(State or other jurisdiction of (IRS Employer(Mark One)xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 o For the quarterly period ended March 31, 2005oTRANSITIONTRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934Wisconsin 39-0875718 For the transition period from ___________________ to ___________________Commission File Number: 001-07283REGAL-BELOIT CORPORATION(Exact name of registrant as specified in its charter)Wisconsin39-0875718incorporation or organization)
Identification Number)200 State Street, Beloit, Wisconsin 53511-6254(Address of principal executive offices)(608) 364-8800(Registrant’s telephone number, including area code)x NOo YES þx NOo29,045,022April 30,July 31, 2005)
• • • • • • • • • • • 2REGAL-BELOIT CORPORATION
FORM 10-Q
For Quarter Ended March 31,June 29, 2005Page No.
Page No.3 4 5 6 – 10 1011 - 11141214 1214 15 16 1316 16 14Certification of CFO Certification of CEO/CFO Unexpected issues and costs arising from the integration of acquired companies and businesses, such as our recent acquisitions of the HVAC motors and capacitors businesses and the Commercial AC motors business from General Electric Company (“GE”) ;, including any effect the acquired businesses may have on our ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002;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 our products;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.
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| March 31, 2005 |
| Dec. 31, 2004 |
| ||
|
|
|
| ||||
|
| (Unaudited) |
| (From Audited |
| ||
ASSETS |
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
Cash and Cash Equivalents |
| $ | 28,882 |
| $ | 31,275 |
|
Receivables, less Allowance for Doubtful Accounts of $2,396 in 2005 and $2,376 in 2004 |
|
| 201,092 |
|
| 176,941 |
|
Income Tax Receivable |
|
| 240 |
|
| 242 |
|
Future Income Tax Benefits |
|
| 6,325 |
|
| 6,493 |
|
Inventories |
|
| 245,594 |
|
| 246,816 |
|
Prepaid Expenses and Other Current Assets |
|
| 17,708 |
|
| 13,152 |
|
|
|
|
| ||||
Total Current Assets |
|
| 499,841 |
|
| 474,919 |
|
Property, Plant and Equipment: |
|
|
|
|
|
|
|
Land and Improvements |
|
| 19,012 |
|
| 19,026 |
|
Buildings and Improvements |
|
| 104,707 |
|
| 104,460 |
|
Machinery and Equipment |
|
| 341,398 |
|
| 335,307 |
|
|
|
|
| ||||
Property, Plant and Equipment, at Cost |
|
| 465,117 |
|
| 458,793 |
|
Less - Accumulated Depreciation |
|
| (208,720 | ) |
| (205,120 | ) |
|
|
|
| ||||
Net Property, Plant and Equipment |
|
| 256,397 |
|
| 253,673 |
|
Goodwill |
|
| 552,972 |
|
| 544,440 |
|
Purchased Intangible Assets, net of Amortization |
|
| 50,554 |
|
| 52,058 |
|
Other Noncurrent Assets |
|
| 25,510 |
|
| 26,962 |
|
|
|
|
| ||||
Total Assets |
| $ | 1,385,274 |
| $ | 1,352,052 |
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|
|
|
| ||||
LIABILITIES AND SHAREHOLDERS’ INVESTMENT |
|
|
|
|
|
|
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Current Liabilities: |
|
|
|
|
|
|
|
Accounts Payable |
| $ | 102,339 |
| $ | 106,374 |
|
Dividends Payable |
|
| 3,483 |
|
| 3,483 |
|
Accrued Compensation and Employee Benefits |
|
| 35,427 |
|
| 30,256 |
|
Other Accrued Expenses |
|
| 48,279 |
|
| 44,094 |
|
Income Taxes Payable |
|
| 9,264 |
|
| 10,731 |
|
Current Maturities of Long-Term Debt |
|
| 271 |
|
| 271 |
|
|
|
|
| ||||
Total Current Liabilities |
|
| 199,063 |
|
| 195,209 |
|
Long-Term Debt |
|
| 563,572 |
|
| 547,350 |
|
Deferred Income Taxes |
|
