RBC - Earnings call transcript Q3 2019 | Regal Rexnord Corporation

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Operator

Good morning and welcome to the Regal Beloit Third Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

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

Robert Cherry

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

Joining me Financial today and are Louis Pinkham, our our President Rob Chief Vice and Chief Officer. Rehard, Executive Officer

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

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

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

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

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

an third me of will detail agenda briefly review and call. quarter. update outlook. today's will the and off quarter on our financial let an with results opening then provide comments for provide lead Rob his XXXX Now Louis the overview in our

Louis some closing have after remarks. will We which, will Q&A, move then to

Now I will turn over the Louis. call to

Louis Pinkham

Regal. joining Thank for for everyone. good Regal's quarter in Rob, Thanks, thank morning call you you earnings third and your interest conference and

conditions experience We macro tough quarter. the to continue in

trade as HVAC distribution and in markets, industrial China. reflected channel reduction of industrial U.S. inventories quarter in market. the financial as uncertainties results particularly the in third slowdown Our pump the well and ongoing The pool in ongoing global the in the

to the below business at normal $X.XX XX.X%. timely challenging the Regal per overall Despite rate ensure delivered the in well simplify that generated of with Regal down environment, our the have approximately rate. I our data sales based decisions and and we growth earnings analytics. share good quarter both and been teams orders am that of this and same at proud X.X% we of using Lean organic posted on principles XX/XX negative make adjusted

the to half overhang implementation in ahead our in each of FER the the being his session, the minutes climate, going North to saw more take sales slightly fan want my the on pre-buy, provide summer residential pre-buy a Rob destocking HVAC we weather of standard expectations. to Now, and segments resulting resulted the impact from I of for energy efficiency detail relatively America the in share down below Starting furnaces. performance. mid-single-digit but expected the perspective motors of first from negative July mild inventory The few rating regulation customer

large last in pressure XX/XX growth negative pruning refrigeration, retrofit in Timing to improve sales commercial the efforts saw our some project this year in account X.X% mix segment. also of put along with vertical We the organic a ongoing quarter. on proactive margin

market, which Pacific a area, the encouragingly, an segment, However climate are to but plan Asia our we EMEA part in saw smaller improvement grow. and we of where

are destocking We in for returns growth demand positioned subsides. well as

sales impact benefit market for are levels weather given which current of see in up headwinds. returned point resulted sales high-efficiency and basis could FER from XX/XX conditions, XX adjusted today, in operating normal margins motor see favorable the overcoming compliance the early in price positive the As along we segment, adverse improvement a in a mix with demand this The we XXXX. year-over-year cuts

quarter of prior distribution our X% the PTS grown we than channel, is year. in uncertainty XX% PTS, the continued end the tough was channel to distribution a as slowdown markets The and North America in average. switching organically the industry anticipation aggressive industrial market. on estimate Approximately which industrial go we trade destocking of higher in way faced the Now in having particularly accelerated cooled sales comparison in through in

down distribution sales our decline significantly due more higher to OEM the rate was PTS of which in to compared explains When destocking, for this segment quarter. direct sales, the the

I in while and of demand, markets where hampering challenging impacts. we end see equipment, feel As stated from impacts do a beverage much year-over-year sales the XX% do the oil this segment, agriculture sales. indirect a nearly our with upstream were X% saw not impact tariffs in QX a before, Also, direct gas, on which in along we and had we decline PTS

our customer verticals, digital holding are we that additional headwinds resources, that growth segment confident solutions, what product sales in market, energy investment a feel net these in past only. these offsetting is was a in Partially this inventory in this share drove strong organic believe down the brands for quarter and X.X% our segment putting that in experience. the impact segment. our destocking this renewable is market QX. two the years end for We position we the leveraging sales strong is However, impact overall the as has and through differentiated on over particular, In pressure gained driven

productivity, adjusted XXX on positive had in XX/XX the segment year-over-year third cost The in basis management quarter. margin reductions. margins, and operating experienced point with still decline pressure Volume largest which the we price partially SG&A impact our offset margin improved

