Regal Beloit Reports Third Quarter Results

- Energy Efficient Products Continue to Gain Traction
- Plant Rationalizations Completed on Plan
- Operating Cash Flow of $110.1 million

• Press Release
• Source: Regal Beloit Corporation
• On 6:00 pm EST, Sunday November 1, 2009

BELOIT, Wis., Nov. 1 /PRNewswire-FirstCall/ -- Regal Beloit Corporation (NYSE: RBC - News) today reported financial results for the third quarter ended September 26, 2009. Net sales of $465.2 million decreased 25.0% as compared to the $620.6 million reported for the third quarter of 2008. Diluted earnings per share were $0.82 as compared to $1.07 for the third quarter of 2008.

"We are pleased to report another sequential improvement in earnings and cash flow," commented Henry Knueppel, Chairman and Chief Executive Officer. "These improvements were driven primarily by continued penetration of our new energy efficiency products and execution of our previously announced plant rationalizations and productivity efforts. We also benefited from temporary tail winds in commodity costs and tax settlements."

Sales for the three months ended September 26, 2009 were $465.2 million, a 25.0% decrease from the $620.6 million reported for the three months ended September 27, 2008. Third quarter 2009 sales included $11.7 million of incremental sales related to the fourth quarter 2008 Dutchi acquisition and the first quarter 2009 CPT acquisition. Sales of high efficiency products were 19.3% of total sales.

In the Electrical segment, sales decreased 24.2% from the prior year third quarter, including the impact of the acquisitions noted above. Exclusive of the acquired businesses, Electrical segment sales decreased 26.3%, largely due to global generator sales decreasing 55.2%, commercial and industrial motors sales in North America decreasing 29.6%, and residential HVAC motor sales decreasing 8.3%. Sales in the Mechanical segment decreased 32.6% from the prior year third quarter.

From a geographic perspective, Asia-based sales decreased 28.3% as compared to the third quarter of 2008. In total, sales to regions outside of the United States were 25.6% of total sales for the three months ended September 26, 2009 in comparison to 26.8% for the comparable period of 2008. The negative impact of foreign currency exchange rates decreased total sales by 1.1%.

The gross profit margin for the three months ended September 26, 2009 was 24.5% as compared to the 21.4% reported for the comparable period of 2008. The gross profit margin for the Electrical segment was 24.6% for the three months ended September 26, 2009 versus 20.6% in the comparable period of 2008. This increase is driven by the mix benefit from high efficiency products, lower material costs and cost reduction efforts, including the benefit from the recent plant closures. The benefit from favorable raw material costs are temporary in nature and are not expected to repeat to the same degree in future quarters. The Mechanical segment gross profit was 23.3% in the three months ended September 26, 2009 versus 28.0% in the comparable period of 2008. The Mechanical segment decrease was primarily driven by the negative fixed cost absorption impact of lower production volumes.

Operating expenses were $65.6 million (14.1% of sales) in the three months ended September 26, 2009 versus $67.1 million (10.8% of sales) in the comparable period of 2008. Operating expenses included an incremental amount of approximately $4.0 million related to the Dutchi and CPT businesses offset by reductions in variable expenses, such as sales commissions, and the impact of cost reduction activities. Other operating expense increases included increased bad debt, legal, and restructuring expense. Electrical segment operating expenses were 13.7% of sales for the three months ended September 26, 2009 versus 10.5% in the comparable period of 2008. Mechanical operating expenses were 17.8% and 13.8% of sales for the three months ended September 26, 2009 and September 27, 2008, respectively.

Income from operations was $48.3 million for the three months ended September 26, 2009 versus $65.7 million in the comparable period of 2008. As a percent of sales, income from operations was 10.4% for the three months ended September 26, 2009 versus 10.6% in the comparable period of 2008. As a percent of sales, Electrical segment operating profit was 10.9% in the third quarter of 2009 versus 10.2% in the comparable period of 2008. Mechanical segment operating profit was 5.6% of sales in the third quarter of 2009 versus 14.3% in the comparable period of 2008.

Net interest expense was $5.0 million for the three months ended September 26, 2009 versus $7.9 million in the comparable period of 2008. The decrease is driven primarily by lower effective interest rates in 2009 versus the comparable period of 2008, and lower average debt outstanding.

The effective tax rate for the three months ended September 26, 2009 was 26.9% versus 36.0% in the prior year period. The decrease in the effective rate is driven primarily by the resolution of certain tax matters and the global distribution of income.

Net income attributable to Regal Beloit Corporation for the three months ended September 26, 2009 was $31.2 million, a decrease of 13.8% versus the $36.1 million reported in the comparable period of 2008. Fully diluted earnings per share was $0.82 as compared to $1.07 per share reported in the third quarter of 2008. (Note: prior year financial results have been restated to reflect the impact of the change in accounting for the Company's convertible senior subordinated notes as required by recent accounting guidance.) The average number of diluted shares was 38,183,014 during the three months ended September 26, 2009 was as compared to 33,715,881 during the comparable period of 2008.

Due to the weighting of both our earnings and the weighted average number of shares outstanding as impacted by our stock offering completed in the second quarter, the sum of the three quarters' earnings per share does not equal the year to date earnings per share.

Cash flow from operations was $110.1 million for the three months ended September 26, 2009, comprised of net income of $31.7 million, non-cash expenses of $18.3 million and a reduction of net assets of $60.1 million. This compares to the cash flow from operations of $42.3 million in the comparable prior year period, which was comprised of the net income of $37.0 million, non-cash expenses of $16.5 million and an increase in net assets of $11.2 million.

The Company ended the third quarter with total debt of $530.6 million as compared to $553.1 million at the end of the second quarter of 2009. Cash and cash equivalents increased $63.8 million during the third quarter to $354.3 million.

Subsequent to September 26, 2009 several additional 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, approximately $47.5 million, will be paid in cash with the premium paid in shares of the Company's common stock. The current diluted earnings per share calculation includes an amount estimated for the dilutive effect of the premium.

"Looking forward to the fourth quarter, ending January 2, 2010, we are expecting the normal seasonal slowing in terms of revenues," continued Mr. Knueppel. "We are expecting to see the continued benefits from our cost reduction efforts, plant rationalizations and sales of energy efficient products. We are projecting earnings for the fourth quarter to be nearly equal to 2008 and in range of $.59 to $.66 per share."

Regal Beloit will be holding a conference call pertaining to this news release at 1:00 PM CT (2:00 PM ET) on Monday November 2, 2009. Interested parties should call 866-394-7807, referencing Regal Beloit conference ID 38452997. International callers should call 763-488-9117 using the same conference ID. A replay of the call will be available through December 2, 2009 at 800-642-1687, conference ID 38452997. 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        Nine Months Ended
                           ------------------        -----------------
                                    (As Adjusted)*              (As Adjusted)*
                       September 26, September 27, September 26, September 27,
                           2009          2008          2009          2008
                           ----          ----          ----          ----
    Net Sales            $465,192      $620,607    $1,363,016     $1,763,266

    Cost of Sales         351,323       487,810     1,063,955      1,377,193
                          -------       -------     ---------      ---------

      Gross Profit        113,869       132,797       299,061        386,073

    Operating Expenses     65,551        67,063       193,084        195,233
                           ------        ------       -------        -------

      Income From
       Operations          48,318        65,734       105,977        190,840

    Interest Expense        5,360         8,341        17,980         25,111

    Interest Income           359           418           869          1,333
                              ---           ---           ---          -----

      Income Before Taxes &
       Noncontrolling
       Interests           43,317        57,811        88,866        167,062

    Provision For Income
     Taxes                 11,645        20,790        25,697         59,434
                           ------        ------        ------         ------

      Net Income           31,672        37,021        63,169        107,628

    Less: Net Income
     Attributable to
     Noncontrolling
     Interests, net of tax    522           882         2,780          2,749
                              ---           ---         -----          -----

      Net Income Attributable
       to Regal Beloit
       Corporation        $31,150       $36,139       $60,389       $104,879
                          =======       =======       =======       ========

    Earnings Per Share of
     Common Stock:

      Basic                 $0.86         $1.15         $1.80          $3.35
                            =====         =====         =====          =====

      Assuming Dilution     $0.82         $1.07         $1.71          $3.14
                            =====         =====         =====          =====

    Cash Dividends Declared $0.16         $0.16         $0.48          $0.47
                            =====         =====         =====          =====

    Weighted Average Number
     of Shares Outstanding:

      Basic            36,055,784    31,357,433    33,589,782     31,326,675
                       ==========    ==========    ==========     ==========
      Assuming
       Dilution        38,183,014    33,715,881    35,294,400     33,452,880
                       ==========    ==========    ==========     ==========

    *The Company adopted new accounting guidance related to Convertible debt
    which requires an adjustment to previously disclosed condensed
    consolidated financial statements.  The adjustment affected convertible
    debt, equity and interest expense.



