form10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
ý
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
for
the quarterly period ended
June
30, 2007
or
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Commission
file number
001-07283
|
(Exact
name of registrant as specified in its
charter)
|
Wisconsin
|
39-0875718
|
(State
of other jurisdiction of incorporation)
|
(IRS
Employer Identification No.)
|
|
200
State Street, Beloit,
Wisconsin 53511
|
|
(Address
of principal executive office)
|
|
Registrant’s
telephone number, including area
code
|
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. YES ý NO
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):
Large
Accelerated Filer ý Accelerated
Filer ¨ Non-accelerated
filer ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES ¨ NO ý
32,093,130
Shares, Common Stock, $.01 Par Value (as of July 23,
2007)
INDEX
|
Page
|
|
|
Item
1 -
|
Condensed
Consolidated Financial Statements (Unaudited)
|
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
6
|
Item
2 -
|
|
|
|
|
12
|
Item
3 -
|
|
16
|
Item
4 -
|
|
16
|
|
|
|
PART
II - OTHER INFORMATION
|
|
|
|
|
Item
1 -
|
|
17
|
Item
1A -
|
|
17
|
Item
2 -
|
|
18
|
Item
4 -
|
|
18
|
Item
6 -
|
|
19
|
|
19
|
|
20
|
CAUTIONARY
STATEMENT
This
Quarterly Report 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 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;
|
·
|
difficulties
in staffing and managing foreign
operations;
|
·
|
other
risks and uncertainties including but not limited to those described
in
Item 1A-Risk Factors of the Company’s Annual
Report on Form 10-K filed on February 28, 2007 and 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 Form 10-Q 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 28,
2007.
REGAL
BELOIT CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In
Thousands of Dollars, Except Per Share Data)
ITEM
I. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
|
June
30, 2007
|
|
|
|
July
1, 2006
|
|
|
|
June
30, 2007
|
|
|
|
July
1, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales |
|
$ |
459,795 |
|
|
$ |
435,269 |
|
|
$ |
878,411 |
|
|
$ |
833,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales |
|
|
355,919 |
|
|
|
331,244 |
|
|
|
677,338 |
|
|
|
636,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
103,876
|
|
|
|
104,025
|
|
|
|
201,103
|
|
|
|
197,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
43,821
|
|
|
|
46,159
|
|
|
|
93,717
|
|
|
|
95,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
From Operations
|
|
|
60,055
|
|
|
|
57,866
|
|
|
|
107,386
|
|
|
|
101,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
4,425
|
|
|
|
5,454
|
|
|
|
9,491
|
|
|
|
10,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
241
|
|
|
|
140
|
|
|
|
330
|
|
|
|
260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Before Taxes & Minority Interest
|
|
|
55,871
|
|
|
|
52,552
|
|
|
|
98,225
|
|
|
|
91,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
For Income Taxes
|
|
|
18,973
|
|
|
|
18,847
|
|
|
|
33,663
|
|
|
|
33,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Before Minority Interest
|
|
|
36,898
|
|
|
|
33,705
|
|
|
|
64,562
|
|
|
|
58,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest in Income, Net of Tax
|
|
|
645
|
|
|
|
396
|
|
|
|
1,496
|
|
|
|
1,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$ |
36,253
|
|
|
$ |
33,309
|
|
|
$ |
63,066
|
|
|
$ |
57,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per Share of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
1.15
|
|
|
$ |
1.08
|
|
|
$ |
2.02
|
|
|
$ |
1.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assuming
Dilution
|
|
$ |
1.06
|
|
|
$ |
0.99
|
|
|
$ |
1.86
|
|
|
$ |
1.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Dividends Declared
|
|
$ |
0.15
|
|
|
$ |
0.14
|
|
|
$ |
0.29
|
|
|
$ |
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
31,546,970
|
|
|
|
30,816,156
|
|
|
|
31,180,641
|
|
|
|
30,759,004
|
|
Assuming
Dilution
|
|
|
34,177,529
|
|
|
|
33,644,909
|
|
|
|
33,862,524
|
|
|
|
33,301,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to Condensed Consolidated Financial Statements.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
Thousands of Dollars)
|
|
|
|
|
|
|
(From
Audited
|
|
|
|
|
(Unaudited)
|
|
|
|
Statements)
|
|
ASSETS |
|
|
June
30, 2007
|
|
|
|
December
30, 2006
|
|
Current
Assets: |
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$ |
53,136 |
|
|
$ |
36,520 |
|
Receivables,
less Allowances for Doubtful Accounts of
|
|
|
|
|
|
|
|
|
$5,919
in 2007 and $5,886 in 2006
|
|
|
272,022 |
|
|
|
218,036 |
|
Inventories
|
|
|
235,848 |
|
|
|
275,138 |
|
Prepaid
Expenses and Other Current Assets
|
|
|
29,160 |
|
|
|
22,557 |
|
Future
Income Tax Benefits
|
|
|
24,651 |
|
|
|
22,877 |
|
Total
Current Assets
|
|
|
614,817 |
|
|
|
575,128 |
|
|
|
|
|
|
|
|
|
|
Property,
Plant and Equipment:
|
|
|
|
|
|
|
|
|
Land
and Improvements
|
|
|
18,256
|
|
|
|
18,400
|
|
Buildings
and Improvements
|
|
|
106,829
|
|
|
|
105,425
|
|
Machinery
and Equipment
|
|
|
380,897
|
|
|
|
360,674
|
|
Property,
Plant and Equipment, at Cost
|
|
|
505,982
|
|
|
|
484,499
|
|
Less
- Accumulated Depreciation
|
|
|
(231,904 |
) |
|
|
(215,619 |
) |
Net
Property, Plant and Equipment
|
|
|
274,078
|
|
|
|
268,880
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
546,251
|
|
|
|
546,152
|
|
Intangible
Assets, net of Amortization
|
|
|
40,156
|
|
|
|
43,257
|
|
Other
Noncurrent Assets
|
|
|
10,734
|
|
|
|
10,102
|
|
Total
Assets
|
|
$ |
1,486,036
|
|
|
$ |
1,443,519
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' INVESTMENT
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
|
133,592
|
|
|
|
108,050
|
|
Commerical
Paper Borrowings
|
|
|
9,650
|
|
|
|
49,000
|
|
Dividends
Payable
|
|
|
4,685
|
|
|
|
4,345
|
|
Accrued
Compensation and Employee Benefits
|
|
|
54,622
|
|
|
|
51,192
|
|
Other
Accrued Expenses
|
|
|
41,166
|
|
|
|
45,578
|
|
Income
Taxes Payable
|
|
|
9,252
|
|
|
|
-
|
|
Current
Maturities of Debt
|
|
|
8,544
|
|
|
|
376
|
|
Total
Current Liabilities
|
|
|
261,511
|
|
|
|
258,541
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Debt
|
|
|
292,103
|
|
|
|
323,946
|
|
Deferred
Income Taxes
|
|
|
70,447
|
|
|
|
65,937
|
|
Other
Noncurrent Liabilities
|
|
|
10,567
|
|
|
|
12,302
|
|
Minority
Interest in Consolidated Subsidiaries
|
|
|
11,284
|
|
|
|
9,634
|
|
Pension
and Other Postretirement Benefits
|
|
|
25,072
|
|
|
|
23,184
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
Investment:
|
|
|
|
|
|
|
|
|
Common
Stock, $.01 par value, 100,000,000 shares authorized in
2007,
|
|
|
|
|
|
|
|
|
50,000,000
authorized in 2006; 32,085,630 issued in 2007 and
|
|
|
|
|
|
|
|
|
31,812,043
issued in 2006
|
|
|
321
|
|
|
|
318
|
|
Additional
Paid-In Capital
|
|
|
332,979
|
|
|
|
329,142
|
|
Less
- Treasury Stock, at cost, 774,100 shares in 2007 and 2006
|
|
|
(15,228 |
) |
|
|
(15,228 |
) |
Retained
Earnings
|
|
|
489,429
|
|
|
|
435,971
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
7,551
|
|
|
|
(228 |
) |
Total
Shareholders' Investment
|
|
|
815,052
|
|
|
|
749,975
|
|
Total
Liabilities and Shareholders' Investment
|
|
$ |
1,486,036
|
|
|
$ |
1,443,519
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to Condensed Consolidated Financial