| 49,470 |
|
| 48,663 |
|
Other Noncurrent Liabilities |
|
| 20,617 |
|
| 17,359 |
|
Minority Interest in Consolidated Subsidiaries |
|
| 4,814 |
|
| 5,292 |
|
Shareholders’ Investment: |
|
|
|
|
|
|
|
Common Stock, $.01 par value, 50,000,000 shares authorized, 29,814,434 issued in 2005 and 29,798,188 issued in 2004 |
|
| 298 |
|
| 298 |
|
Additional Paid-In Capital |
|
| 265,010 |
|
| 263,790 |
|
Less – Treasury Stock, at cost 774,100 shares in 2005 and 2004 |
|
| (15,228 | ) |
| (15,228 | ) |
Retained Earnings |
|
| 297,640 |
|
| 288,837 |
|
Unearned Compensation |
|
| (1,033 | ) |
| (224 | ) |
Accumulated Other Comprehensive Income |
|
| 1,051 |
|
| 706 |
|
|
|
|
| ||||
Total Shareholders’ Investment |
|
| 547,738 |
|
| 538,179 |
|
|
|
|
| ||||
Total Liabilities and Shareholders’ Investment |
| $ | 1,385,274 |
| $ | 1,352,052 |
|
|
|
|
|
(From Audited | ||||||||
(Unaudited) | Statements) | |||||||
June 29, 2005 | Dec. 31, 2004 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and Cash Equivalents | $ | 29,066 | $ | 31,275 | ||||
Receivables, less Allowance for Doubtful Accounts of $2,742 in 2005 and $2,376 in 2004 | 200,178 | 176,941 | ||||||
Deferred Income Taxes | 4,148 | 6,493 | ||||||
Inventories | 234,642 | 246,816 | ||||||
Prepaid Expenses and Other Current Assets | 30,549 | 13,394 | ||||||
Total Current Assets | 498,583 | 474,919 | ||||||
Property, Plant and Equipment: | ||||||||
Land and Improvements | 17,204 | 19,026 | ||||||
Buildings and Improvements | 102,443 | 104,460 | ||||||
Machinery and Equipment | 335,004 | 335,307 | ||||||
Property, Plant and Equipment, at Cost | 454,651 | 458,793 | ||||||
Less — Accumulated Depreciation | (204,780 | ) | (205,120 | ) | ||||
Net Property, Plant and Equipment | 249,871 | 253,673 | ||||||
Goodwill | 554,038 | 544,440 | ||||||
Purchased Intangible Assets, net of Amortization | 48,866 | 52,058 | ||||||
Other Noncurrent Assets | 23,925 | 26,962 | ||||||
Total Assets | $ | 1,375,283 | $ | 1,352,052 | ||||
LIABILITIES AND SHAREHOLDERS’ INVESTMENT | ||||||||
Current Liabilities: | ||||||||
Accounts Payable | $ | 82,116 | $ | 106,374 | ||||
Dividends Payable | 3,781 | 3,483 | ||||||
Accrued Compensation and Employee Benefits | 39,284 | 30,256 | ||||||
Other Accrued Expenses | 54,477 | 44,094 | ||||||
Income Taxes Payable | 19,313 | 10,731 | ||||||
Current Maturities of Long-Term Debt | 476 | 271 | ||||||
Total Current Liabilities | 199,447 | 195,209 | ||||||
Long-Term Debt | 536,895 | 547,350 | ||||||
Deferred Income Taxes | 48,653 | 48,663 | ||||||
Other Noncurrent Liabilities | 19,901 | 17,359 | ||||||
Minority Interest in Consolidated Subsidiaries | 5,115 | 5,292 | ||||||
Shareholders’ Investment: | ||||||||
Common Stock, $.01 par value, 50,000,000 shares authorized, 29,860,022 issued in 2005 and 29,798,188 issued in 2004 | 299 | 298 | ||||||
Additional Paid-In Capital | 265,826 | 263,790 | ||||||
Less – Treasury Stock, at cost 774,100 shares in 2005 and 2004 | (15,228 | ) | (15,228 | ) | ||||
Retained Earnings | 312,302 | 288,837 | ||||||
Unearned Compensation | (844 | ) | (224 | ) | ||||
Accumulated Other Comprehensive Income | 2,917 | 706 | ||||||
Total Shareholders’ Investment | 565,272 | 538,179 | ||||||
Total Liabilities and Shareholders’ Investment | $ | 1,375,283 | $ | 1,352,052 | ||||
3
