RBC RBC Bearings Incorporated

Regal Beloit Corporation (RBC) posted its adjusted diluted EPS of 93 cents per share in the fourth quarter of fiscal 2011 compared with 65 cents per share in the year-earlier quarter, ahead of management’s guidance range of 67 cents – 73 cents and the Zacks Consensus Estimate of 71 cents.

Overall performance was quite favorable in the eyes of management even though there were instances of weakened performances from the residential Heating Ventilating and Air Conditioning (HVAC) and Chinese region sales.

For full year 2011, adjusted diluted EPS came in at $4.71 versus $3.84 in fiscal 2010, beating the Zacks Consensus Estimate of $4.33.

Revenues

The company generated net sales of $727.0 million, up 30.8% from the year-earlier quarter but down 1.4% sequentially. This slightly missed the Zacks Consensus Estimate of $729 million. The sales growth observed was accruing mainly from the EPC acquisition yields which finally ameliorated businesses for Regal Beloit.

On a segmental basis, revenues from Electrical segment sales improved 33.6% from the year-earlier quarter but decreased 1.1% sequentially to $660.3 million. The annual sales growth was mainly due to increased sales from the North American industrial and commercial sectors apart from demands from the EPC businesses.

Mechanical segment sales were up 8.5% from the year-earlier quarter but down 3.9% sequentially to $66.7 million on the back of strong agricultural sales and end-market growth.

In fiscal 2011, net sales came to $2.81 billion, rising 25.5% annually. Segment-wise, Electrical segment  sales amounted to $2.53 billion, increasing 26.5% annually and Mechanical Segment sales came in at $275 million, increasing 16.5% annually, in 2011.

Margins

Gross margin came in at 23.5% for the fourth quarter of 2011, compared to 23.4% in the year-ago quarter and 24.4% in the third quarter of 2011.

The Electrical Segment reported a gross margin of 23.5% versus 23.3% in the year-ago quarter and 24.0% in the previous quarter. Gross margin in the Mechanical Segment fell to 23.9% from 24.2% in the year-ago quarter and 28.2% in the previous quarter.

Operating margin was 8.1% versus 6.9% in the year-ago quarter and 10.6% in the previous quarter. The year-over-year improvement was mainly due to the cost reduction strategies implemented during the quarter and the ameliorations from the synergy projects.

Operating margin in the Electrical Segment was 8.0% versus 6.7% in the year-ago quarter and 10.4% in the previous quarter. Operating margin in the Mechanical Segment came to 8.8% versus 8.6% in the year-ago quarter and 12.6% in the previous quarter.

In 2011, gross margin amounted to 23.7% compared to 24.5% in 2010, whereas operating margin came in at 9.1% in 2011 versus 10.6% in 2010.

Balance Sheet and Cash flows

Regal Beloit ended the year with cash and investments of $142.6 million, up from $124.4 million at the end of the previous quarter. As of December 31, 2011, long-term debt was $909.2 million, down from $955.1 million at the end of the previous quarter.

During the quarter, the company generated $89.0 million of cash from operating activities compared to $26.8 million in the previous year quarter. Cash used for capital expenditures during the quarter came in at $13.2 million versus $15.0 million in the last year quarter.

Acquisition

During the quarter, Regal Beloit Corporation acquired gearing solutions provider Milwaukee Gear Company to expand the businesses of its Mechanical segment and also to increase market share in the oil and gas sector.

Guidance

With expectations of improvement in its commercial and industrial motors operations, the company is also prescient of the weakened revenues from the residential Heating Ventilating and Air Conditioning (HVAC) applications. Regal Beloit projected earnings per share in the range of $1.07 to $1.13 for the first quarter of fiscal 2012.

Capital expenditures for fiscal 2012 are expected at around $110 million, primarily due to the Chinese factory relocation expenses. Effective tax rate is projected to remain between 31% and 31% in 2012.

 
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