BELOIT, Wis., Feb. 5 /PRNewswire-FirstCall/ — REGAL-BELOIT CORPORATION (NYSE:RBC) today reported sales and earnings for the fourth quarter ended December 30, 2006. Net sales decreased 2.5% to $366.6 million from $376.2 million in the fourth quarter of 2005. The fourth quarter comparison was impacted by strong sales reported in the prior year driven primarily by the volume impact of the HVAC industry’s adoption of the SEER 13 legislation. Net income increased 13.1% to $23.0 million as compared to $20.3 million in the comparable period of 2005. Diluted earnings per share increased 7.9% to $.68 compared to $.63 for the fourth quarter of 2005.
In the Electrical segment, sales decreased 1.3% primarily driven by the HVAC business. Included in the results for the quarter were $14.6 million of sales attributable to the Sinya motor business acquired in the second quarter of 2006. Sales of generators increased over 20% and large industrial motors sales increased over 9%. Sales in the Mechanical segment were down 10.6%, however, the sale of substantially all of the assets of the Cutting Tools business in May 2006 reduced segment sales by approximately $4.3 million or 8.3% for the quarter.
The gross profit margin for the fourth quarter of 2006 was 24.3%, which was 150 basis points above the gross profit margin in the fourth quarter of 2005 as a result of contributions from our Lean Six Sigma and productivity initiatives. Income from operations was $39.5 million or 10.8% of sales, a 3.1% increase over the $38.3 million or 10.2% of sales reported for the fourth quarter of 2005. As a result of the 2006 implementation of FAS123R, operating expenses for the fourth quarter of 2006 included $0.9 million of expense related to equity compensation as compared to $0.1 million in the fourth quarter of 2005. Net income in the fourth quarter of 2006 was $23.0 million, a 13.1% increase from $20.3 million reported in the fourth quarter of 2005.
For the full year ended December 30, 2006, net sales increased 13.4% to $1.620 billion from $1.429 billion in 2005. Full year 2006 sales included $36.5 million of sales from the May 2006 acquisition of Sinya which was partially offset by a $14.0 million decrease resulting from the sale of substantially all of the assets of the Cutting Tools business in May of 2006 and the sale of the Illinois Gear business in May of 2005. The gross profit margin improved 220 basis points to 24.0% for the full year, again reflecting the impact of the Lean Six Sigma and productivity initiatives. Income from operations was $194.0 million or 12.0% of sales as compared to the $134.6 million or 9.4% of sales reported for fiscal year 2005. Net income for fiscal 2006 was $109.8 million, a 57.9% increase from $69.6 million reported for fiscal 2005. Diluted earnings per share were $3.28, an increase of 45.8% over the $2.25 reported in 2005.
“The fourth quarter finished in line with our expectations. Our expectations contemplated a return to a more seasonal pattern as compared to the abnormally strong sales environment in the fourth quarter of 2005. On a lower sales base versus 2005, we were able to deliver a strong income performance driven by contributions from our corporate wide initiatives. Additionally, we are quite pleased with our full year results which included record sales and earnings and much improved operating margins,” said Henry Knueppel, Chairman and Chief Executive Officer.
“We continue to see global growth opportunities in all of our businesses and believe that our initiatives will continue to allow us to improve our operating margins, cash flow and return on invested capital,” added Knueppel. “The first quarter of fiscal 2007 will present another difficult sales comparison for our HVAC business. Even with this tough comp, we are expecting continued growth in earnings and believe E.P.S. will be in a range of $.75 to $.83.”
REGAL-BELOIT will be holding a conference call pertaining to this news release at 1:30 PM CST (2:30 PM EST) on Monday, February 5, 2007. Interested parties should call 800-230-1059, access code 861677. A replay of the call will be available through February 16, 2007 at 800-475-6701, access code 861677.
REGAL-BELOIT CORPORATION is a leading manufacturer of mechanical and electrical motion control and power generation products serving markets throughout the world. REGAL-BELOIT is headquartered in Beloit, Wisconsin, and has manufacturing, sales, and service facilities throughout the United States, Canada, Mexico, Europe and Asia.