Statements.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In
Thousands of Dollars)
|
|
Six
Months Ended
|
|
|
|
June
30, 2007
|
|
|
July
1, 2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
income
|
|
$ |
63,066
|
|
|
$ |
57,097
|
|
Adjustments
to reconcile net income to net cash provided
|
|
|
|
|
|
|
|
|
by
operating activities; net of effect of acquisitions
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
20,367
|
|
|
|
16,826
|
|
Minority
interest
|
|
|
1,496
|
|
|
|
1,209
|
|
Excess
tax benefit from stock-based compensation
|
|
|
(6,590 |
) |
|
|
(1,750 |
) |
Loss
(gain) on sale of assets
|
|
|
51
|
|
|
|
(1,850 |
) |
Stock-based
compensation expense
|
|
|
1,871
|
|
|
|
1,725
|
|
Change
in assets and liabilities, net
|
|
|
19,849
|
|
|
|
(37,027 |
) |
Net
cash provided by operating activities
|
|
|
100,110
|
|
|
|
36,230
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
(17,863 |
) |
|
|
(17,873 |
) |
Purchases
of short-term investments, net
|
|
|
-
|
|
|
|
(10,263 |
) |
Business
acquisitions, net of cash acquired
|
|
|
(2,425 |
) |
|
|
(10,962 |
) |
Sale
of property, plant and equipment
|
|
|
-
|
|
|
|
15,541
|
|
Net
cash used in investing activities
|
|
|
(20,288 |
) |
|
|
(23,557 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
proceeds from short-term borrowing
|
|
|
8,200
|
|
|
|
-
|
|
Payments
of long-term debt
|
|
|
(278 |
) |
|
|
(241 |
) |
Net
repayments under revolving credit facility
|
|
|
(31,600 |
) |
|
|
(38,600 |
) |
Net
(repayments) proceeds from commercial paper borrowings
|
|
|
(39,350 |
) |
|
|
20,000
|
|
Dividends
paid to shareholders
|
|
|
(8,709 |
) |
|
|
(7,980 |
) |
Proceeds
from the exercise of stock options
|
|
|
1,403
|
|
|
|
4,239
|
|
Excess
tax benefits from stock-based compensation
|
|
|
6,590
|
|
|
|
1,750
|
|
Distributions
to minority partners
|
|
|
(106 |
) |
|
|
-
|
|
Financing
fees paid
|
|
|
(551 |
) |
|
|
-
|
|
Net
cash used in financing activities
|
|
|
(64,401 |
) |
|
|
(20,832 |
) |
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE ON CASH
|
|
|
1,195
|
|
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
16,616
|
|
|
|
(8,177 |
) |
Cash
and cash equivalents at beginning of period
|
|
|
36,520
|
|
|
|
32,747
|
|
Cash
and cash equivalents at end of period
|
|
$ |
53,136
|
|
|
$ |
24,570
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to Condensed Consolidated Financial
Statements.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2007
(Unaudited)
1. BASIS
OF PRESENTATION
The
accompanying (a) condensed consolidated balance sheet as of December 30, 2006,
which has been derived from audited financial statements, and (b) unaudited
interim condensed consolidated financial statements as of June 30, 2007 have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures
normally included in annual financial statements prepared in accordance with
accounting principles generally accepted in the United States have been
condensed or omitted pursuant to those rules and regulations, although the
Company believes that the disclosures made are adequate to make the information
not misleading.
It
is
suggested that these condensed consolidated financial statements be read in
conjunction with the financial statements and the notes thereto included in
the
Company’s Annual Report on Form 10-K filed on February 28, 2007.
In
the
opinion of management, all adjustments considered necessary for a fair
presentation of financial results have been made. Except as otherwise
discussed, such adjustments consist of only those of a normal recurring
nature. Operating results for the six months ended June 30, 2007 are
not necessarily indicative of the results that may be expected for the entire
fiscal year ending December 29, 2007.
2. SHORT-TERM
INVESTMENTS
Short-term
marketable investments include investments with maturities of greater than
three
months and less than one year. Such marketable investments were
classified as available-for-sale and are reported at fair market value and
classified within Prepaid Expenses and Other Current
Assets. Mark-to-market gains on such investments are not
material.
3. INVENTORIES
Cost
for
approximately 83% of the Company’s inventory is determined using the last-in,
first-out (LIFO) inventory valuation method. The approximate
percentage distribution between major classes of inventories was as
follows:
|
June
30, 2007
|
December
30, 2006
|
Raw
Material
|
12%
|
11%
|
Work-in
Process
|
21%
|
21%
|
Finished
Goods and Purchased Parts
|
67%
|
68%
|
4. ACQUISITIONS
AND DIVESTITURES
On
May 8,
2006, the Company completed the sale of substantially all of the assets of
the
Company’s Regal Cutting Tools business to YG-1 Co. Ltd. for $7.7
million. The Company recorded a net gain of $0.2 million which was
included as a reduction of operating expenses.
On
May 1,
2006, the Company completed the acquisition of selected assets and liabilities
of Changzhou Sinya Electromotor Co. Ltd., Jiangsu Southern Sinya Electric Co.
Ltd. and Changzhou Xiesheng Plastic Co. Ltd. (collectively
“Sinya”). Sinya operations are located in Changzhou, China and
primarily produce electric motors for the HVAC industry. The purchase
price was approximately $13.0 million.
5. COMPREHENSIVE
INCOME
The
Company's comprehensive income for the second quarter and first six months
of
2007 and 2006 was as follows:
|
|
(In
Thousands of Dollars)
|
|
|
|
Second
Quarter Ending
|
|
|
Six
Months Ending
|
|
|
|
June
30, 2007
|
|
|
July
1, 2006
|
|
|
June
30, 2007
|
|
|
July
1, 2006
|
|
Net
income as reported
|
|
$ |
36,253
|
|
|
$ |
33,309
|
|
|
$ |
63,066
|
|
|
$ |
57,097
|
|
Comprehensive
income (loss) from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Pension Liability, net of tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13 |
) |
Translation
adjustments
|
|
|
6,010
|
|
|
|
296
|
|
|
|
6,812
|
|
|
|
512
|
|
Changes
in fair value of hedging activities, net of tax
|
|
|
(2,546 |
) |
|
|
2,641
|
|
|
|
(3,490 |
) |
|
|
4,628
|
|
Hedging
activities reclassified into earnings from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accumulated
other comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
(“AOCI”), net of tax
|
|
|
3,159
|
|
|
|
(529 |
) |
|
|
4,101
|
|
|
|
(3,924 |
) |
Amortization
of net prior service costs and actuarial losses
|
|
|
189
|
|
|
|
-
|
|
|
|
356
|
|
|
|
-
|
|
Comprehensive
income
|
|
$ |
43,065
|
|
|
$ |
35,717
|
|
|
$ |
70,845
|
|
|
$ |
58,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. WARRANTY
COSTS
The
Company recognizes the cost associated with its standard warranty on its
products at the time of sale. The amount recognized is based on
historical experience. The following is a reconciliation of the
changes in accrued warranty costs for the second quarter and first six months
of
2007 and 2006 (in thousands):
|
|
Second
Quarter Ending
|
|
|
Six
Months Ending
|
|
|
|
June
30, 2007
|
|
|
July
1, 2006
|
|
|
June
30, 2007
|
|
|
July
1, 2006
|
|
Beginning
balance
|
|
$ |
5,445
|
|
|
$ |
5,652
|
|
|
$ |
6,300
|
|
|
$ |
5,679
|
|
Deduct: Payments
|
|
|
(1,840 |
) |
|
|
(1,761 |
) |
|
|
(3,454 |
) |
|
|
(3,120 |
) |
Add: Provision
|
|
|
2,423
|
|
|
|
1,618
|
|
|
|
3,182
|
|
|
|
2,950
|
|
Ending
balance
|
|
$ |
6,028
|
|
|
$ |
5,509
|
|
|
$ |
6,028
|
|
|
$ |