Three Months Ended March 31, March 30, (Unaudited) Net Sales $ 337,822 $ 163,084 Cost of Sales 269,378 124,897 Gross Profit 68,444 38,187 Operating Expenses 42,579 25,743 Income From Operations 25,865 12,444 Interest Expense 5,454 1,327 Interest Income 48 3 Income Before Taxes & Minority Interest 20,459 11,120 Provision For Income Taxes 7,642 4,003 Income Before Minority Interest 12,817 7,117 Minority Interest in Income, Net of Tax 531 257 Net Income $ 12,286 $ 6,860 Per Share of Common Stock: Earnings Per Share – Basic $ .42 $ .27 Earnings Per Share – Assuming Dilution $ .41 $ .27 Cash Dividends Declared $ .12 $ .12 Average Number of Shares Outstanding - Basic 29,033,901 25,041,559 Average Number of Shares Outstanding - Assuming Dilution 30,244,393 25,278,192 4
2005
2004 (Unaudited) Three Months Ended Six Months Ended June 29, June 29, June 29, June 29, 2005 2004 2005 2004 Net Sales $ 368,768 $ 177,652 $ 706,591 $ 340,736 Cost of Sales 288,950 136,811 558,329 261,708 Gross Profit 79,818 40,841 148,262 79,028 Operating Expenses 44,007 26,667 86,586 52,322 Income From Operations 35,811 14,174 61,676 26,706 Interest Expense 5,894 1,509 11,348 2,836 Interest Income 28 29 76 32 Income Before Taxes & Minority Interest 29,945 12,694 50,404 23,902 �� Provision For Income Taxes 10,996 4,558 18,638 8,594 Income Before Minority Interest 18,949 8,136 31,766 15,308 Minority Interest in Income, Net of Tax 504 507 1,035 819 Net Income $ 18,445 $ 7,629 $ 30,731 $ 14,489 Per Share of Common Stock: Earnings Per Share – Basic $ .63 $ .31 $ 1.06 $ .59 Earnings Per Share – Assuming Dilution $ .62 $ .31 $ 1.03 $ .58 Cash Dividends Declared $ .13 $ .12 $ .25 $ .24 Average Number of Shares Outstanding - Basic 29,064,518 24,450,391 29,049,209 24,744,342 Average Number of Shares Outstanding - Assuming Dilution 29,720,400 24,677,155 29,982,397 24,977,674
Three Months Ended March 31, March 30, (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 12,286 $ 6,860 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,999 5,226 Gain on sale of assets (135 ) — Change in assets and liabilities (21,989 ) (7,421 ) Net cash (used in) provided by operating activities (839 ) 4,665 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (7,213 ) (3,408 ) Business acquisitions, net of cash acquired (6,197 ) — Sale of property, plant and equipment 501 11 Other, net (252 ) (673 ) Net cash used in investing activities (13,161 ) (4,070 ) CASH FLOWS FROM FINANCING ACTIVITIES: Additions to long-term debt 15,798 6,966 Dividends paid to shareholders (3,483 ) (3,004 ) Dividends paid to minority partners (1,112 ) — Stock issued under option plans 268 502 Net cash provided by financing activities 11,471 4,464 EFFECT OF EXCHANGE RATE ON CASH 136 1 Net (decrease)/increase in cash and cash equivalents (2,393 ) 5,060 Cash and cash equivalents at beginning of period 31,275 9,100 Cash and cash equivalents at end of period $ 28,882 $ 14,160 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for: Interest $ 7,027 $ 1,392 Income taxes $ 4,929 $ 4,814 5
2005
2004 (Unaudited) Six Months Ended June 29, June 29, 2005 2004 Net income $ 30,731 $ 14,489 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,845 11,031 Gain on sale of assets (101 ) — Change in assets and liabilities (15,718 ) (9,209 ) Net cash provided by operating activities 33,757 16,311 Additions to property, plant and equipment (15,549 ) (6,699 ) Business acquisitions, net of cash acquired (5,490 ) — Sale of property, plant and equipment 4,156 1,169 Other, net (344 ) (2,828 ) Net cash used in investing activities (17,227 ) (8,358 ) Proceeds from (payment