Regal Beloit Corporation (NYSE:RBC) Q4 2015 Earnings Conference Call - Final Transcript

Feb 09, 2016 • 10:00 am ET


Regal Beloit Corporation (NYSE:RBC) Q4 2015 Earnings Conference Call - Final Transcript


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Good morning and welcome to the Regal Beloit Fourth Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Robert Cherry, Vice President, Investor Relations. Please go ahead.

Robert Cherry

Thank you, operator. Good morning and welcome to Regal Beloit's fourth quarter 2015 earnings conference call. Joining me today are Mark Gliebe, Chairman and Chief Executive Officer; Jon Schlemmer, Chief Operating Officer and Chuck Hinrichs, Vice President and Chief Financial Officer.

Before turning the call back to Mark, I would like to remind you that the statements made in this conference call that are not historical in nature are forward-looking statements. Forward-looking statements are not guarantees since there are inherent difficulties in predicting future results and actual results could differ materially from those expressed or implied in forward-looking statements.

For a list of factors that could cause actual results to differ materially from projected results, please refer to today's earnings release and our SEC filings.

On Slide 3, we state that we're presenting certain non-GAAP financial measures in this presentation. We believe that these are useful financial measures to provide you with additional insight into our operating performance and for helping investors understand and compare our operating results across accounting periods and in the same manner as management.

Please read this slide for information regarding these non-GAAP financial measures and please see the appendix for reconciliations of these measures to the most comparable measures in accordance with GAAP.

Now, I will turn the call over to Mark.

Mark Gliebe

Welcome everyone and thank you for joining our fourth quarter call and thank you for your interest in Regal. We'll follow our normal agenda. I'll make a few opening comments. Chuck will give a financial update. Jon will provide color on market's operations and the performance of our three segments. After that, I'll summarize both our fourth quarter and full year performance, and then we'll move to Q&A.

Let's start with the fourth quarter highlights. Despite topline pressures, Regal increased adjusted operating margins to 10.3% in the fourth quarter, representing a 250 basis point improvement over prior year.

We'll peel back the onion for you today to illustrate how we obtained such a significant improvement, but no matter how you look at it, this was the fourth quarter in a row with a meaningful increase in our adjusted operating margins.

We increased our adjusted EPS 43% and delivered free cash flow of 169% of adjusted net income, and we used the free cash to pay down $77 million of debt in the quarter.

As reported in our press release, Regal recorded a non-cash impairment charge in the fourth quarter primarily related to businesses with exposure to either China or oil and gas.

Additionally, due to the continuing economic instability in Venezuela, we recorded a $12.8 million charge related to the wind down