    CONDENSED CONSOLIDATED BALANCE SHEETS
    Unaudited
    In Thousands of Dollars

                                                           (As Adjusted
                                                           From Audited
                                           (Unaudited)      Statements)*
                                           September 26,    December 27,
    ASSETS                                     2009             2008
                                               ----             ----
    Current Assets:
      Cash and Cash Equivalents             $354,311          $65,250
      Trade Receivables and Other Current
       Assets                                400,242          436,094
      Inventories                            259,863          359,918
                                             -------          -------
        Total Current Assets               1,014,416          861,262

    Net Property, Plant and Equipment        345,156          358,372

    Other Noncurrent Assets                  801,454          803,862
                                             -------          -------
        Total Assets                      $2,161,026       $2,023,496
                                          ==========       ==========


    LIABILITIES AND EQUITY
    Accounts Payable                        $175,278         $202,456
    Other Current Liabilities                215,140          228,546
    Long-Term Debt                           473,270          560,127
    Deferred Income Taxes                     88,840           72,119
    Other Noncurrent Liabilities              82,516          122,607
                                              ------          -------
        Total Liabilities                 $1,035,044       $1,185,855

    Equity                                 1,125,982          837,641
                                           ---------         -------
        Total Liabilities and Equity      $2,161,026       $2,023,496
                                          ==========       ==========



    *The Company adopted new accounting guidance related to Convertible debt
    which requires an adjustment to previously disclosed condensed
    consolidated financial statements.  The adjustment affected convertible
    debt, equity and interest expense.



    SEGMENT INFORMATION
    Unaudited
    In Thousands of Dollars

                      Mechanical Segment          Electrical Segment
                      ------------------          ------------------
                     Three Months Ending         Three Months Ending
                     -------------------         -------------------
                  Sept 26,         Sept 27,    Sept 26,       Sept 27,
                     2009            2008        2009           2008
                   --------       ---------   --------       --------
    Net Sales      $43,186         $64,078    $422,006       $556,529
    Income from
     Operation       2,398           9,137      45,920         56,597

                     Nine Months Ending           Nine Months Ending
                     ------------------           ------------------
                  Sept 26,         Sept 27,    Sept 26,       Sept 27,
                     2009            2008        2009           2008
                   --------       ---------   --------       --------
    Net Sales     $142,404        $191,889  $1,220,612     $1,571,377
    Income from
     Operation      12,813          28,784      93,164        162,056



    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
    Unaudited
    In Thousands of Dollars

                                                     Nine Months Ended
                                                     -----------------
                                                                (As Adjusted)*
                                              September 26,      September 27,
                                                  2009               2008
                                              -------------      -------------
    CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                  $63,169          $107,628
     Adjustments to reconcile net income to net
      cash provided by operating activities:
        Depreciation and amortization             50,573            45,128
        Excess tax benefits from
         stock-based compensation                 (1,862)           (2,463)
        Loss on sale of assets, net                  243               124
        Stock-based compensation expense           3,258             3,356
        Non-cash convertible debt deferred
         financing costs                           1,063             3,662
        Change in assets and liabilities,
         net of acquisitions                     119,124             1,148
                                                 -------             -----
        Net cash provided by operating
         activities                              235,568           158,583

    CASH FLOWS FROM INVESTING ACTIVITIES:
     Additions to property, plant and equipment  (25,884)          (43,947)
     Purchases of investment securities          (10,696)                -
     Business acquisitions, net of cash
      acquired                                    (1,500)          (15,805)
     Sale of property, plant and equipment           361             2,158
                                                     ---             -----
     Net cash used in investing activities       (37,719)          (57,594)

    CASH FLOWS FROM FINANCING ACTIVITIES:         (5,480)          (10,030)
     Net repayments of short-term borrowings        (152)             (293)
     Payments of long-term debt                  (13,207)         (169,700)
     Net borrowings (repayments) under
      revolving credit facility                        -           165,000
     Net proceeds from long-term borrowings      (27,609)                -
     Net proceeds from the sale of common stock  150,370                 -
     Dividends paid to shareholders              (15,794)          (14,404)
     Purchases of treasury stock                       -            (4,191)
     Proceeds from the exercise of stock options     753             2,740
     Excess tax benefits from stock-based
      compensation                                 1,862             2,463
     Financing fees paid                               -              (454)
                                                     ---              ----
     Net cash provided by (used in)
      financing activities                        90,743           (28,869)

    EFFECT OF EXCHANGE RATES ON CASH                 469              (972)
                                                     ---              ----

     Net increase in cash and cash equivalents   289,061            71,148
     Cash and cash equivalents at beginning of
      period                                      65,250            42,574
                                                  ------            ------
     Cash and cash equivalents at end of
      period                                    $354,311          $113,722
                                                ========          ========

    *The Company adopted new accounting guidance related to Convertible debt
    which requires an adjustment to previously disclosed condensed
    consolidated financial statements.  The adjustment affected convertible
    debt, equity and interest expense.

Buzz up!