of) long-term debt (11,018 ) 18,976 Repurchase of common stock — (12,499 ) Dividends paid to shareholders (6,968 ) (6,011 ) Dividends paid to minority partners (1,315 ) — Stock issued under option plans 1,146 553 Capitalized financing fees — (3,801 ) Net cash used in financing activities (18,155 ) (2,782 ) (584 ) 12 Net (decrease) increase in cash and cash equivalents (2,209 ) 5,159 Cash and cash equivalents at beginning of period 31,275 9,100 Cash and cash equivalents at end of period $ 29,066 $ 14,259 Cash paid for: Interest $ 10,628 $ 2,234 Income taxes $ 5,497 $ 5,559
March 31, December 31, Raw Material 13 % 13 % Work-in Process 25 % 25 % Finished Goods 62 % 62 % First Quarter Ending March 31, March 30, (In Thousands of Dollars) Net income as reported $ 12,286 $ 6,860 Comprehensive income from: Cumulative translation adjustments (1,249 ) (22 ) Changes in fair value of hedging activities, net of tax 2,699 365 Hedging activities reclassified into earnings from AOCI (1,105 ) (216 ) 345 127 Comprehensive income $ 12,631 $ 6,987 First Quarter Ending March 31, March 30, (In Thousands of Dollars) Beginning balance $ 5,007 $ 2,953 Deduct: Payments (1,656 ) (1,116 ) Add: Provision 1,886 1,129 Ending balance $ 5,237 $ 2,966 6March 31,June 29, 2005
(Unaudited)It is suggested theseThese statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (the “2004 Annual Report”).
2005
2004 June 29, 2005 December 31, 2004 Raw Material 14 % 13 % Work-in Process 25 % 25 % Finished Goods 61 % 62 % first quarterssecond quarter and six months of 2005 and 2004 is as follows:
2005
2004 (In Thousands of Dollars) Second Quarter Ended Six Months Ended June 29, June 29, June 29, June 29, 2005 2004 2005 2004 Net income as reported $ 18,445 $ 7,629 $ 30,731 $ 14,489 Comprehensive income (expense) from: Cumulative translation adjustments (729 ) (592 ) (1,978 ) (615 ) Changes in fair value of hedging activities, net of tax 2,409 (91 ) 5,108 190 Hedging activities reclassified into earnings from accumulated other comprehensive income (“AOCI”), net of tax (73 ) (49 ) (1,178 ) (180 ) 1,607 (732 ) 1,952 (605 ) Comprehensive income $ 20,052 $ 6,897 $ 32,683 $ 13,884 first quarterssecond quarter and six months of 2005 and 2004:
2005
2004 (In Thousands of Dollars) Second Quarter Ended Six Months Ended June 29, June 29, June 29, June 29, 2005 2004 2005 2004 Beginning balance $ 5,237 $ 2,966 $ 5,007 $ 2,953 Deduct: Payments (1,149 ) (1,104 ) (2,805 ) (2,220 ) Add: Provision 1,527 1,161 3,413 2,290 Ending balance $ 5,615 $ 3,023 $ 5,615 $ 3,023
Mechanical Segment Electrical Segment 2005 2004 2005 2004 (In Thousands of Dollars) Net sales $ 48,601 $ 46,898 $ 289,222 $ 116,186 Income from operations $ 2,738 $ 2,745 $ 23,127 $ 9,699 Income from operations as a% of net sales 5.6 % 5.9 % 8.0 % 8.3 % Goodwill at end of period $ 530 $ 530 $ 552,442 $ 310,686 Electrical Mechanical Total Balance as of December 31, 2004 $ 543.9 $ 0.5 $ 544.4 GE HVAC acquisition valuation adjustments 4.3 — 4.3 GE HVAC and CAC acquisition costs 3.3 — 3.3 Acquisition of Changzhou Modern Technologies .9 — .9 Balance as of March 31, 2005 $ 552.4 $ 0.5 $ 552.9 7 December 31, 2004 Carrying Accumulated Net Amortized intangible assets: Non-Compete Agreements $ 2.5 $ 0.0 $ 2.5 Trademarks 4.9 0.4 4.5 Patents 15.4 0.0 15.4 Engineering Drawings 1.2 0.0 1.2 Customer Relationships 28.6 0.2 28.4 Total $ 52.6 $ 0.6 $ 52.0 March 31, 2005 Carrying Accumulated Net Amortized intangible assets: Non-Compete Agreements $ 2.5 $ 0.2 $ 2.3 Trademarks 4.9 0.7 4.2 Patents 15.4 0.4 15.0 Engineering Drawings 1.2 0.0 1.2 Customer Relationships 28.6 0.8 27.8 Total $ 52.6 $ 2.1 $ 50.5