5,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. BUSINESS
SEGMENTS
The
Company operates two strategic businesses that are reportable segments,
Mechanical and Electrical (in thousands):
|
|
(Unaudited)
|
|
|
|
Mechanical
Segment
|
|
|
Electrical
Segment
|
|
|
|
Second
Quarter Ending
|
|
|
Six
Months Ending
|
|
|
Second
Quarter Ending
|
|
|
Six
Months Ending
|
|
|
|
June
30,
2007
|
|
|
July
1,
2006
|
|
|
June
30,
2007
|
|
|
July
1,
2006
|
|
|
June
30,
2007
|
|
|
July
1,
2006
|
|
|
June
30,
2007
|
|
|
July
1,
2006
|
|
Net
Sales
|
|
$ |
54,136
|
|
|
$ |
53,042
|
|
|
$ |
105,982
|
|
|
$ |
106,003
|
|
|
$ |
405,659
|
|
|
$ |
382,227
|
|
|
$ |
772,459
|
|
|
$ |
727,592
|
|
Income
from Operations
|
|
|
8,954
|
|
|
|
7,134
|
|
|
|
15,280
|
|
|
|
10,841
|
|
|
|
51,101
|
|
|
|
50,732
|
|
|
|
92,106
|
|
|
|
90,643
|
|
%
of Net Sales
|
|
|
16.5 |
% |
|
|
13.4 |
% |
|
|
14.4 |
% |
|
|
10.2 |
% |
|
|
12.6 |
% |
|
|
13.3 |
% |
|
|
11.9 |
% |
|
|
12.5 |
% |
Goodwill
at end of period
|
|
$ |
530
|
|
|
$ |
530
|
|
|
$ |
530
|
|
|
$ |
530
|
|
|
$ |
545,721
|
|
|
$ |
546,860
|
|
|
$ |
545,721
|
|
|
$ |
546,860
|
|
8. GOODWILL
AND OTHER INTANGIBLES
Changes
in the carrying amount of goodwill for the six months ending June 30, 2007
were
as follows (in thousands):
|
|
Electrical
Segment
|
|
|
Mechanical
Segment
|
|
|
Total
|
|
Balance
as of December 30, 2006
|
|
$ |
545,622
|
|
|
$ |
530
|
|
|
$ |
546,152
|
|
Translation
|
|
|
99
|
|
|
|
-
|
|
|
|
99
|
|
Balance
as of June 30, 2007
|
|
$ |
545,721
|
|
|
$ |
530
|
|
|
$ |
546,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
intangible assets consisted of the following (in thousands):
|
|
|
|
|
June
30, 2007
|
|
Asset
Description
|
|
Useful
Life
(years)
|
|
|
Gross
Value
|
|
|
Accumulated
Amortization
|
|
|
Net
Book
Value
|
|
Non-Compete
Agreements
|
|
|
3
-5
|
|
|
$ |
5,480
|
|
|
$ |
1,955
|
|
|
$ |
3,525
|
|
Trademarks
|
|
|
3
-
5
|
|
|
|
6,679
|
|
|
|
3,821
|
|
|
|
2,858
|
|
Patents
|
|
|
9
-
10.5
|
|
|
|
15,410
|
|
|
|
3,877
|
|
|
|
11,533
|
|
Engineering
Drawings
|
|
|
10
|
|
|
|
1,200
|
|
|
|
307
|
|
|
|
893
|
|
Customer
Relationships
|
|
|
10
|
|
|
|
28,600
|
|
|
|
7,253
|
|
|
|
21,347
|
|
Total
|
|
|
|
|
|
$ |
57,369
|
|
|
$ |
17,213
|
|
|
$ |
40,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
30, 2006
|
|
Asset
Description
|
|
Useful
Life
(years)
|
|
|
Gross
Value
|
|
|
Accumulated
Amortization
|
|
|
Net
Book
Value
|
|
Non-Compete
Agreements
|
|
|
3
-5
|
|
|
$ |
5,470
|
|
|
$ |
1,425
|
|
|
$ |
4,045
|
|
Trademarks
|
|
|
3
-
5
|
|
|
|
6,490
|
|
|
|
3,311
|
|
|
|
3,179
|
|
Patents
|
|
|
9
-
10.5
|
|
|
|
15,410
|
|
|
|
3,107
|
|
|
|
12,303
|
|
Engineering
Drawings
|
|
|
10
|
|
|
|
1,200
|
|
|
|
247
|
|
|
|
953
|
|
Customer
Relationships
|
|
|
10
|
|
|
|
28,600
|
|
|
|
5,823
|
|
|
|
22,777
|
|
Total
|
|
|
|
|
|
$ |
57,170
|
|
|
$ |
13,913
|
|
|
$ |
43,257
|
|
Estimated
Amortization (in thousands)
2007
|
2008
|
2009
|
2010
|
2011
|
$ 7.1
|
$ 6.3
|
$ 5.9
|
$ 5.5
|
$ 4.7
|
Amortization
expense recorded for the three and six months ended June 30, 2007 was $1.7
million and $3.5 million, respectively. The Company performs an annual
evaluation of goodwill and other intangible assets in the fourth quarter of
each
fiscal year for impairment as required by SFAS 142, “Goodwill and Other
Intangible Assets”.
9. DEBT
AND BANK CREDIT FACILITIES
The
Company’s indebtedness, excluding commercial paper borrowings, as of June 30,
2007 and December 30, 2006 was as follows (in thousands):
|
|
June
30,
2007
|
|
|
December
30,
2006
|
|
Revolving
credit facility
|
|
$ |
165,600
|
|
|
$ |
197,200
|
|
Convertible
senior subordinated debt
|
|
|
115,000
|
|
|
|
115,000
|
|
Other
|
|
|
20,047
|
|
|
|
12,122
|
|
|
|
|
300,647
|
|
|
|
324,322
|
|
Less: Current
maturities
|
|
|
(8,544 |
) |
|
|
(376 |
) |
Non-current
portion
|
|
$ |
292,103
|
|
|
$ |
323,946
|
|
|
|
|
|
|
|
|
|
|
During
the quarter ended June 30, 2007, the Company amended its revolving credit
facility (“Facility”). The committed amount of the Facility increased
from $475.0 million to $500.0 million. The conditional commitment,
subject to certain approvals and covenants, increased from $75.0 million to
$200.0 million. The Facility permits the Company to borrow at
interest rates (5.8% at June 30, 2007) 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. We pay a commitment fee on the unused amount of the Facility,
which also varies with the ratio of our total debt to our EBITDA. The
Facility requires us to meet specified financial ratios and to satisfy certain
financial condition tests. We were in compliance with all debt
covenants as of June 30, 2007.
There
was
$9.7 million of commercial paper borrowings outstanding at June 30, 2007,
all of
which had original maturity terms of 90 days or less, and had a weighted
interest rate of 5.5%. Total commercial paper outstanding cannot
exceed $50.0 million under the terms of the Facility. The Facility
provides the liquidity backstop for outstanding commercial
paper. Accordingly, the combined outstanding balances of the Facility
and commercial paper cannot exceed $500.0 million.
The
Company’s $115.0 million, 2.75% convertible senior subordinated debt is
convertible as the closing price of the Company’s common stock exceeded the
contingent conversion share price for the specified amount of
time. As a result, holders of the notes may surrender the notes for
conversion at any time until the maturing of the bonds in March
2024. Holders that exercise their right to convert the notes will
receive up to the principal amount of the notes in cash, with the balance
of the
conversion obligation, if any, to be satisfied in shares of Company common
stock
or cash, at the Company’s discretion. No notes have been converted
into cash or shares of common stock as of June 30, 2007.
As
of
June 30, 2007, a foreign subsidiary of the Company had outstanding $8.2 million
denominated in U.S. dollars. The borrowings were made under a $15.0
million unsecured credit facility which expires in December 2008. The
notes are all short term and bear interest at a margin over
LIBOR.
10. PENSION
PLANS
As
of
December 30, 2006, the Company adopted SFAS No. 158, Employer’s Accounting
for Defined Benefit Pension and Other Postretirement Plans. The
Company’s net periodic pension cost is comprised of the following
components:
|
|
(In
Thousands)
|
|
|
|
Second
Quarter Ending
|
|
|
Six
Months Ending
|
|
|
|
June
30, 2007
|
|
|
July
1, 2006
|
|
|
June
30, 2007
|
|
|
July
1, 2006
|
|
Service
cost
|
|
$ |
1,215
|
|
|
$ |
940
|
|
|
$ |
2,422
|
|
|
$ |
1,880
|
|
Interest
cost
|
|
|
1,267
|
|
|
|
1,048
|
|
|
|
2,534
|
|
|
|
2,188
|
|
Expected
return on plan assets
|
|
|
(1,282 |
) |
|
|
(1,225 |
) |
|
|
(2,565 |
) |
|
|
(2,450 |
) |
Amortization
of prior service cost
|
|
|
31
|
|
|
|
123
|
|
|
|
63
|
|
|
|
246
|
|
Amortization
of net actuarial loss
|
|
|
238
|
|
|
|
868
|
|
|
|
477
|
|
|
|
3,170
|
|
Net
periodic benefit expense
|
|
$ |
1,469
|
|
|
$ |
1,754
|
|
|
$ |
2,931
|
|
|
$ |
5,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
estimated net actuarial loss and prior service cost for defined benefit pension
plans that will be amortized from accumulated other comprehensive income into
net periodic benefit cost during the 2007 fiscal year is $1.0 million and $0.1
million, respectively.
