Regal Rexnord (RRX) 8-K Results of Operations and Financial Condition

	NEWS RELEASE
	FOR RELEASE ON OR AFTER: October 31, 2006
	FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
	David A. Barta Vice President, Chief Financial Officer 608-364-8808, Ext. 106
Page 1 of 5

REGAL-BELOIT THIRD QUARTER NET INCOME

INCREASES 61%

October 31, 2006 (Beloit, WI): REGAL-BELOIT CORPORATION (NYSE:RBC) today reported strong increases in net sales and earnings for the third quarter ended September 30, 2006. Net sales increased 21.2% to $419.3 million from $345.9 million in the third quarter of 2005. Net income increased 60.5% to $29.7 million as compared to $18.5 million in the comparable period of 2005. Diluted earnings per share increased 50.8% to $.89 as compared to $.59 for the third quarter of 2005.

In the Electrical Segment, sales increased 24.9% to $370.4 million. Included in the results for the quarter were $11.7 million of sales attributable to the Sinya motor business acquired during the second quarter of 2006. The sales increase was again driven by strong channel demand in commercial and industrial motors, generators, and HVAC motors. Sales in the Mechanical Segment decreased 0.8% to $48.9 million. Sales in the Mechanical Segment were impacted by the May 2006 sale of the Cutting Tools business which reduced sales by approximately $3.9 million from the comparable period of 2005.

The gross profit margin for the third quarter of 2006 was 24.6%, which is a 250 basis point improvement over the gross profit margin of 22.1% in the third quarter of 2005. The increase was a result of higher volume, productivity and positive product mix, offset, in part, by continued increases in raw material costs. Income from operations was $53.0 million (12.7% of sales), a 53.2% increase over the $34.6 million (10.0% of sales) reported for the third quarter of 2005. As a result of the 2006 implementation of FAS 123R, operating expenses for the third quarter of 2006 included $.8 million of expense related to equity compensation as compared to $.1 million in the third quarter of 2005. Net income in the third quarter of 2006 was $29.7 million, a 60.5% increase from the $18.5 million reported in the third quarter of 2005.

“We are extremely pleased with our record third quarter performance. Solid markets for our products coupled with contributions from our strategic initiatives provided the basis for our strong results,” said Henry Knueppel, Chairman and Chief Executive Officer. “While the housing related and HVAC markets were more challenging, the contributions from new and higher value content products more than offset those market challenges.”

“We expect normal seasonal sales in the fourth quarter, noting that HVAC business will face a tougher comparison because of the strong sales in the fourth quarter of 2005,” Knueppel added. “Based on this view of our markets and the continued contributions from our strategic initiatives, we are forecasting fourth quarter earnings per share to be in the range of $.64 to $.71 per share. Overcoming a difficult fourth quarter comparison and targeting new records for fourth quarter sales and earnings, is a testament to the strength of our people and our initiatives.”

	NEWS RELEASE
	FOR RELEASE ON OR AFTER: October 31, 2006
	FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
	David A. Barta Vice President, Chief Financial Officer 608-364-8808, Ext. 106
Page 2 of 5

REGAL-BELOIT will be holding a telephone conference call pertaining to this news release at 1:30 PM CST (2:30 PM EST) on Tuesday, October 31, 2006. Interested parties should call 866-868-1109, access code 16108930. A replay of the call will be available through November 10, 2006 at 877-213-9653, access code 16108930.

REGAL-BELOIT CORPORATION is a leading manufacturer of mechanical and electrical motion control and power generation products serving markets throughout the world. REGAL-BELOIT is headquartered in Beloit, Wisconsin, and has manufacturing, sales, and service facilities throughout the United States, Canada, Mexico, Europe and Asia.

CAUTIONARY STATEMENT

The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: With the exception of historical facts, the statements contained in this press release may be forward-looking statements. Forward-looking statements represent our management’s judgment regarding future events. We cannot guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors, including: unexpected issues and costs arising from the integration of acquired companies and businesses, such as our acquisitions of the HVAC motors and capacitors businesses and the Commercial AC motors business from General Electric Company; marketplace acceptance of our 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, including continued decline in new housing starts affecting the markets for capital goods; substantial increases in interest rates that impact the cost of our outstanding debt; the impact of capital market transactions that the Company may effect; unanticipated costs associated with litigation matters; the success of our management in increasing sales and maintaining or improving the operating margins of our businesses; actions taken by our competitors; difficulties in staffing and managing foreign operations; our ability to satisfy various covenant requirements under our credit facility; and other risks and uncertainties described from time to time in our reports filed with U.S. Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. The forward-looking statements included in this press release are made only as of the date of this release, and we undertake no obligation to update these statements to reflect subsequent events or circumstances.