First Quarter
First Quarter (In Thousands of Dollars) Mechanical Segment Electrical Segment Second Quarter Six Months Second Quarter Six Months June 29, June 29, June 29, June 29, June 29, June 29, June 29, June 29, 2005 2004 2005 2004 2005 2004 2005 2004 Net Sales $ 51,546 $ 51,142 $ 100,147 $ 98,040 $ 317,222 $ 126,510 $ 606,444 $ 242,696 Income from Operations $ 3,139 $ 3,889 $ 5,876 $ 6,634 $ 32,672 $ 10,285 $ 55,800 $ 20,072 -% of Net Sales 6.1 % 7.6 % 5.9 % 6.8 % 10.3 % 8.1 % 9.2 % 8.3 % Goodwill at end of period $ 530 $ 530 $ 530 $ 530 $ 553,508 $ 310,686 $ 553,508 $ 310,686 3six months ended March 31,June 29, 2005 are as follows (in millions):
Segment
Segment Electrical Mechanical Segment Segment Total Balance as of December 31, 2004 $ 543.9 $ 0.5 $ 544.4 GE HVAC acquisition adjustments 5.4 — 5.4 GE HVAC and CAC acquisition costs 3.3 — 3.3 Acquisition of Changzhou Modern Technologies .9 — .9 Balance as of June 29, 2005 $ 553.5 $ 0.5 $ 554.0 2004 as well as with the February 2005 acquisition of Changzhou Modern Technologies.2004. The preliminary valuation adjustments result from management’s review and valuation of acquired assets of the businesses. For the period ending March 31,six months ended June 29, 2005, the valuationabove adjustments result primarily from the adjustment of finished goods inventory to fair market value. December 31, 2004 Weighted – Carrying Accumulated Average Life (yrs) Amount Amortization Net Amortized intangible assets: Non-Compete Agreements 5.0 $ 2.5 $ 0.0 $ 2.5 Trademarks 4.0 4.9 0.4 4.5 Patents 10.0 15.4 0.0 15.4 Engineering Drawings 10.0 1.2 0.0 1.2 Customer Relationships 10.0 28.6 0.2 28.4 Total 9.2 $ 52.6 $ 0.6 $ 52.0 June 29, 2005 Weighted – Carrying Accumulated Average Life (yrs) Amount Amortization Net Amortized intangible assets: Non-Compete Agreements 5.0 $ 2.5 $ 0.3 $ 2.2 Trademarks 4.0 4.9 1.1 3.8 Patents 10.0 15.4 0.8 14.6 Engineering Drawings 10.0 1.2 0.1 1.1 Customer Relationships 10.0 28.6 1.4 27.2 Total 9.2 $ 52.6 $ 3.7 $ 48.9
Amount
Amortization
Amount
Amortization
7
7. STOCK-BASED COMPENSATION
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|
| First Quarter Ending |
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| March 31, |
| March 30, |
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|
|
| (In Thousands of Dollars, Except |
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Net Income: |
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|
|
|
|
|
| |
As reported |
| $ | 12,286 |
| $ | 6,860 |
| |
Deduct: | Total stock-based employee compensation expense, net of related tax effects |
|
| (467 | ) |
| (152 | ) |
Add: | Total stock-based employee compensation included in net income, net of related tax effects |
|
| 160 |
|
| 17 |
|
|
|
|
|
| ||||
Pro-forma |
| $ | 11,979 |
| $ | 6,725 |
| |
Earnings per share – basic: |
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|
|
|
|
|
| |
As reported |
| $ | .42 |
| $ | .27 |
| |
Pro-forma |
| $ | .41 |
| $ | .27 |
| |
Earnings per share – assuming dilution: |
|
|
|
|
|
|
| |
As reported |
| $ | .41 |
| $ | .27 |
| |
Pro-forma |
| $ | .40 |
| $ | .27 |
|
(In Thousands of Dollars) | ||||||||||||||||
Second Quarter | Six Months Ended | |||||||||||||||