the flat quarter this actions XXXX. quarter are cost However, fourth can sales segment PTS we the pay segment lower as be will and year-to-date and year-over-year margin the dividends on taken in confident relatively results is by in the quarter lumpy

year. saw Industrial and of And X% Finally, also same comparison continued markets. in second in multiple third prior difficult we pool quarter a organic our the quarter segment, as the from demand that declined in in the we of the In period growth business, destocking the in Commercial customer faced we the continued saw inventory end pump double-digit. Systems weakness impact

seen market trade in dispute in China resulted has certain sectors particularly a mid as commercial commercial the impact have single-digit as such been and chillers us, reduction demand from challenging for HVAC ongoing China, The slowdown. the on economy transport HVAC refrigeration, In commercial the a industrial in sales.

same pruning in in the efforts These commercial decline executing profile. of margin While our market this time, at two our to as part combined factors to a sales. we on double-digit improve HVAC XX/XX our are like account

Lastly, organic we in saw distribution segment. headwinds down Altogether, a decline XX.X% to inventory growth distributor the destocking. again these contributed being the driven by in channel, sales sales

especially forward, customers positions advantage experienced which in to have in market advantage service in a loss assembly give market tariff and share we we supply industrial of cost American our future well Although, and and recapture our our us take investments temporary North competitiveness as erosion, believe business, motors and related going rebounds with our improve share. the

the points basis The adjusted C&I in margin prior down was year. operating XXX from

renewed While price XX/XX From some margin in negative mix on free cost company our approach of to positive led the and drove we flow in quarter, the million decline. quarter. a efforts addition saw inventory an our in teams impressive significant an XXX% the management, Through reduction inventory perspective, progress total volume the cash data is income. reduction analytic of net to a adjusted $XX in

income over will be for cash now year-to-date we flow XXX% net expect that We adjusted above the of free are full year. and for XXX%

capital strategy. on our continue deliver balance the In quarter, allocation to we

brings In shares over purchased million. we million us our X to quarterly year-to-date. dividend, to purchased X.X almost shares addition million That for $XX

and year a a weakness continuing lowering $X.XX. of X.X% $X.XX global to the are for range we forward, our of adjusted conditions earnings of outlook from range The $X.XX end by the market reduction midpoint is in ongoing $X.XX uncertainties. Looking driven to to trade the the

are we given While, positive order we accelerating laser the inflection restructuring on are a seeing fourth trends, our still conditions. slightly quarter focused market in efforts

$XX savings. costs, that we XX% with have The plant in and our announced We to recently that already efforts reduction in are million year. annualized of last a closures quarter, reorganization X reduction in SG&A the personnel to a restructuring prior result compared have announced XX% resulted expected in along

We are we improve expect margins. our the deploying which gross approach XX/XX to systematically into organization,

ensuring third of each alignment but training of X,XXX X% have our organization, responsible across will of conducted these XX will XX to for quarter. renewed of the XX previously, global nine team additional a months, the leaders to effort early touch ensure to training management, personnel we Regal's within personally be quarter, next and associates most than X,XXX more that of I now top first resources. XX Regal leaders whom the to this train been the six XX trained we In in

to reduce to footprint we synergies value As footprint creation we is and additional phase now are Regal. that segment. rationalization also further we II more expect provide opportunities to at additional and opportunities in we out around the executing and leverage organization, the new simplification in around a C&I drive opportunities on which simplification product Hence consolidation we decentralized cost especially which It there our continue will, clear program are future. our find

compelling. initiatives cost Well, our are

all have clear growth our also We in opportunities businesses. of

position are effective needs. and service provide ease approach. in class shipment We solve doing and time, from challenging efficient with the in differentiated the strongest order placement products application solutions best market At in energy customers can to to we and ecommerce our provide the an to same channel business to

businesses. met new selling growth of value and strategies that with confident solutions all products, business in with feel with quarter, the I new and our all the During their markets to of review our in potential added groups across

is ongoing clearly share As improving of review part the on earnings, holder focus ROIC business, returns. ultimately the my and of

dialogue The in process. with board Regal's is

make to Day to a quarter value. then Investor our at slowing, March. call, with However, makes we expect our the the our that only more in moves shareholder fourth share created strategy with We on portfolio market full to rollout you plan in sense in and provide

revenue with uncertainty headwinds destocking are net flow the performance. weighted In Week segments cash teams trade strong all make of industrial for distribution in as summary, adjusting reaction me and Regal a slight the income, market proud to quarter, along in XXXX tariffs our trends, driving heavily on headwinds their Regal delivered and guidance sales way of the and in decrease expectations. free in to of pressure at XXX% is our market across our QX inventory

