
Long-Term Debt 548,115 560,127 Deferred Income Taxes 85,052 72,119
Other Noncurrent Liabilities 92,840 122,607 Total Liabilities
$1,044,146 $1,185,855 Equity 1,080,431 837,641 Total Liabilities
and Equity $2,124,577 $2,023,496 *The Company adopted Financial
Accounting Standards Board ("FASB") Staff Position ("FSP") No. APB
14-1, "Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement)" ("FSP APB 14-1"). The adoption of FSP APB 14-1
required an adjustment of convertible debt equity, and interest
expense. SEGMENT INFORMATION Unaudited In Thousands of Dollars
Mechanical Segment Electrical Segment ------------------
------------------ Three Months Ending Three Months Ending June 27,
June 28, June 27, June 28, 2009 2008 2009 2008 Net Sales $47,306
$65,261 $407,244 $541,055 Income from Operation 4,128 9,600 25,339
57,894 Six Months Ending Six Months Ending June 27, June 28, June
27, June 28, 2009 2008 2009 2008 Net Sales $99,218 $127,811
$798,606 $1,014,848 Income from Operation 10,415 19,647 47,244
105,459 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW Unaudited In
Thousands of Dollars Six Months Ended (As Adjusted)* June 27, 2009
June 28, 2008 CASH FLOWS FROM OPERATING ACTIVITIES: Net income
$31,497 $70,607 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
33,793 30,211 Excess tax benefits from stock-based compensation
(1,767) (1,333) (Gain) loss on sale of assets, net (91) 70
Stock-based compensation expense 1,959 1,961 Non-cash convertible
debt deferred financing costs 1,063 2,424 Change in assets and
liabilities, net of acquisitions 58,934 12,345 Net cash provided by
operating activities 125,388 116,285 CASH FLOWS FROM INVESTING
ACTIVITIES: Additions to property, plant and equipment (18,614)
(28,134) Business acquisitions, net of cash acquired (1,500)
(15,805) Sale of property, plant and equipment 306 1,149 Net cash
used in investing activities (19,808) (42,790) CASH FLOWS FROM
FINANCING ACTIVITIES: Net repayments of short-term borrowings
(10,295) (92) Payments of long-term debt (108) (233) Net borrowings
(repayments) under revolving credit facility (13,207) (182,700) Net
proceeds from long-term borrowings - 165,000 Net proceeds from the
sale of common stock 150,507 - Dividends paid to shareholders
(10,063) (9,392) Purchases of treasury stock - (4,191) Proceeds
from the exercise of stock options 771 1,739 Excess tax benefits
from stock-based compensation 1,767 1,333 Financing fees paid -
(418) Net cash provided by (used in) financing activities 119,372
(28,954) EFFECT OF EXCHANGE RATES ON CASH 347 595 Net increase in
cash and cash equivalents 225,299 45,136 Cash and cash equivalents
at beginning of period 65,250 42,574 Cash and cash equivalents at
end of period $290,549 $87,710 *The Company adopted Financial
Accounting Standards Board ("FASB") Staff Position ("FSP") No. APB
14-1, "Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement)" ("FSP APB 14-1"). The adoption of FSP APB 14-1
required an adjustment of convertible debt, equity, and interest
expense. DATASOURCE: Regal Beloit Corporation CONTACT: John Perino,
Vice President, Investor Relations of Regal Beloit Corporation,
+1-608-361-7501 Web Site: http://www.regal-beloit.com/
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