June 29, | June 29, | June 29, | June 29, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net Income: | ||||||||||||||||
As reported | $ | 18,445 | $ | 7,629 | $ | 30,731 | $ | 14,489 | ||||||||
Deduct: Total stock-based employee compensation expense, net of related tax effects | (415 | ) | (229 | ) | (882 | ) | (368 | ) | ||||||||
Add: Total stock-based employee compensation included in net income, net of related tax effects | 102 | 32 | 262 | 49 | ||||||||||||
Pro-forma | $ | 18,132 | $ | 7,432 | $ | 30,111 | $ | 14,170 | ||||||||
Earnings per share – basic: | ||||||||||||||||
As reported | $ | .63 | $ | .31 | $ | 1.06 | $ | .59 | ||||||||
Pro-forma | $ | .62 | $ | .30 | $ | 1.04 | $ | .57 | ||||||||
Earnings per share – assuming dilution: | ||||||||||||||||
As reported | $ | .62 | $ | .31 | $ | 1.03 | $ | .58 | ||||||||
Pro-forma | $ | .61 | $ | .30 | $ | 1.01 | $ | .57 |
(In Thousands of Dollars) | ||||||||||||||||
Second Quarter | Six Months Ended | |||||||||||||||
June 29, | June 29, | June 29, | June 29, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Service cost | $ | 651 | $ | 366 | $ | 1,302 | $ | 731 | ||||||||
Interest cost | 886 | 902 | 1,772 | 1,804 | ||||||||||||
Expected return on plan assets | (1,123 | ) | (1,073 | ) | (2,246 | ) | (2,147 | ) | ||||||||
Amortization of prior service cost | 32 | 25 | 64 | 50 | ||||||||||||
Amortization of net loss | 244 | 240 | 488 | 480 | ||||||||||||
Net periodic benefit cost | $ | 690 | $ | 460 | $ | 1,380 | $ | 918 | ||||||||
8
|
| First Quarter Ending |
| ||||
|
|
| |||||
|
| March 31, |
| March 30, |
| ||
|
|
|
| ||||
|
| (In Thousands of Dollars) |
| ||||
Service cost |
| $ | 651 |
| $ | 365 |
|
Interest cost |
|
| 886 |
|
| 902 |
|
Expected return on plan assets |
|
| (1,123 | ) |
| (1,074 | ) |
Amortization of prior service cost |
|
| 32 |
|
| 25 |
|
Amortization of net loss |
|
| 244 |
|
| 240 |
|
|
|
|
| ||||
Net periodic benefit cost |
| $ | 690 |
| $ | 458 |
|
|
|
|
|
8
9. EARNINGS PER SHARE (EPS)
|
| First Quarter Ending |
| ||||
|
|
| |||||
|
| March 31, |
| March 30, |
| ||
|
|
|
| ||||
Denominator for basic EPS – weighted average shares |
|
| 29,033,901 |
|
| 25,041,559 |
|
Effect of dilutive securities |
|
| 1,210,492 |
|
| 236,633 |
|
|
|
|
| ||||
Denominator for diluted EPS |
|
| 30,244,393 |
|
| 25,278,192 |
|
Second Quarter Ended | Six Months Ended | |||||||||||||||
June 29, | June 29, | June 29, | June 29, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Denominator for basic EPS – weighted average shares | 29,065 | 24,450 | 29,049 | 24,744 | ||||||||||||
Effect of dilutive securities | 655 | 227 | 933 | 234 | ||||||||||||
Denominator for diluted EPS | 29,720 | 24,677 | 29,982 | 24,978 |
the effect of such options being anti-dilutive.
ruled.
matter.
9
9
In the firstsecond quarter and six months of 2005, $1.6$2.3 million and $3.9 million, respectively, of net increased hedgefair market value of derivative instruments was recorded in AOCI. At March 31,June 29, 2005, the Company had a balance of $3.4$4.7 million in other current assets and a corresponding net after tax gain of $2.1$2.9 million in AOCI. Of the total other current assets and AOCI $.1related to derivative instruments, $1.7 million and $1.0 million, respectively, were related to currency hedges, with the balance relating to commodity hedges.
The Company estimates that $3.7 million of gains will be reclassified from AOCI to earnings within the next 12 months, based on valuations at June 29, 2005.