We growth and returns positioned for demand destocking subsides. are when well

ability and in for initiatives demonstrated the in deleverage growth Our quickly future. excited achieve by reduce SG&A our as QX QX. and for move XX.X% long-term, deleverage out business setting very remain drive to improved to the prospects about profitable our in cost restructuring clearly expectation our I rate on up the is

will more details turn our performance. Rob, I will over the call provide to financial now who on

Robert Rehard

Thank everyone. and morning you, Louis, the

operating some quarter weakness and Despite impact company sales rate, will profit. with segments and the on normal comments more and I minimize providing the the them our to guidance. by helping total in our on below our start had markets detail these the we top headwinds, XX.X% mentioned, in end Louis line at in As Regal delevered several regions. headwinds significant that saw

declining business organic was initiative. continue XX.X% low Starting with Systems, from declines industrial China sales quarter prior and third declines the margin driven in and year. the American pump by HVAC to our printing The Commercial execute and were and Industrial double-digit in approach down distribution. in sales on commercial to single-digit our pool North XX/XX saw The as the we proactive accounts also segment

The but X.X%, year, prior adjusted sequentially. in basis down C&I operating was the margin XXX was for points margin experienced the quarter. the entirely volume This in relatively due quarter decline to flat almost compared the to

headwinds, this well cost cost in was to normal partially in despite of were Deleverage segment. offset However, favorable able price segment below the deleverage actions. impact XX.X% the the C&I volume the discretionary and we

our were quarter business, weakness project from Orders weakness all in a our approximately The of market the and in number decline inventory the in destocking in orders. impact pool C&I markets. XX%, project China and markets, pump industrial delays the for down end in in generation reflecting the drove cancellations the

Lastly, it's we this in are rates, to seeing order fourth determine improvement quarter is some too early sustainable. improvement if but

were sales from the impacts we market. the pre-buy in in Other weather HVAC quarter commercial the pruning down and further quarter The X.X% driven from in from summer Turning in headwinds the prior the primarily year. impact mild the half primarily with Solutions organic of of decrease American North residential Climate account along third was refrigeration came by the deploy FER XX/XX. the first as the the year,

negative our Pacific driven during turn note, We Climate XX.X%, started deflation. formulas On adjusted for our compared a quarter. prior in saw to positive to price basis of operating price sales the commodity expansion quarter The also see some and was points region material Asia was our we improve The in margin the improvements, up XX/XX positive to the activities. year. productivity XX cost due margin by

was the the the by to certain expenses volume margin variable Climate allowed impacted well us down significantly the drivers more segment very as Climate But a discretionary from headwind this as segment shown overcome quarter decline. timing impacted in cost slide. actions, for These favorable year. efforts X.X%, other, relative Deleverage partly on the by to low the in of Orders the prior the the were slightly. of rate other

with mentioned, along HVAC previously in the pre-buy of dampen some weather our the the impact the the mild quarter. As demand in first of residential year half FER

the our commercial headwinds refrigeration order in enter we As HVAC rate fourth to we and see continue in residential markets. quarter,

While order still rates will ordering fourth on it weather the slightly an be part year-over-year we is down are and play surely early performance, to currently important projecting in quarter.