In
the
second quarter of 2007 and 2006, the Company contributed $0.1 million, and
$0.3
million, respectively, to defined benefit pension
plans. Contributions to defined benefit pension plans for the six
months ended June 30, 2007 and July 1, 2006 were $0.2 million and $0.4 million,
respectively. The Company expects to contribute an additional $1.0
million, for total contributions of $1.2 million in 2007. The Company
contributed a total of $3.0 million in 2006. The assumptions used in
the valuation of the Company’s pension plans and in the target investment
allocation have remained the same as those disclosed in the Company’s Annual
Report on Form 10-K filed on February 28, 2007.
11. SHAREHOLDERS’
INVESTMENT
The
Company recognized approximately $1.0 million and $0.9 million in share-based
compensation expense during the second quarter of 2007 and 2006,
respectively. Share-based compensation expense for the six months
ended June 30, 2007 and July 1, 2006 was $1.9 million and $1.7 million,
respectively. The total income tax benefit recognized relating to
share-based compensation for the six months ended June 30, 2007 and July 1,
2006
was approximately $6.6 and $1.8 million, respectively. The Company
recognizes compensation expense on grants of share-based compensation awards
on
a straight-line basis over the vesting period of each award
recipient. As of June 30, 2007, total unrecognized compensation cost
related to share-based compensation awards was approximately $11.1 million,
net
of estimated forfeitures, which the Company expects to recognize over a weighted
average period of approximately 3.0 years.
On
April
20, 2007, shareholders approved the 2007 Regal Beloit Corporation 2007 Equity
Incentive Plan (“2007 Plan”), which authorized an additional 2.5 million shares
for issuance under the 2007 Plan. Under the 2007 Plan and the
Company’s 2003 and 1998 stock plans, the Company was
authorized as of June 30, 2007 to deliver up to 5.0 million shares of common
stock upon exercise of non-qualified stock options or incentive stock options,
or upon grant or in payment of stock appreciation rights, and restricted
stock. Approximately 2.8 million shares were available for future
grant or payment under the various plans at June 30, 2007.
On
April
20, 2007, the Company’s shareholders approved an amendment to the Company’s
Articles of Incorporation that increased the number of shares of common stock
that the Company is authorized to issue from 50 million shares to 100 million
shares. Each authorized share is accompanied by one Common Stock
Purchase Right as described in our Annual Report on Form 10-K filed on February
28, 2007.
Share-based
Incentive Awards
The
Company uses several forms of share-based incentive awards, including
non-qualified stock options, incentive stock options and stock appreciation
rights (SAR’s). All grants are made at prices equal to the fair
market value of the stock on the grant dates, and expire ten years from the
grant date.
The
majority of the Company’s annual option and SAR incentive awards are made in the
second quarter. The per share weighted average fair value of
share-based incentive awards granted in the May, 2007 annual grant was
$16.68. The fair value of the awards is estimated on the date of the
grant using the Black-Scholes pricing model and the following
assumptions: risk-free interest rate of 4.7%, expected dividend yield
of 1.2%, expected volatility of 32.0% and an estimated life of 7
years.
A
summary
of share-based awards (options and SAR’s) as of June 30, 2007 is as
follows:
|
|
Shares
|
|
|
Wtd.
Avg.
Exercise
Price
|
|
|
Wtd.
Avg.
Remaining
Contractual
Term
(years)
|
|
|
Aggregate
Intrinsic
Value
(in
millions)
|
|
Number
of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
1,498,675
|
|
|
$ |
31.19
|
|
|
|
6.3
|
|
|
$ |
23.3
|
|
Exercisable
|
|
|
706,925
|
|
|
$ |
23.32
|
|
|
|
4.8
|
|
|
$ |
16.4
|
|
Restricted
Stock
The
Company also granted a total of 31,500 restricted stock awards to certain
employees during the six-months ended June 30, 2007. Restrictions
generally lapse three years after the date of grant. The Company
values restricted stock awards at the closing market value of its common stock
on the date of grant.
12. INCOME
TAXES
The
Company adopted Financial Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN 48) as of the beginning
of fiscal 2007, December 31, 2006. FIN 48 clarifies the
accounting for uncertainty in income taxes by defining criteria that a tax
position on an individual matter basis must meet before that position is
recognized in the financial statements. Additionally, FIN 48 provides
guidance on measurement, derecognition, classification, interest and penalties,
interim period accounting, disclosures and transition. As a result of
adopting FIN 48, the Company determined that approximately $0.6 million
(including approximately $0.4 million in estimated interest payments) of tax
benefits previously recognized were considered uncertain tax positions; as
such
these deductions may not be sustained upon examination by taxing
authorities. This adjustment was reflected as a reduction of retained
earnings. In addition, consistent with the provisions of FIN 48, the
Company reclassified $6.9 million of income tax liabilities from current to
non-current liabilities because payment of cash is not anticipated within one
year of the balance sheet date. As a result of the adoption of FIN
48, certain tax liabilities as of December 30, 2006 were reclassified in the
condensed consolidated balance sheet. Income tax liabilities of $6.3
million were reclassified from current liabilities to non-current
liabilities. In addition, $5.9 million of prepaid taxes were
reclassified from current liabilities to current assets in the December 30,
2006
comparative condensed consolidated balance sheet.
As
of the
adoption date at the beginning of the fiscal year and at June 30, 2007, the
Company had approximately $6.9 million of unrecognized tax benefits, $3.3
million of which would affect its effective tax rate if
recognized. The Company recognizes interest and penalties related to
uncertain tax positions in income tax expense.
The
Company or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction, and various states and foreign jurisdictions. Federal
tax returns from 2003 through 2006 and various state tax returns from 2001
through 2006 remain subject to income tax examinations by tax
authorities. The Company estimates that the unrecognized tax benefits
will not change significantly within the next year.
13. EARNINGS
PER SHARE (EPS)
The
numerator for the calculation of basic and diluted earnings per share is
net
income. The denominator is computed as follows (in
thousands):
|
Second
Quarter Ending
|
|
Six
Months Ending
|
|
June
30, 2007
|
|
July
1, 2006
|
|
June
30, 2007
|
|
July
1, 2006
|
Denominator
for basic EPS - weighted average
|
31,547
|
|
30,816
|
|
31,181
|
|
30,759
|
Effect
of dilutive securities
|
2,631
|
|
2,829
|
|
2,682
|
|
2,543
|
Denominator
for diluted EPS
|
34,178
|
|
33,645
|
|
33,863
|
|
33,302
|
Options
for common shares
where the exercise price was above the market price at June 30, 2007, totaling
approximately 133,000 shares, have been excluded from the calculation of
the
effect of dilutive securities as the effect of such options is
anti-dilutive. There were 14,500 anti-dilutive option shares
outstanding at July 1, 2006.
An
action
(the “Action”) was filed on June 4, 2004, and amended in September 2004, against
one of the Company’s subsidiaries, Marathon Electric Manufacturing Corporation
(“Marathon”), by Enron Wind Energy Systems, LLC, Enron Wind Contractors, LLC and
Zond Minnesota Construction Company, LLC (collectively, “Enron
Wind”). The Action was filed in the United States Bankruptcy Court
for the Southern District of New York (the “Court”) where each of the Enron Wind
entities has consolidated its Chapter 11 bankruptcy petition as part of the
Enron Corporation bankruptcy proceedings. In the Action, Enron Wind
has asserted various claims relating to the alleged failures and/or degradations
of performance of about 564 generators sold by Marathon to Enron Wind from
1997
to 1999. In January 2001, Enron Wind and Marathon entered into a
“Generator Warranty and Settlement Agreement and Release of All Claims”
(“Warranty Agreement”). This Warranty Agreement resolved various
issues related to past performance of the generators, provided a limited
warranty related to the generators going forward, and contained a release
by all
parties of any claims related to the generators other than those arising
out of
the obligations contained in the Warranty Agreement.
Enron
Wind is seeking to recover the purchase price of the generators and
transportation costs totaling about $21 million. In addition,
although the Warranty Agreement contains a waiver of consequential, incidental,
and punitive damages, Enron Wind claims that this limitation is unenforceable
and seeks recovery of consequential, incidental and punitive damages incurred
by
it and by its customers, totaling an additional $100 million. Enron
Wind has asserted claims of breach of contract, breach of the implied covenant
of good faith and fair dealing, promissory fraud, and intentional interference
with contractual relations.
On
July
30, 2007, Marathon entered into a settlement agreement with Enron Wind to
resolve all matters alleged by Enron Wind in the Action. Under the
terms of the settlement agreement, Enron Wind will fully release and discharge
Marathon from all claims relating to the Action and, in exchange, Enron Wind
will receive a monetary payment. After contributions from other
involved parties, the pre tax impact of Marathon’s portion of the
payment under the settlement agreement would be approximately $1.8 million.