10
first half of 2005 was 21.0%, compared to 23.2% in the comparable period of 2004. Income from operations for the first half of 2005 was $61.7 million, a 130.9% increase from the $26.7 million reported in the comparable period of 2004. As a percent of sales, income from operations was 8.7% versus 7.8% reported for the first six months of 2004. 11$337.8$368.8 million, which is a 107.1%107.5% increase over $163.1$177.7 million in the firstsecond quarter of 2004. Included in the sales are $155were $177.5 million of sales from the Commercial AC Motors and HVAC Motors and Capacitors businesses we acquired in 2004. We continued to see strong demand throughout the majority ofSales in our markets. Electrical segment increased 150.7% including the sales attributable to the acquired businesses. Approximately 93% of the sales increase is attributable to the sales from the acquired businesses. Sales in our Mechanical segment, which reflect the impact of the sale of the Illinois Gear business in May 2005, increased 148.9%.8%. The sale of the Illinois Gear business reduced segment sales by approximately $1.5 million for the second quarter.increased 3.6%were $100.1 million as strong sales at our Hub City, Mastergear, and Durst divisions were partially offset by soft salescompared to $98.0 million in our Cutting Tools and ElectraGear divisions.Grosscomparable 2004.20.3%21.6%, which was consistent withcompared to the fourth23.0% reported in the second quarter of 2004 and compares to 23.4% in20.3% reported for the first quarter of 2004.2005. Gross margins werecontinued to be impacted by continued raw material cost increases which were, only partiallyhowever, mostly offset by pricingprice increases we instituted and productivity actions. This difference impacted total margins by approximately 70 basis points for the quarter.improvements we achieved. Additionally, the gross margin of the acquired businesses reduced our margins in total, due primarily to our operations in certain higher cost facilities retained by GE, from which we are transitioning our operations. Our gross margin for the current operating cost structure. 12.6%11.9% of sales versus 15.8%15.0% in the firstsecond quarter of 2004, reflecting the volume leveraging of fixed costs and the impact of the acquired GE businesses, which have lower operating expenses as a percent of sales as compared to the remainder of our businesses. Operating expenses in the first half of 2005 were 12.3% of sales versus 15.4% in the comparable period of 2004.firstsecond quarter was $25.9$35.8 million versus $12.4$14.2 million in the firstsecond quarter of 2004, an increase of 108.9%152.7%. As a percent of sales, income from operations was 7.7%9.7% versus 7.6%8.0% in the firstsecond quarter 2004.$5.5 million versus $1.3$5.9 million in the firstsecond quarter of 2005 versus $1.5 million in comparable 2004. This increase was driven by theour higher level of debt outstanding resulting primarily from the funds borrowed for the cash portion of the 2004 acquisitions. Interest expense in the six months of 2005 was $11.3 million versus $2.8 million for the same period of 2004. Our effective tax rate in the firstsecond quarter of 2005 was 37.3%36.7% as compared to 36.0%35.9% in the firstsecond quarter of 2004.Net$12.3$18.4 million, an increase of 78.3%141.8% versus the $6.9$7.6 million reported in the firstsecond quarter of 2004. Fully diluted earnings per share were $.41$.62 which was an increase of 51.9%100.0% versus $.27$.31 in the firstsecond quarter of 2004. The average number of diluted shares in the firstsecond quarter of 2005 was 30,244,393.29,720,400, versus 24,677,155 shares in comparable 2004. The increase in the average number of shares outstanding versus the firstsecond quarter of 2004 resulted primarily from the shares issued to General ElectricGE as part of the consideration paid for the HVAC businessmotors and capacitors businesses we acquired on December 31, 2004. Net income was $30.7 million in the first half of 2005 versus $14.5 million reported in comparable 2004. Fully diluted earnings per share were $1.03, which was an increase of 77.6% versus $.58 for the same period of 2004. The average number of diluted shares was 29,982,397 for the six months of 2005, versus 24,977,674 shares in comparable 2004.