North inventory also industrial our challenges channel. in of were primary Solutions, a Partially sales sales year. headwind quarter offsetting in growth the third be a positive the was the slowdown American X.X% destocking to was market. significant in Turning The the end Transmission in and in segment to which to markets, Power prior organic due continues impacted the down oil from sales renewable energy these gas Upstream headwind. distribution continued

The operating down XX.X% basis for the prior to year. margin adjusted in points XXX PARTNERSHIP was compared the quarter

is be can significant and segment results by not fully as the Favorable sales. price year-over-year decline. margin on segment cost, SG&A the lower offset quarter flat lump reductions could relatively PTS the cost However, productivity volume improve year-to-date

actions expect do in provide discretionary implemented cost in the quarter fourth we the third significantly However, performance improved late will quarter.

for PTS in down distribution the again main or the was industrial and driver a slowdown quarter channel. Orders the mid-teens,

impact we the of flat the for relatively orders per on destocking to we the As quarter, the to year continue year-over-year quarter. and see expect our distribution fourth rates order to enter the fourth

key will metrics summarize I Now, a financial few the for quarter. third

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

of capital XXXX. expenditures We for year million the expect $XX full

We capital our that deploy we of are value. focused weighted average above drives cost ultimately on returns improve shareholder ensuring capital and that

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

for increase disclosure announcements. We $XX the from of full to now our XXXX, restructuring million year expect guidance, most of plant million prior an related $X due is recent and costs which of the

to We approximately from business savings will total annualized expect million, closures both result the the announced reorganization the more plant and annualized closures of resulting bringing than plant million. savings our $XX in $XX

income We're the and in ETR rate the third rate lower higher in due tax expected tax both was tax businesses quarter assets the digestive accident. tax effective XX.X%. adjusted the The the and to of was the in regions. The quarter effective for adjusting lower year than quarter effect operating full

We this a provide table a a full reconcile table, adjusted prorated the for year the approximately our expect to to GAAP presentation in of We adjusted be ETR the the XX.X% XXXX. now ETR. to appendix ETR

X.X. billion our debt with net total million. We to debt net debt ended was EBITDA $XXX Our our $X.XXX the quarter ratio at was adjusted and

now of quarter. over flow shares, to driven expect achieved purchased shares was in a at inventory in We XXX.X%, year-to-date million quarter, for as brings free income cash $XXX.X million XXXX. cash per our a allocation in year XXX% strategy. we We for we reduction by And of execute the our the million balance third million full quarter. above $XX.X on This of our in $XX.XX X of our X,XXX,XXX free net an flow part the percentage $XX.X average continue to purchases share. just to be Also

XXXX. update guidance Now, on year I full for an provide our will

sales in to for done uncertainties, growth slowdown economic the the organic overall channel since mid-single-digit as guidance industrial trade updated from full continued the inventories U.S. year Asia. the global a due Our and to impacts slowdown access be ongoing

EPS volume to a a an resulting EPS EPS range adjusted quarter discretionary of We to range deleverage, is to XXXX The a to year our lowering or guidance basis, adjusted $X.XX guidance are $X.XX, actions partially to at a $X $X.XX. of is from we positive $X.XX year from efforts. of of to offset fourth price the our reduction a our the cost, full The range with of by On guidance productivity, which $X.XX and cost $X.XX to range midpoint. driven $X.XX XX/XX the range $X.XX. we range full GAAP are lowering XXXX $X.XX $X.XX

Although cost we cost we reductions. with this are to continue be not dynamics, align to better dramatic structure accelerate the near-term slowdown anticipating our to

to and see more to efficiently sales us help operate and up for We offset our allowing benefits our expect us set some of also from reorganization growth. profitable restructuring, headwinds, future

the In focus organization. optimization and our making, addition are speed to business level our every a making financial better forecasting of a through ensure across accountability of accuracy, reviews deep processes organization entire cost monthly reductions the also above, P&L to noted improvements and decision business cash at cadence and we of to disciplined and

We visibility changes working to sales, performance. and process conditions, costs This in forecasting. are in faster our and providing market to react improving orders, already is a our and review accuracy to capital business driving financial path ability business improved trade new clear sustained

to new We benefits expect of to process continue well realize into future. the foreseeable this the

we ready to are take questions. Operator, now

Operator

question [Operator begin The Baird. now comes Mike from the Halloran will question-and-answer session. first We Instructions] with

