Regal Beloit Reports Second Quarter Results

- 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, [phone]



Web Site:  http://www.regal-beloit.com/ 

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