CAUTIONARY STATEMENT
The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: With the exception of historical facts, the statements contained in this press release may be forward looking statements. Forward-looking statements represent our management’s judgment regarding future events. We cannot guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors, including: unexpected issues and costs arising from the integration of acquired companies and businesses, marketplace acceptance of our recent acquisitions, including the loss of, or a decline in business from, any significant customers; unanticipated fluctuations in commodity prices and raw material costs and issues affecting our ability to pass increased costs on to our customers; cyclical downturns affecting the markets for capital goods; substantial increases in interest rates that impact the cost of our outstanding debt; the impact of capital market transactions that the Company may effect; unanticipated costs associated with litigation matters; the success of our management in increasing sales and maintaining or improving the operating margins of our businesses; actions taken by our competitors; difficulties in staffing and managing foreign operations; our ability to satisfy various covenant requirements under our credit facility; and other risks and uncertainties described 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 press release are made only as of the date of this release, and we undertake no obligation to update these statements to reflect subsequent events or circumstances.
STATEMENTS OF INCOME
In Thousands of Dollars
(Unaudited)
Three Months Ended Fiscal Year Ended
December 30, December 31, December 30, December 31,
2006 2005 2006 2005
Net Sales $366,649 $376,222 $1,619,545 $1,428,707
Cost of Sales 277,653 290,300 1,230,174 1,117,943
Gross Profit 88,996 85,922 389,371 310,764
Operating Expenses 49,512 47,632 195,354 176,192
Income From
Operations 39,484 38,290 194,017 134,572
Interest Expense 4,599 5,037 19,886 22,090
Interest Income 281 57 711 442
Income Before Taxes
& Minority Interest 35,166 33,310 174,842 112,924
Provision For Income
Taxes 11,239 11,421 62,051 39,829
Income Before
Minority Interest 23,927 21,889 112,791 73,095
Minority Interest in
Income, Net of Tax 958 1,580 2,985 3,538
Net Income $22,969 $20,309 $109,806 $69,557Per Share of Common
Stock:
Earnings Per Share $.74 $.66 $3.56 $2.34
Earnings Per Share –
Assuming Dilution $.68 $.63 $3.28 $2.25
Cash Dividends
Declared $.14 $.13 $.55 $.51
Average Number of
Shares Outstanding 30,981,273 30,644,045 30,846,854 29,675,206
Average Number of
Shares – Assuming
Dilution 33,973,308 32,316,793 33,504,190 30,878,981CONDENSED BALANCE SHEETS
In Thousands of DollarsASSETS (Unaudited) (Audited)
Current Assets: Dec. 30, 2006 Dec. 31, 2005
Cash and Cash Equivalents $36,520 $32,747
Receivables and Other Current Assets 260,671 230,217
Inventories 275,138 224,316
Total Current Assets 572,329 487,280
Net Property, Plant and Equipment 268,880 244,329
Goodwill 546,152 546,168
Other Noncurrent Assets 53,359 64,777
Total Assets $1,440,720 $1,342,554
Liabilities and Shareholders’
Investment
Accounts Payable $108,513 $82,513
Commercial Paper Borrowings 49,000 25,000
Other Current Liabilities. 103,716 111,278
Long-Term Debt 324,028 386,332
Other Noncurrent Liabilities 103,795 89,435
Shareholders’ Investment 751,668 647,996
Total Liabilities and
Shareholders’ Investment $1,440,720 $1,342,554SEGMENT INFORMATION
In Thousands of Dollars
(Unaudited)Mechanical Segment
Three Months Ended Fiscal Year Ended
Dec. 30, Dec. 31, Dec. 30, Dec. 31,
2006 2005 2006 2005
Net Sales $46,070 $51,546 $201,004 $201,011
Income from
Operations $5,931 $5,109 $22,230 $16,044Electrical Segment
Three Months Ended Fiscal Year Ended
Dec. 30, Dec. 31, Dec. 30, Dec. 31,
2006 2005 2006 2005
Net Sales $320,579 $324,676 $1,418,541 $1,227,696
Income from
Operations $33,553 $33,181 $171,787 $118,528
