RBC - Earnings call transcript Q4 2017 | Regal Rexnord Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Hello, everyone, and welcome to the Regal Beloit Fourth Quarter 2017 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Rob Cherry, Vice President-Business Development and Investor Relations. ahead. go Please

Robert Cherry

Good quarter operator. welcome Regal to Thank earnings morning, conference fourth XXXX call. Beloit's you, and

Joining me Vice today Officer; are and Rehard, Mark Gliebe, Chairman Financial of Chief Financial and Planning Officer; Vice Chief President Jon and Operating Chuck and Hinrichs, President Analysis. Officer; Rob Schlemmer, Chief Executive

historical Mark, Before made call conference in to like in are remind statements. I not forward-looking nature the turning over you to this that would call that statements are the

difficulties in not in results are since guarantees and from are inherent future statements actual predicting Forward-looking could those there results expressed forward-looking materially differ or implied statements.

operating list state additional results, cause are actual and accordance those please that performance provide operating GAAP. management. and our and certain our non-GAAP we of a On information in and results manner, projected today's factors this to you to with filings. from release same are presentation. these earnings in presenting Please the materially Appendix For into accounting regarding that that comparable measures We believe investors read as most financial the a slide for for understand periods refer please our useful non-GAAP financial to of we to in measures, this the measures for reconciliation X, and, compare could financial results insight SEC differ measures those measures helping see across with slide

to over Now, turn Mark. call I the will

Mark Joseph Gliebe

you for make our your I'll Thank our normal everyone. for follow comments. interest and few Welcome, Rob. We'll you opening a quarter Regal. Thanks, joining fourth call, in thank agenda.

of and Regal's recall, Chuck update, financial at Rob overall Rehard April as Hinrichs the CFO the X. effective may retiring be provides you Chuck normally Now, will will be March end but

XXXX on Chuck impact that, fourth our with I'll then cover So, results as summarize provide Then, Rob our color the and delivered the X.X%. a total top Jon will the to year well provide up markets, Q&A. Regal of sales three U.S. solid the as update and performance guidance. reform will a quarter our and segments. fourth move organic tax and of financial quarter in operations we'll after And on performance will line

In industrial fact, American and in up was organic and a most in organic Commercial improved end-markets. and commercial in Recall sales & the sequentially. growth segment rate row quarter fourth sales organic flat. quarter a where quarter fourth level, At in Xth with digits, strength X.X%, our were comparison were the North the the in HVAC the XXXX, Industrial, oil gas, broad Climate difficult. the making In were Asian sales XXXX residential end-markets, segment, that up double

the in points year resulting over inflation up but The productivity, margin was from The held earnings was year. comparisons. perspective, were commodity incremental year. benefited oil the and in by a profit segment, the distribution. and quarter strong From margin adjusted robust improved XX and an PTS X.X% operating up sales tougher over SG&A operating basis operating price with share gas, organic and growth year strong back energy, for renewable XX.X% Finally, per adjusted volume,

quarter. an As total set goal that year. and of the repatriate goal may met the quarter you We in in million used to fourth goal on of march We quarter further exceeded the recall, of a by $XXX we third $XX $XX quarter ratio sales with progress in cash that adjusted repatriating down million in cash million debt this additional a EBITDA X.X. margins. which a the and to cash help year-end strong growth Overall, our solid it was to improve debt, operating to organic yielded us pay

and encouraged remain our all three increases in enter performing. Year, segments, price we the up that year New sticking, are are our we year our Looking over are orders forward, manufacturing facilities as

growth organic year total assumes to guidance up to digit. our low be XXXX, mid-single For

We markets, light industrial pricing. and positive commercial commercial are HVAC and end-markets, incremental top-line from our robust residential to benefit and in growth continued expecting

are year the that we as difficult On have We growth the forecasting the simply to efforts, in the that versus our increases as expect of all organic three comparisons. to more benefits due half, second second half rates in stronger price margin simplification from first implemented half will performance, from see well be we segments.

I it adjusted $X.XX, will to Our for guidance Chuck. the over up at over to per now earnings set share $X.XX total midpoint XX% been turn XXXX at has year XXXX.

Charles A. Hinrichs

the everyone. you, and the in Thank were up year. fourth Mark, morning, XXXX prior from Sales good million, X.X% quarter $XXX.X

a year. And was sales the increased XXXX, from the currency the our full-year sales a organic quarter above growth solid Foreign X.X% X.X% in was for positive X.X%. prior Therefore, prior translation year. the organic

C&I XXXX. Looking full-year the fourth sales had segments, and segment In X.X%, growth organic for growth the and three sales growth of quarter at our had the segment organic solid growth had the of in organic organic the we Climate X.X%. segment had of X.X%, summary, PTS

margin quarter. by X.X%. was slide. Our fourth consistent quarter the Compared This margin our with is was we took LIFO quarter, by price/cost on the XX shown points. prior driven million our growth volume offset the with In headwind. The adjusted in some year, $X.X operating to guidance from the LIFO improvement was expense, in segment impact basis the last up from

expense primarily both partially can in see, the fourth benefit LIFO in a and the Climate PTS offset And the had Climate compared the LIFO quarter to by in timing XXXX to you expenses C&I SG&A finally, As year higher prior due and were PTS the our segment segments. segments.

a we the to adjusted operating of in Our quarter. our improvement XXXX over show In continue margin fourth only SG&A the in increase modest summary, the for prior-year period. half expenses second show

XXXX GAAP Our basis to the fourth adjustments per were reported a EPS earnings on There three quarter. fourth share were $X.XX. quarter in GAAP

or was related adjustment share. and per The of costs million restructuring first $X.X $X.XX

was closed The the business of sale assets of a per second the $X.XX from or on share. adjustment $XXX,XXX gain previously

by from $X.XX $X.XX, increase or Net benefit representing year. a per earnings per fourth the tax adjusted the income quarter U.S. the reform, the $X which tax million fourth was share. adjustments, our adjustment the X.X% of quarter provisional a prior third for were reduced The provision from share these XXXX

For prior the up the year. share per adjusted earnings our were $X.XX, full-year X.X% XXXX, from

Now, summarize key few financial metrics. a I'll

capital Our fourth were quarter. the $XX.X expenditures million in

in spending XXXX $XX.X capital were full-year the Our million.

in resulted of $X.X activities the related simplification restructuring and Our million costs quarter. in fourth

ETR show restructuring For $XX.X reform. the information. related million million, the costs full-year guidance. earlier line effective rate were our XXXX, quarter right $X and In was excluding tax quadrant, our from upper XX%, The with fourth tax the the in in benefit provisional we

the quadrant, we ETR fourth excluding left XXXX provide again, XXXX, our XX.X%, benefit. on balance our the data the full-year For was In quarter $X sheet. million lower

repaying Our was and million achieved In the $X,XXX.X was fourth our million total debt $X,XXX.X we debt net reduction quarter, good of debt. $XX.X debt million.

full our total we the $XXX.X year For debt million. by XXXX, reduced

$XX.X fourth to our Free We quarter serve XX% the income total of generated our present Our the our the million the information a total debt cash for to we year, goal X.X to EBITDA free investment of end the the in cash to ratio as lower cash of adjusted flow achieving in increased in quadrant, quarter. was free quarter In inventory flow. below representing at ratio on X.X. EBITDA our debt declined flow customers. we net right lower of

seventh our of finally, pleased flow that additional net exceeded representing For year consecutive were was free cash year amount the with we XXX% XXX.X% XXXX, cash of income. And exceeded and flow of our full stated success was This million. from goal big free cash We repatriation $XX the a the net quarter a million businesses. our the in non-U.S. year we as on repatriated full fourth XXXX million $XXX.X $XXX for of XXXX basis. income,

Now to the over I'll Rob. call turn

Robert J. Rehard

Thank you, Chuck.

Let I like how the are me make. walk U.S. through impacts tax There reform you Regal. main two to new points would legislation

estimates on slide. from The the and fourth non-U.S. with net benefit There of revaluation the more the than is earnings that a on tax our the that noted include million quarter liabilities. offset on first reform $X results benefit dividends the large impact tax combination from make tax point up this are legislation. the XXXX the of taxes benefit The deferred as is net new the non-U.S. provisional withholding of transition

As but adjusted GAAP per previously $X.XX our included our earnings, in from earnings. is this Chuck share mentioned, benefit excluded

estimating our tax for that nearly effective rate XXXX. is point are in a second The X% decrease we

the You'll recall rate XX.X% the of was impact legislation. excluding tax reform tax XXXX new effective that Regal's

We are estimating rate XX%. to our XXXX approximately be effective tax

our year for on full XXXX. guidance information provide I'll Now,

the Our improvements in an three continued expecting efforts, third guidance row sales low- this to assumes in improvement year and in growth segments to We're price. margin all for We're organic from operating expecting digit simplification full volume leverage, a mid-single incremental improvement. year see of for making XXXX, year. adjusted the full our the

to guidance or Also [XXXX] $XX restructuring $X.XX. XX% to EPS to GAAP of GAAP The year. XXXX guidance. for convert $X.XX EPS the guidance adjusted adjusted million adjusted costs our summary, XXXX (sic) included expected on $X.XX. in In is related full-year key midpoint XXXX slide, assumptions share. per EPS full $X.XX year over of basis, year reference, EPS be the full your guidance, the $X.XX are at is this shown our are our Our to the EPS On adjustments up our some an prior to is and

Now, I'll turn Jon. to the call over

Jonathan J. Schlemmer

from million & the morning, were organic in I'll In more sales Industrial experienced operating C&I broad-based margin pump, demand quarter, markets commercial walk we sales Good you the in increasing pool end gas and details HVAC, the sales give Rob. end everyone. and organic and with well year. sales as the was on X.X% Commercial of In In across prior Thanks, oil $XXX each strong markets. through segments performance. America, North strength as distribution. and Systems,

in generation market. by strength center businesses up were power data driven Our the

in Finally, China we strong had demand businesses. our

growth more improvement, Price on margin from price up commodity In year. a was over improved strong we margin Adjusted XX basis but partially prior the sales basis X.X% quarter in points year. prior margin was Volume way. increase was had up in is fourth had the a in points effective the summary, improvement our margins implemented positive During operating December. quarter, we impact of the organic offset XX and by sequentially of and inflation. quarter, on general sales,

slide the areas further three business walk There we're you actions XXXX. through On we've are next focused taken profitability to to of number I'll the in improve the on our margins. of a C&I C&I improve

in undertook of we simplification XXXX. actions related the The first set activities to are

programs half recall, the of will restructuring these improvements programs million of $X of in segment. As completed programs to XXXX in the Most XXXX. majority you were the on the deliver were approximately million focused C&I XXXX. $X of These second cost

on The is area improvement focused pricing. of second

see of Price/cost formulas. price in as was will the quarter positive price from margins implemented improvements XXXX, continued headwind two-way in a XXXX. the fourth the as our material the well impact increase We we from to

we finally, a from volume And We the positive manufacturing in expect expect operations. neutral to C&I price/cost quarter. improvements be by second our and productivity impact

headwinds we earlier As ramped reported, experienced up efficiency as we our in operations. XXXX

improvements in started as However, we XX quarter nice were OEM efficiencies fourth will prior customers were our guidance believe Climate the into sales and in sales to expansion XXXX. flat prior the we our we to exited margins America, We with manufacturing North margin million in Solutions, that continued C&I our flat on C&I our In carry to reflects organic grew points $XXX segment XXXX. quarter, year. fourth HVAC over basis year. sales In see versus residential

we orders started in HVAC the North to weaker the HVAC slow XXXX, exited particularly did sales the start In in our demand up business. low-double strong prior we year. strong a to in HVAC had digits XXXX. the you quarter heating been we difficult quarter as well the quarter fourth up face as mild distribution In fourth pick sales have out recall as we a with quarter of but as comparison, If with and the entered XXXX, we've season, in distribution, quarter distribution the America

improvement relative X.X% XXX and grow year. Solutions in in operating The prior productivity expenses we our higher inflation prior in by higher in by commodity was we're were the basis of operations. Climate the and volumes margin XXXX, year margins segment from business driven was by and growth XXXX. of by year investments SG&A. This full the in sales, of points SG&A expecting higher For sales driven year. the Climate was factory another organic solid partially up Adjusted the to quarter higher The sales XX.X% also offset and organic timing

continue a to was quarter, did two-way we in price/cost agreements material our see sequential as improvement contribute. While price headwind the positively

price/cost second neutral expect of to quarter We XXXX. turn by the

on points of For the XX% XXXX, had operating margins year the Solutions XX incremental margins full segment. Climate adjusted very improved strong in growth. basis sales We our

margins Climate in slight reflects guidance XXXX. in Our improvements

we our Before ago, residential trade the an businesses. positive very and were participated weeks in to commercial Chicago. key a recent show. It highlight for to across event review Regal technologies in themes AHR PTS we latest segment, booth. talk about was this There the like us HVAC Two to I'd opportunity and gave three our our Expo

innovations about was goes solutions for the of to help our in the energy timing first we legislation into was efficiency effect perfect show new and upcoming them legislation. we've The U.S. to the the new July products to customers customers FER, The gas that furnaces. were able as legislation meet XXXX, and meet allow Regal will developed

Ensite, example new products. theme a new product second our around was field ECM near IoT product, our A great HVAC utilizes The high-efficiency capabilities that of is latest communication.

systems new field, that are diagnose in help problems OEMs how see to their customers the product field, own assure contractors can help assemble program installed very Our equipment. help contractors and the even and correctly interested in were this

was The motor about delivers and energy in size, all control efficiency. technology. disruptive third and theme axial weight, increased our technology improvements reduced This noise

If system, pre-mix new the blowers, you have growth. UlteMAX product. this and motor strategy utilized enterprise line you of drive seen our is technology element would of to our control, latest Star in in visited innovation new refrigeration our DEC core boiler our A commercial HVAC and our booth,

leads our well the For upcoming capabilities, with growth. generated We as the Regal, was efficiency and all control as customers many motor disruptive had at the our axial all and new future fueling show legislation, energy IoT our show, positive both technology. interactions our existing about

growth end-markets. segment. margins, points Now, let's PTS with our but driven by strength XX million sales, Power industrial marine sequentially. sales was talk up was Adjusted performance the was nearly were $XXX prior sales XXX increasing year offset oil higher basis the in the about contributed basis from in and Transmission from XX% Sales by of points in volume year. distribution, gas, and Solutions in positively renewable organic prior XX.X% and The energy, margin higher expenses. SG&A aerospace operating quarter but down to The

we to margins in recall, half the best with expenses the XXXX it that commented compare of to second you If half prior second the be due margins previously XXXX the timing would year. SG&A

year. to second The adjusted of as operating was half second sales, half in up margin points the XX% PTS compared XXXX prior XXX basis

on PTS margins For the now about our sales operating basis margin growth improved strong performance feel the Overall, the year. XX to full-year the Mark. XXXX, in call I'll adjusted XXXX. incremental points segment. turn the XX% full back we on were The over with good PTS the in business

Mark Joseph Gliebe

Thanks, Jon.

Now, like quarter briefly total our fourth summarize XXXX go to Q&A, our results. year and before to we I'd results

X.X%. Organic sales the quarter. First, increased fourth

to up the Our for per operating margins were compared adjusted up quarter and points were share XX our earnings X.X% as prior basis year.

share at than look earnings the XX Xth per X.X% up increased margins XXXX, let's Organic year, used of Adjusted net the year. with significant of that repurchase repatriated were of In flow increased for greater shares. finished free Now, a commodity cash. the XXXX, operating total $XX income adjusted XXX%. sales to basis full $XXX in million We our we X.X% portion of we spite for consecutive points headwinds. for million and to cash cash

debt For $XXX down debt to we X.X. year, and million reduced total paid EBITDA adjusted our to the of

to Day, cash growth, enterprise return years the Investor laid invested over margin, four and free we the our net strategy income. expected flow in Organic communicated performance XXXX Finally, may on capital, recall metrics: three at operating you March out and key our next

expect on closing, that pleased XXXX. metrics. progress we we continue four all momentum into made XXXX that are will In in XXXX, We meaningful

encourage all entered segments good were and three start that we year. in as orders a up We are the off to

Our consecutive at XXXX continued our of increase share point organic guidance reflects a our center third and of in guidance. XX% growth, adjusted year margin per improvement, the earnings

take We questions. will now your

Operator

you. Thank

ahead. Oppenheimer. now session. We question-and-answer Please will question our go first Glynn begin with Christopher from the comes And

Christopher Glynn

morning. Good Thanks. Hey.

Mark Joseph Gliebe

Good morning, Chris.

Christopher Glynn

On the specifically? XXXX, the gap the negative XXXX in was neutral for second view by price/cost quarter C&I what towards

Mark Joseph Gliebe

us quarter? what for the the asking price/cost the of You're was value variance

Christopher Glynn

for No, XXXX.

the get throughout for that year? XXXX, might is wondering second expecting to the about negative I'm We've quarter good. been gap of what which been talking gap to XXXX. by a neutral You're have

Mark Joseph Gliebe

Yes.

sized end year, jump is this. tell We you haven't front big saw for midway at then of but it through XXXX We can Chris, a year. in we the what the inflation and the

that increase to price the we way in formulas two-way months there's So, announced material secondly is work price gap. And December. three then, our a six

catch-up move in throughout sequentially through where we believe the continue the the from get expected to quarter to better it'll half second it we year, got as were going we neutral. quarter-to-quarter to second better So and sequentially forward, from mode go right we and

Christopher Glynn

Great. discuss at thoughts Okay. below up EPS XX%, growth? by profit if around the directional just X% midpoint implies you segments And the midpoint improvement then That operating midpoint. line I'm OP the about gave the wondering that guidance. could general you

Mark Joseph Gliebe

we're improvement C&I out for perspective, big an C&I. of weaker The margin performer. from obviously business views Jon you and, on chunk three laid Well, is company the in our expecting all segments. operating a the

So focused that segment. out. made slight on comment and our margin laid also improvement we we're the quite Jon that Climate Jon expect OP in that

should we're it. that give about you So, thinking how directionally

Christopher Glynn

Okay. Thanks, Mark.

Mark Joseph Gliebe

Chris. Thanks,

Operator

comes from BMO ahead. Capital go Markets. with Scott question Please Graham next Our

R. Scott Graham

morning. Good Good quarter. Hey. job. Good

Mark Joseph Gliebe

morning, Good Scott. Thanks.

R. Scott Graham

to you fill I wanted the couple to in for maybe blanks a of ask us.

same Are you the – segments? what all give you two about was of in in just lines by because give able gave you segments XXXX think information to for of didn't segment. all for sort the I expectations the other could simplification in for I and us asked along fill segment what is price/cost one Chris that only kind mean. You hoping of maybe the segments three you talked I three

Mark Joseph Gliebe

little commented past then benefit million can a could previously million so – that We've million segment, that Typically, of bit that some in of payback two-year that roughly I the segment. $X on C&I bit We you expect color direction. restructuring will $XX And $X the focused I that have C&I we a we in disclosed add in to restructuring in our Jon spent the $XX was investment. XXXX. XX% there, of million we a little Scott. a add on – of kind XXXX give commented Well,

the of kind the expect that segment. figure what help went of benefit out will So, by kind we you and rest where would spending of

Jonathan J. Schlemmer

Mark, Climate and programs that And PTS. in in XX%, spent both was other

R. Scott Graham

Okay. calculations. some are right you've price/cost be PTS, I'll in now XXXX? do negative, you segments. and you tell of All for if – you right, expect where us of that's – Could some to neutral in then the where turn those expect And two to given you kind of or us when

Jonathan J. Schlemmer

Scott, Sure. is this Jon.

PTS, and So, in been saw a in little have would in expecting bit unlike C&I, we we're the Climate of price/cost a in tailwind and XXXX. same what XXXX

R. Scott Graham

holistically, meeting, XX%. operating X.X%, businesses for, Great. look about to points. only Jon. margin that year Last And legacy XX XX% a we expansion your basis at right, indicated believe, to at to I ago a you, little Maybe if XXXX at question. Thank calculations target the things you, your bit are more ended my up

if I'm – squeeze expect rata you Yeah. mean could is We if like that, then an catch-up And got price/cost, to would a would on year a sort Does be. your accordion? the that we there get goal this works where that to a so, (XX:XX)? to where land in XXXX of want did little sort you'd even this you behind on pro be wondering obviously thinking of but

Mark Joseph Gliebe

Yes. I thanks. Scott, question, so, understand your

half XXXX, them margins back out in a margins of margin the points. With basis points made you March operating for inflation second on back total ourselves half operating we of was the say, or and adjusted news improve XXXX. had a XXX operating margins our We down them. one operating XX% adjusted should March and And regards in increase copper did good year, improve laid that meaningful in to four year in over we metrics, three-year adjusted adjusted last to for I you're we that the our in year we of to points period. – this year, basis improvement progress. – expect XX say improved So, margins we to the slowed goal progress, of out XXX spot great all right that are progress you're the right laid right, of is four The basis

would So, we we included digit do have have we did improvement in our mid-single to guidance margin growth. revenue and comment low- that

is the So, that are planning for year year improvement this margin this guidance. into baked or we expecting

R. Scott Graham

I'm granular XX business' more there just Yes. to as trying it excluding only if issue get appear you sorry, be that C&I. and it's the a points obviously with legacy was not up maybe the I'm there Mark, margin because continues little to does – PTS basis

that I guess $X to little cost taken back. were that really or holding of sort out of million you beyond the there? how next just margin from I of that we So, hoping just more a hear C&I bit guys get was that It's worth benefit kind about is XXXX. away million What's $X

Mark Joseph Gliebe

Yes.

So, what I you're I got I understand. apologize. saying.

and XXXX in right, Jon three lay we're to improvement you're out the C&I in drive things that the to focused did segment. try the on So,

majority to is actions. on on do finish focused the incremental that programs, that there up one? simplification our on want you of the pricing C&I. So, fact on investment he And our commented Jon, commented He

Jonathan J. Schlemmer

Yes.

margins, half of will we improve pricing Those the with help that as in well saw of price the second XXXX in that we the as the lag in first of XXXX. part implemented the continue to the we So, of the that XXXX. December, to in is business half benefit exposed of our our two-way see increase increase the That that formulas. expect the to copper will price material

productivity manufacturing clearly that us. We piece so help That operations. had longer neutral some of second challenges hurt the no XXXX the be to our it efficiencies, from being expect in headwind is We margins. big a price/cost a by to our quarter, the C&I. then last the will in turn And

We better performance. are expecting

XXXX. have focus that in in lot a We area of

the the a to C&I So, expecting see from simplification of million million year. is segment $X to this $X we're portion benefits just the in

R. Scott Graham

good to right. All you. hear. That's Thank

Mark Joseph Gliebe

Thanks, Scott.

Operator

next Our comes Stifel. ahead. go from McCarthy question Please Robert with

Robert Paul McCarthy

Good the of morning. and start, good year. Congratulations on end a a good

Mark Joseph Gliebe

Thanks, Bob.

Robert Paul McCarthy

me, Can you okay? hear

Mark Joseph Gliebe

Thank Yes. you. morning. Good

Robert Paul McCarthy

calls, cadence – there probably some get how questioning, there other kind jumping the can and of of guess of I any I to actions going any getting in kind missed. that know some because on, year? is it see been XQ, something contributor it's XQ? a level really I've any for Yes. I for you're I texture of might kind has to just help a that XQ, but want not XXXX excellent year I which around In so other the of arms off the rate? of if and words, been of be you'd pricing comment organic around much XQ, be will set But couple around model. price growth say anything my terms your about in probably event, price/cost, How much will full

Mark Joseph Gliebe

Rob. Thanks, Okay.

first, So, two into it break let's pieces.

The price formulas. first one material is the two-way

So, we have material to the company. in represent gap price the total XX% two-way which of (XX:XX) a formulas six-month three typically revenue the of

And have benefit in will then up. caught we as so, copper into up increase the to those it year. caught general X% increase will in effect all those quarter, head X% second be half, And segments. was... piece second increase price Jon, there's the went the three The from And which see of second the have the we big – that throughout of saw, the we'll that is was and in price which into December

Jonathan J. Schlemmer

in the X% Rob, into And talked said, a the Typical vary Mark price increase product range. do X% increase December increases went that that in in Yes. well, quarter. same but range increase, of in as range C&I. we to but by But about as lot the was price Climate also segment general price PTS in it the had and was price effect fourth we our in our

Robert Paul McCarthy

your So, on there. I general realization price be the two – what basis will typically effective the questions What your of the will on historically? increases, well, – be follow-up material effective guess

Mark Joseph Gliebe

contractual. material On the two-way they're formulas, price

So...

Robert Paul McCarthy

price No, no. your the I'm talking increases. realization? price general about for is experience the typical What

Mark Joseph Gliebe

specifically to going into related anything get not price. I'm Yes. to

I price that are the sticking. increases comment the earlier However, made

So, it should...

Robert Paul McCarthy

Okay, okay. right. All Nice All try. right.

across for on, us Moving in expecting C&I just conversation around of Can just the you lot what about the of a you us of level we're for XXXX segments, incrementals? the in set of couple – guidance margins. next for embedded each the how one for could incremental and maybe the I what's of of this simplification should context margins thinking guess those years kind obviously of we and is and about – day, in for terms and level talk word incremental set be

Mark Joseph Gliebe

Yeah.

there's key incremental back that held drivers So on kind us XXXX. of two margins in

the we efficiency half inflation facilities. up the big mentioned the that second year. was some have robust second challenges happened the in first The our the as we the in again and jump back of did, quarter, in And second was ramping demand very was

head incrementals roughly C&I Climate two XX% in PTS XXXX business, So those roughly in segment. the as headwinds, expect and the without our XX% into the which is normal we roughly in would we XX% business,

Robert Paul McCarthy

I'll then and then of and plant in you has rhetoric view that I trade mean And kind there footprint move that terms a question, how of lot of pricing, thing? kind been withdrawal and on. mean the around any talk NAFTA. from of for you're last what conceptual of risk Obviously, would looking Okay. at the that

Mark Joseph Gliebe

who say that deals our our view that at a relatively would large I U.S. serving of Mexico and attention tend compete who Mexico have in is this in are We are we anything with definitely we we compete in people But with who got footprint don't customers. look to Obviously, because we our or NAFTA with Mexico. are tend to compete that people also located located with outside the

NAFTA is, my inflation. our would So is of that in view. result in competition on were the and guess there If have That's would agreements challenges inflation. put competition it simply would on tariffs our significant that coming sense result best is, our our or similar put out us

Robert Paul McCarthy

Chuck. Good Luck,

Charles A. Hinrichs

you, Thank Rob.

Mark Joseph Gliebe

Rob. Thanks,

Operator

Please Research. go Our ahead. next with question comes from Josh Wolfe Pokrzywinski

Josh Pokrzywinski

Hi. Good morning, guys.

Mark Joseph Gliebe

Good morning, Josh.

Josh Pokrzywinski

a somewhere So it this at I neighborhood recur. price/cost $XX probably guidance, I EBIT to the ways. has of seem is But right think as your like maybe come it's don't guess it up know we've add-back question but of to midpoint I after the if and million know few about LIFO doesn't an in

supply to million over there say that a of LIFO, large seems call and guess think the think EBIT normal a isn't XX%, all core The price/cost few business it saying million year. as headwind from in million is really half, it point? I $X incremental margin year roughly that the of there of I interruptions million is for If I starting arithmetic that number Climate. growth a imply $X benefits, in it's restructuring just So you're correct of bucks about first chain a across $XX

Mark Joseph Gliebe

you're will to be say headwind a price/cost front expect half neutral that that of Well, right be in that we the the and year. will

burn back, growth in assuming rates throughout So in the and guidance for us year. mid-single that the low more included should commodity had digit inflation no we off year. we XXXX, margin basis to inflation, of with continued But our points improvement XX improvement organic held

commodity a from guidance. we're is baked So everything into that that headwind assuming

Jonathan J. Schlemmer

the you this that price/cost But math headwind walked first Josh, I quoted too would pieces. seems the is Jon, there, I say, half catch And you a the didn't all just in high. through the number for

Josh Pokrzywinski

then deltas [off-line] the we flare to of some years set up here? wiggle that and should there mix like. circling just on level enter of some how I up from regional business follow look word (sic) that mix we what maybe and Rob's the has been some Climate again, had I Okay. Middle the as guess on think about business, back We the Is know And online can past share share recently. dynamics over of, you XXXX? and East kind use few more those

Mark Joseph Gliebe

to that our we year, back, and we're into in – with for battle at in feel the XXXX products how Well, putting the out, good thinking that world. business change the XXXX FER legislation. are competition, the And position we're at go the that like substantial of about for their with we're positioned customers our to half as we are furnace position back going a start well energy think legislation. our customers we the

So we we're of good another expecting in growth XXXX had XXXX. year a in X.X% with year pretty growth and

Josh Pokrzywinski

you. going Got calibrate one then moves final just might one, some forward. us And help

around is in today, roughly obviously. contemplated up the guidance? that have you level ton $XXX lot HRC that think guys I a your Is a January in

Mark Joseph Gliebe

We've our price the today taken you're material what Yeah, thinking in good at into price should is the we've consideration. But that it yes, regardless what The that about into two-way price our that right – the taken is of will way. that copper is. formulas say I guidance. is assumed adjust we're news

thanks, So Josh.

Josh Pokrzywinski

Thanks perfect. Okay, a lot, guys.

Operator

question Our next go from Jeff comes with Please KeyBanc. ahead. Hammond

Jeffrey Hammond

Hey. Good morning, guys.

Mark Joseph Gliebe

morning. Good

Jeffrey Hammond

explain where the couple and benefits big the a had XQ? kind the then on build a can with you one then you LIFO, expense adjustment and into with just Just we any – couple and of do LIFO

Robert J. Rehard

Morning, Jeff. take Rehard. Rob that This one. I'll is

C&I. able a that's this the in fact, that guided. our had impact happen. variations similar So, a LIFO as anticipating going Chuck of what we facilities at to a explained would to what LIFO there segment. Obviously, inflation, expense you in impact news in a happened inflation, mentioned for forward LIFO point the expect The have guidance offset LIFO impact million well. and we're not – that's some LIFO a news good benefit our $X.X was impact perspective we manufacturing you by in when the performed XXXX. from because have had business Climate The were The is good we remarks,

Jeffrey Hammond

Okay. away? And headwind goes was you the then inefficiency XXXX think can that you quantify in what

Mark Joseph Gliebe

We Jeff, in year. as facilities our that and both well were comment we exited performing that manufacturing haven't the Climate we C&I but done did work,

Jeffrey Hammond

in million the achieved Climate incremental does then normal, in you that the $X seems it as putting something some And time certainly hasn't into out lower saves because that $X and the just include called like that you're seems to XX% been like that Okay. million guide? quite than it

Mark Joseph Gliebe

I Climate, meant think this, I C&I? you the you answer let Jon think, Jeff, I'll but term used

Jeffrey Hammond

sorry. yes, C&I, Yes,

Mark Joseph Gliebe

Yes. Jon I'll let the answer question.

Jonathan J. Schlemmer

Yes.

in clearly to get that we our in C&I didn't think segment. the I expected we get XXXX incrementals

see we're Mark to on basis. didn't same C&I we're margin XXXX. The the XXXX. the incrementals of what the that way expect C&I had is is expectation level segment as a on we very to we've focused said, go-forward in That improving for even thinking we So, historically in about performance though our perform

Jeffrey Hammond

guys. Thanks, Okay.

Mark Joseph Gliebe

Jeff. Thanks,

Operator

ahead. Walter Global. question next with go Seaport Liptak comes from Our Please

Walter Scott Liptak

Hi. Thanks. Good Good morning. quarter.

Mark Joseph Gliebe

Thanks, Walt.

Walter Scott Liptak

and I C&I our much how memories on much refresh and price just about ask to how could you price want if is general is two-way formulas?

Mark Joseph Gliebe

this up. Jon take at I'll a can shot follow then So, and

is of C&I. Climate split two-way – that the the and price split about company material On between and XX% XX% it's it's formulas,

than is since has on of impact it an segment, it a does So, C&I more it than Climate C&I. bigger

I... there else to – anything want is You

Jonathan J. Schlemmer

No. That of Climate is two-way the is roughly XX% sizes price roughly the the right, total the segment by between split it that driven split revenue revenue company's segment. C&I and – material formula up

the So, pricing. with is C&I exposed what to of general we rest do

Walter Scott Liptak

competitors Is talk Okay. up getting you December well. the presumably market, through that the O&G, about the in of you the mentioned it wonder is general by are And on pricing, if best being as price. on distribution? general – affected it it rest taking price was the you're could oil so and I flow where

Mark Joseph Gliebe

particular say I I it's segment. worse – price or broadly. broadly in just increases implemented, any getting we're it's that any on progress would better say we our and wouldn't have

Jonathan J. Schlemmer

global And on a well. as basis

Walter Scott Liptak

recovering, year? And the your tightening up Okay. The little a prices flexibility Can what's in XXXX? for markets markets later the on are supply. during up take are bit you hopefully

Mark Joseph Gliebe

– we jump looking Well, another it. big be had commodities, in jump if big certainly a would we at in

Walter Scott Liptak

Thank right. All you. Okay.

Mark Joseph Gliebe

Thank you, Walt.

Operator

Longbow Dankert next go Research. ahead. with comes question Our Please from Chris

Chris Dankert

Hey. Good Thanks morning, for guys. questions. my taking

Mark Joseph Gliebe

Good morning, Chris.

Chris Dankert

just commercial facing we huge increased U.S. was the more mix, think But XXXX not the efficiency kind of I growth just guess is organic looking guess, or of standards Climate I I there. Climate, benefit of stiffer I should rest you're out expecting that here? some rate at increasing comps how part in the know the to from a helping guess bit standards the a those I about

Jonathan J. Schlemmer

Jon. mix bit positive see of business, little was Climate I is a would did say we nice that see. to this Chris, which Yes. our in the on quarter

at high that efficiency quarter. we standard So, the fourth products a our little in was versus look favorable product

quarter, than we more as would we that to that those the that are segment So, go the say probably positive did see growth equipment because to standards that a revenue see didn't into even of impactful commercial our and the though aspect I a in contribution. equipment. our products segment bit C&I Climate overall kinds of

With Climate we'll the gas upcoming see furnaces, change that impact segment. in for our

of pre-build, in XXXX. be However, more expecting depending with to the potentially happens what on that we're

Chris Dankert

incrementals looking then, think year if kind it. $X benefit like on I were EBIT Got targeted or even in it FX of just guess that closer is gap at guess, is the Thanks. looks the inflation of labor help the of adjust PTS, out of kind the can it. fourth difference? And between XX% your I us Got XX%, the XX%. you like you bridge was I it line, big, million that last quarter and

Jonathan J. Schlemmer

SG&A a I timing would part the say big of was it expenses. that of the

For in incrementals targeting in them line the we'd the year, are to like we XX% quite where PTS, more our incrementals in were of because PTS. not so XX% be

quarter the in the the the more help drive company. to related the a to little fourth did very business. timing SG&A some our We, prior grow bit the investments But in that organic the helping growth about view the sales margins those way, So, in in that investments SG&A really in we especially expenses. We in were back feel target. quarter, XXXX good is of well segment, as to from were course as with and by year the make in held fourth

Chris Dankert

Understood. Thanks guys, congrats the again much, and so on quarter.

Mark Joseph Gliebe

Chris. Thanks,

Operator

ahead. O'Donnell next our Ryan question comes And Baird. from Please with go

Ryan O'Donnell

taking morning, Thanks for my Good Hey. guys. question.

Mark Joseph Gliebe

Ryan. morning, Good

Ryan O'Donnell

a on taking XXXX the back just margin. So, step

better year-over-year is half probably of If of expansion us? in half you price/cost out in the for could think kind you the half, better half, that in way about first there terms first any second second with can being versus with parse volumes

Jonathan J. Schlemmer

haven't We to guidance year as organic comparisons as improvement way of see out at any throughout the as basis, half half half particular a first On sales growth second margin we we're on expecting better are you it a we've prior basis. in terms in on the mentioned, the expecting – to simply half little Mark because laid to look or margin Ryan. of the quarterly compared to see XXXX, to the a in margins expansion, year-over-year year. But

Ryan O'Donnell

seen in side? me, obviously Got may one And price that helpful. in last kind have the you. December then increase around any just of That's you the guys pre-buy for price non-material formula

Mark Joseph Gliebe

Are you talking about for XXXX, Ryan?

Ryan O'Donnell

quarter, any have that kind price that may you increase? ahead fourth December Yes, pre-buy Right. seen of of the in

Jonathan J. Schlemmer

to would a be revenues. was if view was one, our small impact and significant Ryan, there it not

Ryan O'Donnell

Got you. guys. time, the Appreciate

Jonathan J. Schlemmer

Thanks, Ryan.

Operator

turn question-and-answer remarks. our the like to concludes this any Gliebe to closing over Mark And back I'd session. conference for

Mark Joseph Gliebe

us like to be to and we before Regal for earnings be Linda of We Thank dedication Hinrichs his Regal. comment add email you on call would This Regal the his day. close great through I contributions very for the will you done appreciate questions part much that wife, key And you today. time. and in you, wish has your Chuck Chuck of his until the participant. thank and where (XX:XX), operator. interest all we years, in all last sincerely team the and with Regal the thank have for call, Regal. you will be a best retirement. Chuck your at been Have end Chuck for eight will everyone a March, for one Chuck, a Chuck can so that Regal. nearly to

Operator

The today's Thank concluded. attending has now for conference you presentation.

now disconnect. You may

Regal Rexnord (RRX) 6 Feb 182017 Q4 Earnings call transcript