The
settlement agreement is subject to approval by the Court. Marathon
expects that a motion to approve the settlement agreement will be filed by
Enron
Wind with the Court in the near future and that, subject to scheduling, the
Court will take action on the motion during the third quarter of
2007.
Marathon
has denied and continues to deny all the allegations asserted in the Action.
If
the settlement agreement is not approved by the Court, then Marathon will
continue to defend vigorously all of the claims asserted in the
Action.
On
April
26, 2007, the Company received notice that the U.S. Environmental Protection
Agency (“U.S. EPA”) has filed an action against the Company in the United States
District Court for the Northern District of Illinois seeking reimbursement
of
the U.S. EPA’s unreimbursed past and future remediation costs incurred in
cleaning up an environmental site located near a former manufacturing facility
of the Company in Illinois. In 1999, the Company and other parties
identified as potentially responsible parties (“PRPs”) reached an agreement with
the U.S. EPA to partially fund the costs of certain response actions taken
with
respect to this site. In 2004, the Company received communications
from the U.S. EPA indicating that the Company was identified as one of three
PRPs regarding additional remedial actions to be taken by the U.S. EPA at
this
site. In response, the Company provided to the U.S. EPA its
environmental expert’s assessment of the site in 2004. The Company
believes that it is not a PRP with respect to the site in question and intends
to defend vigorously the associated claim. As of June 30, 2007
amounts that have been recorded in the Company’s financial statements related to
this contingency are immaterial.
The
Company is, from time to time, party to other lawsuits arising from its normal
business operations. It is believed that the outcome of these
lawsuits will have no material effect on the Company’s financial position or its
results of operations.
15. DERIVATIVE
INSTRUMENTS
The
Company periodically enters into commodity futures and options hedging
transactions to reduce the impact of changing prices for certain commodities,
such as copper and aluminum, based upon certain firm commitments to purchase
such commodities. These transactions are designated as cash flow
hedges and the contract terms of commodity hedge instruments generally mirror
those of the hedged item, providing a high degree of risk reduction and
correlation. Derivative commodity assets of $2.8 million and $1.7
million are recorded in current assets as of June 30, 2007 and December 30,
2006, respectively. The value of the effective portion of the
contracts of $1.6 million net of tax and $1.0 million net of tax, as of June
30,
2007 and December 30, 2006, was recorded in accumulated other comprehensive
income (“AOCI”).
The
Company uses a cash flow hedging strategy to protect against an increase in
the
cost of forecasted foreign currency denominated transactions. As of
June 30, 2007, derivative currency assets of $2.5 million and $0.8 million
are
recorded in other current assets and other non-current assets,
respectively. At December 30, 2006, derivative currency assets of
$2.2 million and $1.0 million were recorded in other current assets and other
non-current assets, respectively. The value of the effective portion
of the contracts of $2.0 million net of tax as of June 30, 2007 and December
30,
2006, was recorded in AOCI.
Of
the
net unrealized gain of $3.6 million in AOCI at June 30, 2007, $3.1 million
is
expected to be realized in the next year. The impact of hedge
ineffectiveness was immaterial for all periods.
16. SUBSEQUENT
EVENTS
On
July
3, 2007, the Company signed an agreement to acquire certain assets of the FASCO
Residential/Commercial operations, and the stock of the FASCO
Asia/Pacific operations of the Tecumseh Products Company. The
transaction is valued at approximately $220.0 million and is expected to close
in the third quarter of 2007 subject to required approvals.
Unless
the context requires otherwise, references in this Item 2 to “we”, “us”, “our”
or the “Company” refer collectively to Regal Beloit Corporation and its
subsidiaries.
OVERVIEW
End
markets for the Company’s products continued to show strength during the second
quarter of 2007. Net sales increased 5.6% to $459.8 million from
$435.3 million in the second quarter of 2006.
Net
income increased 8.8% to $36.3 million in the second quarter of 2007 as compared
to $33.3 million in the comparable period last year. Diluted earnings
per share increased 7.1% to $1.06 in the second quarter of 2007 as compared
to
$0.99 for the comparable period of 2006.
RESULTS
OF OPERATIONS
Second
Quarter 2007 versus Second Quarter 2006
Sales
for
the quarter were $459.8 million, a 5.6% increase over the $435.3 million
reported for the second quarter of 2006. Second quarter 2007 sales
included $27.3 million of sales related to the Sinya motor business as compared
to $10.2 million in the period from acquisition on May 1, 2006 through July
1,
2006. Second quarter 2006 sales also included $1.7 million of sales
related to the Company’s cutting tools business. Substantially all of
the assets of the Company’s cutting tools business were sold in May
2006.
In
the
Electrical Segment, sales increased 6.1%. The soft housing market and
a comparison to a strong 2006 that was favorably impacted by the SEER 13
legislation impacted sales in the HVAC business, which decreased 10.7%. The
sales for the remainder of the motor businesses increased 19.1%, including
$27.3
million of sales attributable to the Sinya motor business acquired in the second
quarter of 2006. Sales for the power generation businesses increased
22.3%. Sales in the Mechanical Segment increased 2.1%, however, second quarter
2006 sales also included $1.7 million of sales related to the Company’s cutting
tools business. Substantially all of the assets of the Company’s
cutting tools business were sold in May 2006.
Gross
margin for the quarter was 22.6%, compared to 23.9% in the second quarter of
2006. Material costs, specifically copper and aluminum, continued to
increase and have a significant impact on our gross margins during the
quarter. These costs were partially offset by new products,
productivity, pricing actions and positive product mix resulting in a net 1.3%
decrease in gross margin.
Operating
expenses were $43.8 million (9.5% of sales) in the second quarter of 2007 versus
$46.2 million (10.6% of sales) in second quarter of 2006. Income from
operations was $60.1 million versus $57.9 million in the second quarter of
2006,
an increase of 3.8%. As a percent of sales, income from operations
was 13.1% in the second quarter of 2007 versus 13.3% for the second quarter
of
2006. This decrease reflected increased raw material costs partially
offset by contributions from new products, pricing actions, productivity, and
the leveraging of fixed costs.
Net
interest expense was $4.2 million versus $5.3 million in the second quarter
of
2006. The decrease reflected lower levels of debt outstanding, which
was partially offset by higher interest rates.
The
tax
rate for the quarter was 34.0% versus 35.9% in the prior year period. The tax
rate was impacted by the distribution of income, which was weighted more to
lower tax rate countries than during the comparable period of 2006.
Net
income for the second quarter of 2007 was $36.3 million, an increase of 8.8%
versus the $33.3 million reported in same period of 2006. Fully
diluted earnings per share was $1.06 as compared to $0.99 per share reported
in
the second quarter of 2006. The average number of diluted shares was
34,177,529 during the second quarter of 2007 as compared to 33,644,909 during
the comparable period last year.
Six
Months Ended June 30, 2007 versus Six Months Ended July 1,
2006
Sales
for
the six months ended June 30, 2007 were $878.4 million, which is a 5.4% increase
over the $833.6 million reported for the comparable period of
2006. The sale of substantially all of the assets of the Company’s
cutting tool business (completed May 2006) reduced 2007 sales by approximately
$6.4 million. The Sinya motor business reported sales of $45.2
million for the period ending June 30, 2007, as compared to $10.2 million from
the acquisition date of May 1, 2006 through July 1, 2006.
Excluding
our HVAC business, we saw strong demand for our products throughout the first
half of 2007, driven by strong end market activity. Electrical
Segment sales increased 6.2% as compared to the first six months of
2006. Sales for this segment showed strength in all product lines
except HVAC, which has been affected by a soft housing market in 2007 and
comparisons with a strong 2006 that was favorably impacted by the SEER 13
legislation. Included in these results are the results for the Sinya
motor business acquired on May 1, 2006. Mechanical Segment sales for
the first six months of 2007 were comparable to sales for the first six months
of the prior year; however sales for the six months ended July 1, 2006 included
$6.4 million of sales related to the Company’s cutting tools
business. Substantially all of the assets of the Company’s cutting
tools business were sold in May, 2006.
Gross
margin for the six months ended June 30, 2007 was 22.9%, which is 0.8 percentage
points lower than the comparable period of 2006. Material costs had a
significant impact on the first six months of 2007, partially offset by the
contribution from new products, productivity efforts, pricing actions and
positive product mix across our entire business. The raw material
cost increases resulted primarily from increases in the costs of copper and
aluminum.