Our
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Our outstanding long-term debt increased from $547.4decreased to $536.9 million at December 31, 2004 toJune 29, 2005 from $563.6 million at March 31, 2005, due primarily to $32.5 million of cash provided by operating activities in the $24.2second quarter of 2005, of which an $11.0 million increasereduction in inventories was a significant factor. Compared to long-term debt of $547.4 million at December 31, 2004, our accounts receivable.long-term debt at June 29, 2005 was $10.5 million lower. Of our total long-term debt, $444.5$417.5 million was outstanding under our $475 million unsecured revolving credit facility that expires on May 5, 2009 (the “Facility”). The Facility permits the Companyus to borrow at interest rates based upon a margin above the London Inter-Bank Offered Rate (“LIBOR”), which margin varies with the ratio of total funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). These interest rates also vary as LIBOR varies. LIBOR has risen a total of 2.4 percentage points since June 2004. We also pay a commitment fee on the unused amount of the $475 million Facility credit limit, which also varies with the ratio of our total debt to our EBITDA. At March 31,June 29, 2005, the Company’sour margin above LIBOR was 1.5% and our commitment fee rate was .3%. The Facility requires us to maintain specified financial ratios and to satisfy certain financial condition tests. We were in compliance with all of these tests as of March 31,June 29, 2005.
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$1.2 million. immaterial for all periods included in this report. 14March 31,June 29, 2005, we had $115.9 million of fixed rate debt and $447.9$421.5 million of variable rate debt, the latter subject to interest rate risk. The variable rate debt is under a credit facility with an interest rate based on a margin above LIBOR. As a result, interest rate changes impact future earnings and cash flow assuming other factors are constant. A hypothetical 10% change in our weighted average borrowing rate on outstanding variable rate debt at March 31,June 29, 2005, would result in a change in after-tax annualized earnings of approximately $795,000.quarterhalf of 2005, we began to enter into contracts to hedge certainforeign-currency denominated forecasted foreign operations transactions. Contracts are executed with creditworthy banks and are denominated in currencies of major industrial countries. It is our policy not to enter into derivative financial instruments for speculative purposes.immaterial. firstsecond quarter and six months of 2005, $1.6$2.3 million and $3.9 million, respectively, of net increased hedge value was recorded in AOCI. At March 31,June 29, 2005, we had a balance of $3.4$4.7 million in other current assets and a corresponding net after tax gain of $2.1$2.9 million in AOCI, representing the fair market value of cash flow commodity and foreign currency hedges. Of the total other current assets and AOCI values, $.1$1.7 and $1.0 million, respectively, related to currency hedges, with the balance relating to commodity hedges.hedges and translation adjustments.a. arewere effective in recording, processing,
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Name | For | Withheld | ||||||
J. Reed Coleman | 23,629,004 | 1,214,644 | ||||||
Stephen N. Graff | 23,960,534 | 883,114 | ||||||
Thomas J. Fischer | 24,033,157 | 810,491 |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Sectiona) ExhibitsExhibit Description 3.1 Exhibit NumberExhibit Description3.2 10.1Second Amendment, dated January 25, 2005,Amendments to the Amended and Restated Credit AgreementBylaws of the Registrant [Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated April 28, 2005 (file #001-07283)].4.1 Letter agreement, dated as of May 5, 2004, among31, 2005, between REGAL-BELOIT Corporation and various financial institutions, filed herein.General Electric Company [Incorporated by reference to Exhibit 4.1 of REGAL-BELOIT Corporation’s Current Report on Form 8-K dated June 6, 2005 (file #001-07283)].31.1 31.131.2 31.232 32 of 1350 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302906 of the Sarbanes-Oxley Act of 2002.1316
| ||
| REGAL-BELOIT CORPORATION | |
(Registrant) | ||
| ||
/S/ David A. Barta | ||
David A. Barta | ||
Vice President | ||
(Principal Accounting and Financial Officer) | ||
DATE:August 8, 2005 |
DATE: May 10, 2005
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Exhibit Number | Exhibit Description | |
3.1 | Bylaws of the Registrant, as amended on April 22, 2005, filed herewith. | |
3.2 | Amendments to the Bylaws of the Registrant [Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated April 28, 2005 (file #001-07283)]. | |
4.1 | Letter agreement, dated as of May 31, 2005, between REGAL-BELOIT Corporation and General Electric Company [Incorporated by reference to Exhibit 4.1 of REGAL-BELOIT Corporation’s Current Report on Form 8-K dated June 6, 2005 (file #001-07283)]. | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32 | Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |