- 2008 Net Sales, Net Income and EPS Reach Record Levels BELOIT,
Wis., Feb. 4 /PRNewswire-FirstCall/ -- Regal Beloit Corporation
(NYSE:RBC) today reported financial results for the fourth quarter
and fiscal year ended December 27, 2008. Net sales of $483.0
million increased 1.7% as compared to the $474.7 million reported
for the fourth quarter of 2007. Diluted earnings per share were
$0.67 as compared to $0.71 for the fourth quarter of 2007. For the
full year of 2008, sales reached a record $2.246 billion as
compared to $1.802 billion for 2007. Full year diluted earnings per
share were $3.87 per share as compared to $3.49 per share for 2007.
"We are very pleased to report another record year for the Company.
This is clearly proof of our ability to adapt to a changing
environment through improved operating efficiencies and the
introduction of a record number of new products in 2008," commented
Henry Knueppel, Chairman and Chief Executive Officer, "Our results
were achieved despite unprecedented raw material inflation, a
depressed HVAC market throughout the year, and deteriorating
industrial and commercial markets late in 2008." Sales for the
fourth quarter of $483.0 million were 1.7% above the $474.7 million
reported for the fourth quarter of 2007. Sales for the fourth
quarter included $38.2 million of sales attributable to the Hwada
acquisition completed in April of 2008, the Dutchi acquisition
completed in October of 2008 and the Alstom acquisition completed
in November 2007. Sales for the Electrical segment increased 2.6%
as compared to the comparable period of 2007, including the results
from the acquisitions mentioned above. Sales for the HVACR products
decreased 7.8% for the quarter. Sales of commercial and industrial
motors decreased 5.6% and sales of electric generators increased
13.2%. Sales in the Mechanical segment decreased 4.1%. From a
geographic perspective, sales outside the United States were 28.9%
of total sales for the quarter as compared to 25.2% in the fourth
quarter of 2007. The negative impact of foreign currency exchange
rate changes decreased total sales by 2.2%. From an energy
efficiency standpoint, sales of high efficiency products increased
12.8% from the fourth quarter of 2007 and represented 11.7% of
total sales for the quarter. The gross profit margin for the fourth
quarter of 2008 was 23.7%, which was 150 basis points above the
gross profit margin in the fourth quarter of 2007, primarily driven
by our focus on Lean Six Sigma, other productivity improvements and
the margin gain from the higher mix of more energy efficient
products. While material inflation exceeded the impact of price
increases, strong productivity results more than offset the price
-- inflation shortfall. Income from operations was $39.6 million or
8.2% of sales as compared to the $45.3 million or 9.5% of sales
reported for the fourth quarter of 2007. The operating margins were
impacted by the businesses acquired in 2008, which operated at
lower margins and an increase in operating expenses. Included in
operating expense was approximately $5.0 million of additional
expense related to reserves for certain discrete customer
receivables and impairment of certain fixed assets. Operating
expenses increased approximately $5.2 million as a result of the
2007 Alstom and 2008 acquisitions. Net income in the fourth quarter
of 2008 was $21.4 million as compared to the $24.0 million reported
in the fourth quarter of 2007. Diluted earnings per share were
$0.67 versus the $0.71 reported in the fourth quarter of 2007. For
the full year ended December 27, 2008, net sales increased 24.6% to
a record $2.246 billion from $1.802 billion in 2007. Full year 2008
sales included $404.5 million of incremental sales from the
businesses acquired in 2007 and 2008. The gross profit margin
decreased 60 basis points to 22.3% for the full year. While margins
were favorably impacted by the Company's Lean Six Sigma and
productivity initiatives, the impact of raw material inflation net
of product price actions decreased margins on an overall basis.
Income from operations was $230.4 million or 10.3% of sales as
compared to the $206.1 million or 11.4% of sales reported for
fiscal year 2007, reflecting the impact of the price-inflation gap
and the lower overall margin contribution from the acquired
businesses. Net income for fiscal 2008 was $128.6 million as
compared to $118.3 million reported for fiscal 2007. Diluted
earnings per share were $3.87, an increase of 10.9% over the $3.49
reported in 2007. The Company ended the year with total debt of
$576.5 million as compared to $564.3 million at the end of 2007.
The primary debt covenant for the Company is Debt-to-EBITDA which
ended the year at approximately 2.0, which is well within the limit
of 3.75. "While the fourth quarter started on a positive note with
a relatively strong sales performance in October, the global
economic issues became apparent as we moved into November and
December. Although we will be facing significant business
challenges in 2009, we are well positioned with our strong balance
sheet and our adherence to maintaining operational efficiency to
meet those challenges. These will continue to serve as powerful
drivers in the Company's long-term growth and profitability goals,"
continued Henry Knueppel, Chairman and Chief Executive Officer.
"Due to the impending headwinds in the sales environment, we are
continuing to aggressively address our production rates, cost
structure and inventory levels. We are adjusting our workforce and
are accelerating productivity and plant restructuring projects. Raw
material costs will provide some relief as the year progresses;
however, this will be substantially muted in the first half as a
result of commodity hedges. Given these situations and the normal
seasonality of our business, we are estimating first quarter
earnings per share to be in the range of $0.38 to $0.46 and
sequential improvement as we move through the year," concluded
Henry Knueppel, Chairman and Chief Executive Officer. The guidance
for the first quarter includes the impact of the change in
accounting for the Company's convertible senior subordinated notes
as prescribed in APB 14-1. This impact will be a non-cash interest
charge in the amount of $1.4 million. The comparable amount for
2008 would have been $1.6 million. This will be further highlighted
in the Company's annual report on Form 10-K when filed with the
Securities and Exchange Commission. Regal Beloit will be holding a
conference call pertaining to this news release at 10:30 AM CT
(11:30 AM ET) on Thursday, February 5. Interested parties should
call 866-394-7807, referencing Regal Beloit conference ID 83558992.
International callers should call 763-488-9117 using the same
conference ID. A replay of the call will be available through
February 19, 2009 at 800-642-1687, conference ID 83558992.
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
Quarterly Report 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, 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; --
difficulties in staffing and 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 27, 2008 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 Form 10-K 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 Form10-K filed on February 27, 2008. STATEMENTS OF
INCOME In Thousands of Dollars (Unaudited) Three Months Ended
Fiscal Year Ended December 27, December 29, December 27, December
29, 2008 2007 2008 2007 Net Sales $482,983 $474,682 $2,246,249
$1,802,497 Cost of Sales 368,376 369,146 1,745,569 1,389,144 Gross
Profit 114,607 105,536 500,680 413,353 Operating Expenses 75,016
60,237 270,249 207,293 Income From Operations 39,591 45,299 230,431
206,060 Interest Expense 6,260 7,449 27,709 22,056 Interest Income
146 238 1,479 933 Income Before Taxes & Minority Interest
33,477 38,088 204,201 184,937 Provision For Income Taxes 11,399
13,382 72,225 63,683 Income Before Minority Interest 22,078 24,706
131,976 121,254 Minority Interest in Income, Net of Tax 640 664
3,389 2,907 Net Income $21,438 $24,042 $128,587 $118,347 Earnings
Per Share of Common Stock: Basic $0.68 $0.77 $4.10 $3.79 Assuming
Dilution $0.67 $0.71 $3.87 $3.49 Weighted Average Number of Shares
Outstanding: Basic 31,393,295 31,326,459 31,343,330 31,252,145
Assuming Dilution 32,623,311 33,840,176 33,250,689 33,920,886
CONDENSED BALANCE SHEETS In Thousands of Dollars (Unaudited)
December 27, December 29, 2008 2007 ASSETS Current Assets: Cash and
Cash Equivalents $65,250 $42,574 Receivables and Other Current
Assets 438,140 367,717 Inventories 357,550 318,200 Total Current
Assets 860,940 728,491 Net Property, Plant and Equipment 358,372
339,343 Other Noncurrent Assets 803,862 794,413 Total Assets
$2,023,174 $1,862,247 LIABILITIES AND SHAREHOLDERS' INVESTMENT
Accounts Payable $204,790 $183,215 Other Current Liabilities
230,229 128,705 Long-Term Debt 561,190 558,918 Deferred Income
Taxes 72,907 75,055 Other Noncurrent Liabilities 130,124 58,325
Total Liabilities 1,199,240 1,004,218 Shareholders' Investment
823,934 858,029 Total Liabilities and Shareholders' Investment
$2,023,174 $1,862,247 SEGMENT INFORMATION In Thousands of Dollars
(Unaudited) Mechanical Segment Three Months Ended Fiscal Year Ended
Dec. 27, Dec. 29, Dec. 27, Dec. 29, 2008 2007 2008 2007 Net Sales
$55,718 $58,120 $247,607 $243,534 Income from Operations $10,115
$7,636 $38,899 $36,371 (Unaudited) Electrical Segment Three Months
Ended Fiscal Year Ended Dec. 27, Dec. 29, Dec. 27, Dec. 29, 2008
2007 2008 2007 Net Sales $427,265 $416,562 $1,998,642 $1,558,963
Income from Operations $29,476 $37,663 $191,532 $169,689 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS In Thousands of Dollars
(Unaudited) For the Year Ended December 27, December 29, December
30, 2008 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income
$128,587 $118,347 $109,806 Adjustments to Reconcile Net Income to
Net Cash Provided from Operating Activities: Depreciation and
amortization 61,457 46,619 37,682 Stock-based Compensation 4,580
3,841 3,572 Minority Interest in Earnings of Subsidiaries 3,389
2,907 2,985 Excess Tax Benefits from Stock-based Compensation
(2,463) (6,712) (3,949) Losses (Gains) on Sales of Property, Plant
and Equipment 124 564 (1,889) Changes in Assets and Liabilities,
Net of Acquisitions (41,475) 35,060 (54,659) Net Cash Provided from
Operating Activities 154,199 200,626 93,548 CASH FLOW FROM
INVESTING ACTIVITIES: Additions to Property, Plant and Equipment
(52,209) (36,628) (52,545) Business Acquisitions, Net of Cash
Acquired (49,702) (337,643) (10,962) Sale of Property, Plant and
Equipment 2,238 637 20,189 Net Cash Used in Investing Activities
(99,673) (373,634) (43,318) CASH FLOWS FROM FINANCING ACTIVITIES:
Long-Term Debt Proceeds 165,200 250,000 8,500 Net (Payments)
Proceeds Short-Term Borrowings (11,820) 5,000 - Payments of
Long-Term Debt (324) (382) (1,294) Net (Repayments) Proceeds from
Commercial Paper Borrowings - (49,000) 24,000 Net Repayments Under
Revolving Credit Facility (162,700) (14,500) (69,900) Proceeds from
the Exercise of Stock Options 2,880 2,190 6,942 Excess Tax Benefits
from Stock-based Compensation 2,463 6,712 3,949 Financing Fees Paid
(454) (1,706) - Distributions to Minority Partners (3,044) (2,741)
(2,538) Purchases of Treasury Stock (4,191) - - Dividends Paid to
Shareholders (19,426) (18,099) (16,627) Net Cash Provided from
(Used in) Financing Activities (31,416) 177,474 (46,968) EFFECT OF
EXCHANGE RATE ON CASH: (434) 1,588 511 Net Increase in Cash and
Cash Equivalents 22,676 6,054 3,773 Cash and Cash Equivalents at
Beginning of Year 42,574 36,520 32,747 Cash and Cash Equivalents at
End of Year $65,250 $42,574 $36,520 DATASOURCE: Regal Beloit
Corporation CONTACT: David A. Barta, Vice President, Chief
Financial Officer of Regal Beloit Corporation, +1-608-361-7405
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