Operating
expenses were $93.7 million (10.7% of sales) versus $95.8 million (11.5% of
sales) in the comparable period of 2006. Included in operating
expenses in the first half of 2006 was a second quarter $1.6 million gain
resulting from the sale of real property in the Mechanical
Segment. Operating expenses for the first half of 2006 also included
$2.0 million of incremental expense related to the Regal Beloit Supplemental
Executive Retirement Plan resulting from a change in assumptions associated
with
retirement benefits for certain key executives. Income from
operations was $107.4 million versus $101.5 million in the comparable period
of
2006, an increase of 5.8%. As a percent of sales, income from
operations was equal to the comparable period of 2006.
Net
interest expense was $9.2 million versus $10.0 million in the comparable period
of 2006. This decrease was driven by the lower level of debt
outstanding, partially offset by an increase in interest rates.
LIQUIDITY
AND CAPITAL RESOURCES
Our
working capital was $353.3 million at June 30, 2007, an 11.6% increase from
$316.6 million at year-end 2006. The $36.7 million
increase was was driven by a $54.0 million increase in accounts receivable
resulting primarily from increased sales in the second quarter of 2007, a $16.6
million increase in cash, partially offset by a $25.5 million increase in
accounts payable and a $39.3 million decrease in inventories. The
ratio of our current assets to our current liabilities (“current ratio”) was
2.4:1 at June 30, 2007 as compared to 2.2:1 at year-end 2006.
Net
cash
provided by operating activities was $100.1 million for the six months ended
June 30, 2007 as compared to $36.2 million in the comparable period of
2006. During the first six months of 2007, decreases in our
inventories provided $46.9 million more operating cash as compared to the
comparable period of 2006. Net cash used in investing activities was
$20.3 million in the first six months of 2007 as compared to the $23.6 million
used in the prior year. Additions to property, plant and equipment
were $17.9 million in the first six months of 2007, which was equal to the
comparable period of 2006. Our cash used in financing activities was
$64.4 million during the first six months of 2007 versus $20.8 million used
in
the comparable period of 2006. The increase in cash used in financing
activities is driven by a $44.2 million increase in net debt repayments during
the six months ended June 30, 2007 as compared to the first six months of
2006.
Our
outstanding long-term debt decreased from $323.9 million at December 30, 2006
to
$292.1 million at June 30, 2007. Of our total long-term debt, $165.6
million was outstanding under our $500.0 million unsecured revolving credit
facility that expires on April 30, 2012 (the “Facility”). The
Facility permits the Company 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. We pay a commitment fee on the unused amount of the Facility,
which also varies with the ratio of our total debt to our
EBITDA. The Facility requires us to meet specified financial
ratios and to satisfy certain financial condition tests. We were in
compliance with all debt covenants as of June 30, 2007.
In
addition to the Facility, at June 30, 2007, we also had $115.0 million of
convertible senior subordinated debt outstanding at a fixed interest rate of
2.75%, $9.7 million of short-term commercial paper borrowings and $11.8 million
of other debt. At June 30, 2007, our borrowing availability under the
Facility was $319.1 million based on the Facility’s credit limit. The
Company’s pending acquisition of certain assets of the FASCO division of
Tecumseh Products Company which is discussed in Footnote 16 of the condensed
consolidated financial statements, will utilize approximately $220.0 million
of
our available Facility.
As
of
June 30, 2007, a foreign subsidiary of the Company had outstanding $8.2 million
denominated in U.S. dollars. The borrowings were made under a $15.0
million unsecured credit facility which expires in December 2008. The
notes are all short term and bear interest at a margin over
LIBOR.
CRITICAL
ACCOUNTING POLICIES
We
recognized revenue when all of the following have occurred: an
agreement of sale exists; pricing is determinable; collection is reasonably
assured; and product has been delivered and acceptance has occurred according
to
contract terms.
We
use
contracts and customer purchase orders to determine the existence of an
agreement of sale. We use shipping documents and customer acceptance,
when applicable, to verify delivery. We assess whether the sale price
is subject to refund or adjustment, and we assess collectibility based on
the
creditworthiness of the customer as well as the customer’s payment
history.
Returns,
Rebates and Incentives
Our
primary incentive program provides distributors with cash rebates or account
credits based on agreed amounts that vary depending on the end user or original
equipment manufacturing (OEM) customer to whom our distributor ultimately
sells
the product. We also offer various other incentive programs that
provide distributors and direct sale customers with cash rebates, account
credits or additional products and services based on meeting specified program
criteria. Certain distributors are offered a right to return product,
subject to contractual limitations.
We
record
accruals for customer returns, rebates and incentives at the time of revenue
recognition based primarily on historical experience. Adjustments to
the accrual may be required if actual returns, rebates and incentives differ
from historical experience or if there are changes to other assumptions used
to
estimate the accrual.
Impairment
of Long-Lived Assets or Goodwill and Other Intangibles
We
evaluate the recoverability of the carrying amount of long-lived assets whenever
events or changes in circumstances indicate that the carrying amount of an
asset
may not be fully recoverable through future cash flows. We evaluate
the recoverability of goodwill and other intangible assets with indefinite
useful lives annually or more frequently if events or circumstances indicate
that an asset might be impaired. We use judgment when applying the
impairment rules to determine when an impairment is
necessary. Factors that could trigger an impairment review include
significant underperformance relative to historical or forecasted operating
results, a significant decrease in the market value of an asset or significant
negative industry or economic trends. We perform our annual
impairment test in accordance with SFAS 142, “Goodwill and Other Intangible
Assets.”
Approximately
half of our domestic employees are covered by defined benefit pension plans
with
the remaining employees covered by defined contribution plans. Most
of our foreign employees are covered by government sponsored plans in the
countries in which they are employed. Our obligations under our
domestic defined benefit plans are determined with the assistance of actuarial
firms. The actuaries provide us with information and recommendations
regarding such factors as withdrawal rates and mortality rates. The
actuaries also provide us with information and recommendations from which
management makes further assumptions on such factors as the long-term expected
rate of return on plan assets, the discount rate on benefit obligations,
and
where applicable, the rate of annual compensation increases. Based
upon the assumptions made, the investments made by the plans, overall conditions
and movement in financial markets, particularly the stock market and how
actual
withdrawal rates, life-spans of benefit recipients, and other factors differ
from assumptions, annual expenses and recorded assets or liabilities of these
defined benefit plans may change significantly from year
to year. Based on our annual review of actuarial
assumptions as well as historical rates of return on plan assets and existing
long-term bond rates, we set the long-term rate of return on plan assets
at 8.5%
and an average discount rate at 5.9% for our defined benefit plans as of
December 30, 2006.
We
operate in numerous taxing jurisdictions and are subject to regular examinations
by various U.S. Federal, state, and foreign jurisdictions for various tax
periods. Our income tax positions are based on research and
interpretations of the income tax laws and rulings in each of the jurisdictions
in which we do business. Due to the subjectivity of interpretations
of laws and rulings in each jurisdiction, the differences and interplay in
tax
laws between those jurisdictions as well as the inherent uncertainty in
estimating the final resolution of complex tax audit matters, our estimates
of
income tax liabilities may differ from actual payments or
assessments.
Use
of Estimates and Assumptions
The
preparation of our condensed consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires
the
use of estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the related disclosure of contingent
assets and liabilities. Management bases its estimates on historical
experience and on other assumptions that are believed to be reasonable under
the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent
from
other sources. Actual results may differ from these estimates under
different assumptions or conditions.
New
Accounting Pronouncements
In
February 2007, Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standard (SFAS) No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities, Including an Amendment of FASB
Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to
choose to measure many financial instruments and certain other items generally
on an instrument-by-instrument basis at fair value that are not currently
required to be measured at fair value. SFAS 159 is intended to
provide entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions. SFAS 159 is
effective for the Company on January 1, 2008, although early adoption is
permitted. If the Company elects to adopt SFAS 159 early, it would
need to concurrently early adopt the provisions of Statement of Financial
Accounting Standard No. 157, Fair Value Measurements (“SFAS 157”),
which is described below. The Corporation is evaluating the
provisions of SFAS 159.
In
September 2006, the FASB issued SFAS 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans (“SFAS
158”). SFAS 158 requires that companies prospectively recognize
through Accumulated Other Comprehensive Income the over funded or under funded
status of their defined benefit plans as an asset or liability in
their balance sheets. The Company adopted SFAS 158 as of
December 30, 2006.
In
September 2006, the FASB issued SFAS 157, Fair Value Measurements
(“SFAS 157”). SFAS 157 defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair value
measurements. SFAS 157 will be effective beginning in fiscal
2008. We are evaluating the new standard to determine the effect on
our financial statements and related disclosures.
In
June
2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise’s financial statements
in accordance with FASB Statement No. 109, Accounting for Income
Taxes. FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. The Company
adopted FIN 48 in the first quarter of 2007. See Note 12 to the
condensed consolidated financial statements.
ITEM
3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
We
are
exposed to market risk relating to the Company’s operations due to changes in
interest rates, foreign currency exchange rates and commodity prices of
purchased raw materials. We manage the exposure to these risks
through a combination of normal operating and financing activities and
derivative financial instruments such as commodity cash flow hedges and foreign
currency forward exchange contracts.
The
Company
is exposed to
interest rate risk on certain of its short-term and long-term debt obligations
used to finance our operations and acquisitions. At June 30, 2007, we
had $123.8 million of fixed rate debt and $186.5 million of variable rate
debt,
the latter subject to interest rate risk. The variable rate debt is
primarily under the 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 June 30, 2007, would result in a change in after-tax annualized earnings
of
approximately $0.6 million.
The
Company periodically enters into commodity futures and options hedging
transactions to reduce the impact of changing prices for certain commodities,
such as copper and aluminum. Contract terms of commodity hedge
instruments generally mirror those of the hedged item, providing a high degree
of risk reduction and correlation.
We
are
also exposed to foreign currency risks that arise from normal business
operations. These risks include the translation of local currency
balances of foreign subsidiaries, intercompany loans with foreign subsidiaries
and transactions denominated in foreign currencies. Our objective is
to minimize our exposure to these risks through a combination of normal
operating activities and the utilization of foreign currency contracts to manage
our exposure on the transactions denominated in currencies other than the
applicable functional currency. 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. We do not hedge our exposure to
the translation of reported results of foreign subsidiaries from local currency
to United States dollars.
All
hedges are recorded on the balance sheet at fair value and are accounted for
as
cash flow hedges, with changes in fair value recorded in accumulated other
comprehensive income (“AOCI”) in each accounting period. An
ineffective portion of the hedge’s change in fair value, if any, is recorded in
earnings in the period of change. The impact due to ineffectiveness
was immaterial for all periods included in this report.
Derivative
commodity assets of $2.8 million and $1.7 million are recorded in current assets
as of June 30, 2007, and December 30, 2006, respectively. The value
of the effective portion of the contracts of $1.6 million net of tax and $1.0
million net of tax, as of June 30, 2007 and December 30, 2006, was recorded
in
accumulated other comprehensive income.
The
Company uses a cash flow hedging strategy to protect against an increase in
the
cost of forecasted foreign currency denominated transactions. As of
June 30, 2007, derivative currency assets of $2.5 million and $0.8 million
are
recorded in other current assets and other non-current assets,
respectively. At December 30, 2006, derivative currency assets of
$2.2 million and $1.0 million were recorded in other current assets and other
non-current assets, respectively. The value of the effective portion
of the contracts of $2.0 million net of tax as of June 30, 2007, and December
30, 2006 was recorded in AOCI.
Of
the
net unrealized gain of $3.6 million in AOCI at June 30, 2007, $3.1 million
is
expected to be realized in the next year. The impact of hedge
ineffectiveness was immaterial for all periods included in this
report.
Disclosure
Controls and Procedures. The Company’s management, with the
participation of the Company’s Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Company’s disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)
under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the
end of the period covered by this report. Based on such evaluation,
the Company’s Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of such period, the Company’s disclosure controls and
procedures were effective in recording, processing, summarizing and reporting,
on a timely basis, information required to be disclosed by the Company in
the
reports that it files or submits under the Exchange Act.
Internal
Control Over Financial Reporting. There were no changes in the
Company’s internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter
to which this report relates that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial
reporting.
Items
3
and 5 are inapplicable and have been omitted.
ITEM
1. LEGAL
PROCEEDINGS
An
action
(the “Action”) was filed on June 4, 2004, and amended in September 2004, against
one of the Company’s subsidiaries, Marathon Electric Manufacturing Corporation
(“Marathon”), by Enron Wind Energy Systems, LLC, Enron Wind Contractors, LLC and
Zond Minnesota Construction Company, LLC (collectively, “Enron
Wind”). The Action was filed in the United States Bankruptcy Court
for the Southern District of New York (the “Court”) where each of the Enron Wind
entities has consolidated its Chapter 11 bankruptcy petition as part of the
Enron Corporation bankruptcy proceedings. In the Action, Enron Wind
has asserted various claims relating to the alleged failures and/or degradations
of performance of about 564 generators sold by Marathon to Enron Wind from
1997
to 1999. In January 2001, Enron Wind and Marathon entered into a
“Generator Warranty and Settlement Agreement and Release of All Claims”
(“Warranty Agreement”). This Warranty Agreement resolved various
issues related to past performance of the generators, provided a limited
warranty related to the generators going forward, and contained a release
by all
parties of any claims related to the generators other than those arising
out of
the obligations contained in the Warranty Agreement.
Enron
Wind is seeking to recover the purchase price of the generators and
transportation costs totaling about $21 million. In addition,
although the Warranty Agreement contains a waiver of consequential, incidental,
and punitive damages, Enron Wind claims that this limitation is unenforceable
and seeks recovery of consequential, incidental and punitive damages incurred
by
it and by its customers, totaling an additional $100 million. Enron
Wind has asserted claims of breach of contract, breach of the implied covenant
of good faith and fair dealing, promissory fraud, and intentional interference
with contractual relations.
On
July
30, 2007, Marathon entered into a settlement agreement with Enron Wind to
resolve all matters alleged by Enron Wind in the Action. Under the
terms of the settlement agreement, Enron Wind will fully release and discharge
Marathon from all claims relating to the Action and, in exchange, Enron Wind
will receive a monetary payment. After contributions from other
involved parties, the pre tax impact of Marathon’s portion of the payment under
the settlement agreement would be approximately $1.8 million. The settlement
agreement is subject to approval by the Court. Marathon expects that
a motion to approve the settlement agreement will be filed by Enron Wind with
the Court in the near future and that, subject to scheduling, the Court will
take action on the motion during the third quarter of 2007.
Marathon
has denied and continues to deny all the allegations asserted in the Action.
If
the settlement agreement is not approved by the Court, then Marathon will
continue to defend vigorously all of the claims asserted in the
Action.
On
April
26, 2007, the Company received notice that the U.S. Environmental Protection
Agency (“U.S. EPA”) has filed an action against the Company in the United States
District Court for the Northern District of Illinois seeking reimbursement
of
the U.S. EPA’s unreimbursed past and future remediation costs incurred in
cleaning up an environmental site located near a former manufacturing facility
of the Company in Illinois. In 1999, the Company and other parties
identified as potentially responsible parties (“PRPs”) reached an agreement with
the U.S. EPA to partially fund the costs of certain response actions taken
with
respect to this site. In 2004, the Company received communications
from the U.S. EPA indicating that the Company was identified as one of three
PRPs regarding additional remedial actions to be taken by the U.S. EPA at
this
site. In response, the Company provided to the U.S. EPA its
environmental expert’s assessment of the site in 2004. The Company
believes that it is not a PRP with respect to the site in question and intends
to defend vigorously the associated claim. As of June 30, 2007
amounts that have been recorded in the Company’s financial statements related to
this contingency are immaterial.
The
Company is, from time to time, party to other lawsuits arising from its normal
business operations. It is believed that the outcome of these other
lawsuits will have no material effect on the Company’s financial position or its
results of operations.
The
business and financial
results of the Company are subject to numerous risks and
uncertainties. The risks and uncertainties have not changed
materially from those reported in the 2006 Annual Report on Form
10-K.
ITEM
2. UNREGISTERED
SALES OF
EQUITY SECURITIES AND USE OF PROCEEDS
The
following table contains detail related to the repurchase of common stock
based
on the date of trade during the quarter ended June 30, 2007.
2007
Fiscal
Month
|
|
Total
Number
of
Shares
Purchased
|
|
|
Average
Price
Paid
per
Share
|
|
|
Total
Number of
Shares
Purchased as
Part
of Publicly
Announced
Plans or
Programs
|
|
|
Maximum
Number
of
Shares that May
Be
Purchased
Under
the Plan or
Programs
|
|
April
1, 2007 to May 4, 2007
|
|
|
-
|
|
|
$ |
-
|
|
|
|
-
|
|
|
|
1,225,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
5, 2007 to June 2, 2007
|
|
|
14,846
|
|
|
$ |
46.61
|
|
|
|
-
|
|
|
|
1,225,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
3, 2007 to June 30, 2007
|
|
|
228,991
|
|
|
$ |
46.54
|
|
|
|
-
|
|
|
|
1,225,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
243,837
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Under
the
Company’s equity incentive plans, participants may pay the exercise price or
satisfy all or a portion of the federal, state and local withholding tax
obligations arising in connection with plan awards by electing to (a) have
the
Company withhold shares of common stock otherwise issuable under the award,
(b)
tender back shares received in connection with such award or (c) deliver
other
previously owned shares of common stock, in each case having a value equal
to
the exercise price or the amount to be withheld. During the second
quarter of 2007, the Company acquired 243,837 shares of common stock that
were
presented to the Company by employees to pay the exercise price or to satisfy
withholding taxes in connection with the exercise and/or vesting of stock
awards. These shares were then cancelled by the
Company.
ITEM
4. SUBMISSION
OF MATTERS TO A
VOTE OF SECURITY HOLDERS
(a)
|
The
Company held its Annual Meeting of Shareholders on April 20,
2007.
|
(b)
|
The
Directors elected at the meeting and those continuing after the
Annual
Meeting:
|
Class
A Directors
|
Class
B Directors
|
Class
C Directors
|
Dean
A. Foate
|
Christopher
L. Doerr
|
Thomas
J. Fischer
|
G.
Frederick Kasten
|
Mark
J. Gliebe
|
Carol
N. Skornicka
|
Henry
W. Knueppel
|
Curtis
W. Stoelting
|
|
(c)
|
(1) The
Shareholders voted for the election of the following Class B Directors
to
serve until the 2010 Annual Meeting of
Shareholders:
|
|
Votes
For
|
Votes
Against
|
Abstentions
|
Christopher
L. Doerr
|
25,304,694
|
2,241,799
|
66,607
|
Mark
J. Gliebe
|
24,834,041
|
2,709,072
|
69,987
|
Curtis
W. Stoelting
|
25,307,216
|
2,236,897
|
68,987
|
(2)
|
The
Shareholders voted for election of the following Class A Director
to serve
until the 2009 Annual Meeting of Shareholders:
|
|
Votes
For
|
Votes
Against
|
Abstentions
|
G.
Frederick Kasten, Jr.
|
24,995,624
|
2,548,745
|
68,731
|
(3)
|
The
proposal to amend the Company’s Articles of Incorporation to increase the
number of share of Common Stock that the Company is authorized
to issue
was approved by a vote of 20,295,284 Votes For, 7,269,224 Votes
Against
and 48,593 abstentions.
|
(4)
|
The
proposal to approve the Regal Beloit Corporation 2007 Equity Incentive
Plan was approved by a vote of 20,735,198 Votes For, 4,453,486
Votes
Against, 71,810 abstentions and 2,352,607 broker
non-votes.
|
(5)
|
The
proposal to ratify the appointment of Deloitte & Touche LLP as the
company’s independent registered public accounting firm for 2007 was
approved by a vote of 27,482,421 Votes For, 87,749 Votes
Against and 42,930
abstentions
|
|
Exhibit
Number
|
|
Exhibit
Description
|
|
3.1
|
|
Articles
of Incorporation of Regal Beloit Corporation, as amended through
April 20,
2007. [Incorporated by reference to Exhibit 3.1 to Regal Beloit
Corporation’s Current Report on Form 8-K filed on April 25, 2007 (File No.
001-07283)]
|
|
|
|
|
|
3.2
|
|
Amended
and Restated Bylaws of Regal Beloit Corporation. [Incorporated by
reference to Exhibit 3.2 to Regal Beloit Corporation’s Current Report on
Form 8-K filed on April 25, 2007 (File No. 001-07283)]
|
|
|
|
|
|
4.1
|
|
Second
Amended and Restated Credit Agreement, dated as of April 30, 2007,
among
Regal Beloit Corporation, the financial institutions party thereto
and
Bank of America, N.A., as administrative agent. [Incorporated by
reference
to Exhibit 4.1 to Regal Beloit Corporation's Current Report on Form
8-K
filed on May 2, 2007 (File No. 001-07283)]
|
|
|
|
|
|
10.1
|
|
Regal
Beloit Corporation 2007 Equity Incentive Plan (incorporated by reference
to Appendix B to Regal Beloit Corporation's definitive proxy statement
on
Schedule 14A for the Regal Beloit Corporation 2007 annual meeting
of
shareholders held April 20, 2007 (File No. 1-07283))
|
|
|
|
|
|
10.2
|
|
Form
of Stock Option Award Agreement under the Regal Beloit Corporation
2007
Equity Incentive Plan. [Incorporated by reference to Exhibit 10.2
to Regal
Beloit Corporation’s Current Report on Form 8-K filed on April 25, 2007
(File No. 001-07283)]
|
|
|
|
|
|
10.3
|
|
Form
of Restricted Stock Award Agreement under the Regal Beloit Corporation
2007 Equity Incentive Plan. [Incorporated by reference to Exhibit
10.3 to
Regal Beloit Corporation’s Current Report on Form 8-K filed on April 25,
2007 (File No. 001-07283)]
|
|
|
|
|
|
10.4
|
|
Form
of Restricted Stock Unit Award Agreement under the Regal Beloit
Corporation 2007 Equity Incentive Plan. [Incorporated by reference
to
Exhibit 10.4 to Regal Beloit Corporation’s Current Report on Form 8-K
filed on April 25, 2007 (File No. 001-07283)]
|
|
|
|
|
|
10.5
|
|
Form
of Stock Appreciation Right Award Agreement under the Regal Beloit
Corporation 2007 Equity Incentive Plan. [Incorporated by reference
to
Exhibit 10.5 to Regal Beloit Corporation’s Current Report on Form 8-K
filed on April 25, 2007 (File No. 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.
|
|
|
|
|
|
32.1
|
|
Certifications
of the Chief Executive Officer and
Chief Financial Officer Pursuant to 18 U.S.C. Section
1350
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
REGAL
BELOIT CORPORATION
(Registrant)
_______________________________
David
A.
Barta
Vice
President and Chief Financial Officer
(Principal
Accounting and Financial Officer)
Date: August
2, 2007
Exhibit
Number
|
|
Exhibit
Description
|
3.1
|
|
Articles
of Incorporation of Regal Beloit Corporation, as amended through
April 20,
2007. [Incorporated by reference to Exhibit 3.1 to Regal Beloit
Corporation’s Current Report on Form 8-K filed on April 25, 2007 (File No.
001-07283)]
|
|
|
|
3.2
|
|
Amended
and Restated Bylaws of Regal Beloit Corporation. [Incorporated by
reference to Exhibit 3.2 to Regal Beloit Corporation’s Current Report on
Form 8-K filed on April 25, 2007 (File No. 001-07283)]
|
|
|
|
4.1
|
|
Second
Amended and Restated Credit Agreement, dated as of April 30, 2007,
among
Regal Beloit Corporation, the financial institutions party thereto
and
Bank of America, N.A., as administrative agent. [Incorporated by
reference
to Exhibit 4.1 to Regal Beloit Corporation's Current Report on Form
8-K
filed on May 2, 2007 (File No. 001-07283)]
|
|
|
|
10.1
|
|
Regal
Beloit Corporation 2007 Equity Incentive Plan (incorporated by reference
to Appendix B to Regal Beloit Corporation's definitive proxy statement
on
Schedule 14A for the Regal Beloit Corporation 2007 annual meeting
of
shareholders held April 20, 2007 (File No. 1-07283))
|
|
|
|
10.2
|
|
Form
of Stock Option Award Agreement under the Regal Beloit Corporation
2007
Equity Incentive Plan. [Incorporated by reference to Exhibit 10.2
to Regal
Beloit Corporation’s Current Report on Form 8-K filed on April 25, 2007
(File No. 001-07283)]
|
|
|
|
10.3
|
|
Form
of Restricted Stock Award Agreement under the Regal Beloit Corporation
2007 Equity Incentive Plan. [Incorporated by reference to Exhibit
10.3 to
Regal Beloit Corporation’s Current Report on Form 8-K filed on April 25,
2007 (File No. 001-07283)]
|
|
|
|
10.4
|
|
Form
of Restricted Stock Unit Award Agreement under the Regal Beloit
Corporation 2007 Equity Incentive Plan. [Incorporated by reference
to
Exhibit 10.4 to Regal Beloit Corporation’s Current Report on Form 8-K
filed on April 25, 2007 (File No. 001-07283)]
|
|
|
|
10.5
|
|
Form
of Stock Appreciation Right Award Agreement under the Regal Beloit
Corporation 2007 Equity Incentive Plan. [Incorporated by reference
to
Exhibit 10.5 to Regal Beloit Corporation’s Current Report on Form 8-K
filed on April 25, 2007 (File No. 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.
|
|
|
|
32.1
|
|
Certifications
of the Chief Executive Officer and Chief Financial Officer Pursuant
to 18
U.S.C. Section 1350
|