	NEWS RELEASE
	FOR RELEASE ON OR AFTER: October 31, 2006
	FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
	David A. Barta Vice President, Chief Financial Officer 608-364-8808, Ext. 106
Page 3 of 5

STATEMENTS OF EARNINGS 

In Thousands of Dollars

		(Unaudited)
		Three Months Ended				Nine Months Ended
	September 30,			September 28,		September 30,		September 28,
		2006		2005		2006		2005
Net Sales	$	419,301	$	345,894	$	1,252,896	$	1,052,485
Cost of Sales		316,231		269,296		952,521		827,643
Gross Profit		103,070		76,598		300,375		224,842
Operating Expenses		50,021		41,990		145,842		128,560
Income From Operations		53,049		34,608		154,533		96,282
Interest Expense		5,038		5,706		15,287		17,053
Interest Income		170		309		430		385
Income Before Taxes and Minority Interest		48,181		29,211		139,676		79,614
Provision For Income Taxes		17,623		9,771		50,812		28,408
Income Before Minority Interest		30,558		19,440		88,864		51,206
Minority Interest in Income, Net of Tax		818		923		2,027		1,958
Net Income	$	29,740	$	18,517	$	86,837	$	49,248
Per Share of Common Stock:
Earnings Per Share - Basic	$	.96	$	.62	$	2.82	$	1.68
Earnings Per Share - Assuming Dilution	$	.89	$	.59	$	2.60	$	1.62
Cash Dividends Declared	$	.14	$	.13	$	.41	$	.38
Average Number of Shares Outstanding-Basic		30,888,136		29,912,663		30,802,048		29,339,151
Average Number of Shares Outstanding-
Assuming Dilution		33,440,015		31,234,336		33,347,817		30,399,710

	NEWS RELEASE
	FOR RELEASE ON OR AFTER: October 31, 2006
	FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
	David A. Barta Vice President, Chief Financial Officer 608-364-8808, Ext. 106
Page 4 of 5

CONDENSED BALANCE SHEETS

In Thousands of Dollars  

ASSETS	(Unaudited)		(Audited)
Current Assets:	Sept. 30, 2006		Dec. 31, 2005
Cash and Cash Equivalents	$	40,186	$	32,747
Receivables and Other Current Assets		309,532		230,217
Inventories		241,366		224,316
Total Current Assets		591,084		487,280
Net Property, Plant and Equipment		263,722		244,329
Goodwill		547,372		546,168
Purchased Intangible Assets, Net		43,565		45,674
Other Noncurrent Assets		21,307		19,103
Total Assets	$	1,467,050	$	1,342,554
Liabilities and Shareholders’ Investment
Accounts Payable	$	95,349	$	82,513
Other Current Liabilities		179,196		136,278
Long-Term Debt		362,176		386,332
Other Noncurrent Liabilities		96,795		89,435
Shareholders’ Investment		733,534		647,996
Total Liabilities and Shareholders’ Investment	$	1,467,050	$	1,342,554

SEGMENT INFORMATION

In Thousands of Dollars

		(Unaudited)
		Mechanical Segment								Electrical Segment
		Third Quarter				Nine Months				Third Quarter				Nine Months
		Sept. 30, 2006		Sept. 28, 2005		Sept. 30, 2006		Sept. 28, 2005		Sept. 30, 2006		Sept. 28, 2005		Sept. 30, 2006		Sept. 28, 2005
Net Sales	$	48,931	$	49,318	$	154,934	$	149,465	$	370,370	$	296,576	$	1,097,962	$	903,020
Income from Operations	$	5,458	$	5,061	$	16,299	$	10,936	$	47,591	$	29,547	$	138,234	$	85,346

	NEWS RELEASE
	FOR RELEASE ON OR AFTER: October 31, 2006
	FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
	David A. Barta Vice President, Chief Financial Officer 608-364-8808, Ext. 106
Page 5 of 5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of Dollars)

	(Unaudited)
	Nine Months Ended
		September 30,
		2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	86,837
Adjustments to reconcile net income to net cash provided by operating activities;
Depreciation and amortization		25,835
Gain on sale of assets		(1,881	)
Stock-based compensation expense		2,665
Change in assets and liabilities		(60,646	)
Net cash provided by operating activities		52,810
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment		(37,689	)
Purchases of short-term investments, net		(5,853	)
Business acquisitions, net of cash acquired		(10,962	)
Sale of property, plant and equipment		15,555
Net cash used in investing activities		(38,949	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt, net		(23,933	)
Proceeds from commercial paper borrowings, net		22,737
Dividends paid to shareholders		(12,301	)
Proceeds from the exercise of stock options		5,132
Excess tax benefits from stock-based compensation		1,960
Net cash used in financing activities		(6,405	)
EFFECT OF EXCHANGE RATE ON CASH		(17	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		7,439
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		32,747
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	40,186

# # #

Corporate Offices

200 State Street ● Beloit, WI 53511-6254

608-364-8808 ● Fax: 608-364-8818

Website:   www.regal-beloit.com