Mike Halloran

versus couple here, sequential I So, talk match the destocking, lot and you're pockets that got and side, of where the the point pieces different at the cadence of questions you're sell in to a starting a are materializing, again? end the the could we still seeing of maybe kind a if the markets moving you lot about on maybe Could is then are about of And out and talk selling in what you underlying know that destocking the inventory where in you deteriorating? first ones but demand are stability fourth quarter of cadence here. of

Louis Pinkham

Yes.

one. I'll So, Mike, that take

question. that in So, there was a lot

to there. a try few answer me let So points

destocking, still ways go. to levels, in QX, there's inventory improved definitely of inventory improved but First all, it's

our believe do channel we our through distributors that's pool in and And continue our pump, through, QX. in so power or whether this will with transmission

orders But some sequential sequential we've would comp segment pretty when perspective. expectations, in got quarter-over-quarter at up a I a stable and QX year-over-year year. we're, this you you tough about, PTS Now, from we're X% our was know, last think say orders of point from

driving some challenges. that's so And

than recognized absolutely distribution distribution, Now we in in in segment has the that reduction and through of channel. orders did our greater XX% channel saw that a PTS business OEM goes we

the we're and X%, at chillers us, uncertainties a transport last as had comp you HVAC a in year Industrial getting trade worse. as seeing When definitely our that well not tough commercial Systems Commercial and worse, pool quarter for getting market, business, quarter, the a and refrigeration look as ago we headwind being well China but not commercial

And then first There the lastly, was much FER Climate what expected. half year. in the is of the pretty pre-buy we

PTS, clearly there of will that. stable that So in decline. took saw And supply and your which overhang industrial we tell share C&I, we was bit the that our is Climate improving better an the year. in inventory to chain, I which that little PTS from probably OEM although our both business you of overall part in feel answer is motors pressure But question, because helps a particular Mike. through segment of and reduction Hopefully then the strongly this overall, on position our some

Mike Halloran

if out from Could buckets could restructuring, at incremental of simplification quarter, X.X one out with pressures, this beyond other opportunity That of XX much other you you're time. driven that is things layering the that seen then us cost much helpful. year? well? least the the it's It's you that of I on And would the maybe some that help as combined this was I'm better was quarter, acceleration last if And more to kind how year go pressures. of versus the, the working these through deleverage next very announced revenue is million any on, XX it's you just potential point think just market layering

Robert Rehard

So Mike, this Rob. is

related our the announced in another you're the or commented closures, to was buckets right, which million. call And are one of two last approximately we the XX reorganization So we've primary the plant are organization, now realignment $XX additional million. the that which five the is

million the get you that's So how combined. XX

should Now, and through XXXX. see most see of we comes an and that's annualized that do we number

are expect, portion third on you we course, Of come fourth the would as organization. quarter that of seeing into the the quarter, especially exit as the a and through realignment of we go

those So we're that, referring savings are the that buckets and to. two those through are coming primary

Louis Pinkham

just but here will Yes, share runway much a to add Mike, don't the I feel be well. quarter Day, want strategies we more comment I you there's know it. that to of what then and want the too as fourth outlining to in Investor

And you especially just for industrial and in either up of business million, the making rightfully that Rob, also XX product or a sure cost on. that to that will management, bring big captured XX/XX, competitive we piece margin that you that then are I'll commercial there's the but two so tell our hear And make items customer. focused the in our are we getting value overall that we and paid rationalization

Operator

comes Julian question with next Barclays. ahead. The Please from go Mitchell

Julian Mitchell

first Maybe just question around. a

comments. that in PTS did to about wanted home QX Just you in in also most out the general drop, QX big I of is think orders looking wondered, was around better? started is the Were flattish in a around there for has point quarter you start slightly that's the that looking better at off QX? after talk that C&I, of Just would why two to on call in simply destocking in done, or commentary particular sort geographies markets it and any in or and those

Louis Pinkham

of the honestly, part quite PTS C&I question. take part. that So I'll hear didn't But I the Julian,

repeat you a ask to But inventory from I'll really destocking. PTS second. the it's a perspective, So that in

the we effects definitely secondary from saw uncertainty. trade Now,

levels. strongly missed our down we But apologize, feel of markets. really destocking QX, the I on and oil markets perspective, Our slowing about I C&I. handling the down. energy unit question We and about better definitely turning ag why material a from market, your gas bev market QX our it's that our then are of and feel And and Julian,

Julian Mitchell

Was had started was happening? bit of off in little -- something just seen just in C&I than that the Oh, that phenomenon what destocking think better order of QX you'd there less mentioned same terms sure, was intake. or QX a you've it I else

Louis Pinkham

The phenomenon, definitely to same say.

Julian Mitchell

would be question second around. just my then And

If at obviously seems come. for think to a Beloit, just if control of Regal been wondered, on several challenge extremely years effective I there's already, the that's you the now. and overall look growth measures been has cost about you it more organic

You're and spending right decremental about margins future to medium much lowering time, spent trying making think to base in is or of growth energy term sure the that most your cost now enhancement on stay narrow?

Louis Pinkham

Julian, it's really if will. a Cities, Tale of Two you

it's Our C&I business, very cost focused.

pockets Now, growth but do opportunity? I our see is Yes, focus of cost.

am solutions our we're about and Our got we're and product strong markets. technology Climate we've product, good opportunities PTS product, business, excited I new developing moving roadmaps and really there. We've into got differentiated

And growth in organic be those so particular going to our in segments. to we're able I accelerate two believe,

step bullish ability up growth organic I'm So about at to our Regal.

Operator

question Joe next Ritchie from Sachs. The comes with Goldman

Joe Ritchie

guest, from pretty on Some Louis, maybe the just a this standpoint. was growth so OEMs what's bit. little reported being resi surprised touch guys, see decent in as can market? to I quarter you that negative maybe you for a results the HVAC happening touch that of I a little And on bit

Louis Pinkham

of And overhang some and OEM. the it's inventory Sure, Joe FER the happy really to. really reductions

but certainly in So the the nothing saw definitely first $X when really pressure of the us. And OEMs, channel million put pre-buy we significance. about you think out in our on QX that that some then inventory reduction of emptied in half

we had variables large pressure. because comp confident, Climate, these probably other we're year anything especially here share we're I of refrigeration a of in And motors our about on had if which which last our from commercial space, tough we percent not is in fairly solutions. worried had a projects, one gaining all retrofit at feel But of a then retrofit

Joe Ritchie

the that specifically, overhang And in subsides on Climate, inventory XQ?

Louis Pinkham

impact. at We piece And That's now, would cold, weather. one really this some story good it although is other weather expect the which where will have least to which so a it are. it is weather But continues we thing. does there's is right

Joe Ritchie

a on our maybe and just usually this guess to And price Climate then positive out thing one companies, sticking formula calling other a to out you're of deflation quarter? with turning material question turns be I the margins. negative lot

remind overall impacts and your deflationary margins the growth how again, a this of Just bit to more little as we business us a environment? begin in

Robert Rehard

Rob. negative, we Climate Joe, Certainly, have two material formula especially is our way place started turn in has Sure, this price in segments. that to

the the deflation for math mentioned, margin in way in as that works segments. through can be as that that us accretive work we However, our the you

Joe Ritchie

Got it.

So negative the in to think to positive and is it? way about growth margins

Robert Rehard

That Correct. is correct.

Operator

with The from next Stephens. question Robert comes McCarthy

Robert McCarthy

I Do intrigued the but pruning, businesses? by lot to divestitures But, want potential of also larger that fact could XXXX, that mean, we problem that's potentially may just a to suppose. a children. the you're around the to your ability around probably absence organization the the guess how doing even given that of mean, I concerns selling do could you value from to some move and business? I first reconcile tough negative And certain like assets I you board, don't we be anything down portfolio focus, shut going of ability you're on part some some the in going dilutive obviously, question product think perhaps worth I you take cost just you with it be just see out, mean, is. that? do kind the I something exiting from and you the in a position that consultations there's because was of cycle comments where and are the to of

Louis Pinkham

I variables consideration. weigh take so in would Yes, those that of would any we say, I'll that all, first one. all about, you talked

there's laser businesses I earlier, all operational of in commented believe, to our I performance focused as for that. we in runway us Now, doing improve are and

think value creation. sense that think situation, board But a forward makes from it talking in I we benefit to for not where move multiple so shareholder we will perspective, to and don't going a we considerations. are there's be And a and about options

dialogues. perspective so, performance. focused and heads we'll keep to down manage need the And our now, our my And operating right board on portfolio folks is their with

your no. in that's of to position a shutdown. considered. see not any significant about we to around even not any but mean, position whether think we entity, Perhaps we're, where shutdown, businesses certainly could world, question specific in any we're or the being a -- Now, I not of businesses need is our somewhere a perhaps, small not

Robert McCarthy

to orders positive go of least, it But then at we the initial other an OEM have to of some some about going on like expectations into in be in they're destocking XXXX to of fortunes order the cycle. of issues. year, you and side, in we're might near-term the for as tied next terms to absence that beyond businesses due kind to looks sticking what thinking were And be of are bottoming for going terms that their

possible, you year? how year you mean, sequentially the fact about the another questioning, growth some given tough bottoming coming that in despite I directionally or do down prior course some and is could have down a you've the in of here, see If compares think XXXX? of going fact up to be we earnings to that as possible So, alluded it that could kind we're

Louis Pinkham

Yes. that take I'll one as well.

into going tomorrow. coming this out We're operating plan we're of at You strat point, just plan. actually starting know,

business our and with going our working into business tomorrow and understand So on so I'll Rob the after will actually to assumptions working I be day XXXX. groups. be groups the

in expectations too XXXX so, a bit revenue. comment for early And or on for to us it's growth

and is you and there. absolute confident runway cost on very tell can opportunity excited in and us I What we for is. XXXX feel There

rate certainly delivering historically a that, huge markets but have delivered. help what at than at Now, minimum influence us clearly the on with much will that a better a is we have

you So, that regarding that's thinking it. XXXX about right to that's I'm perspective hopefully but a how gives we're ready now, about all state

Operator

Oppenheimer. from next The question Glynn with Christopher comes

Christopher Glynn

Wondering account about about and You the at exits little Climate and that for complexion think beyond pretty give pro forma on sizing basis the the impacts? of detailed How divestitures which, C&I. on front? us the tables color those pruning you talked we should

Louis Pinkham

Yes.

therefore the we not be we should And bring then XX/XX said what from to if success customer exit with And we I So, to the that bring. paid of, term? management approach, or we what able long value And competitive, this are about we what marketplace? provide. we it's going customer Or when previously not, margin product at look cost be for we for need be and to we fairly to it all perspective cost for does we're our are our perhaps positioned if that to competitive? regards

But to it really sales -- specific for we're we particular we some of on so. to Now do don't the business, impact that the in haven't historically, of headwind and performance out certainly But broken the us, in what plan business. think has can you end, our XX/XX C&I us therefore you our Climate and up, it. we little Chris I it how will a understanding assure improve in the Hopefully help help about and is mix gives our that margins.

Christopher Glynn

on and rounding through worthy. you favorable more a little looking model again, noted are the towards the share sounds the sides And It side, destock. then PTS actually trends

to much generate visibility magnitude more Just wondering how you are and runway in have how there? process where for the that order about you thinking you

Louis Pinkham

couple a things Yes, of say I would here. so,

we share through the believe it's perspective. over distributors. there and commercial in than in perspective, very QX From sales levels all, confident, see inventory seen see in it share with close the the a relationships their and there's distributors of we're an a QX, better was with more on last from feet we we've but valves our opportunity partnering First couple we position years, definitely street, more inventory some our growth growth partially investments, have

on Regal connectivity argue experience. the that digital our would of commercial, products through, distribution digital through our And digital channels which that are also and so in through our I'm and customer and in bringing our solutions we'll best out do more products solutions lastly, our our XXXX about experience, with in is we will But March particular. timeframe I very distribution the elaborate excited has customer our

motors is so so situated individual we're and motor our which gear side our providing rather a provide Regal gearing about is perfectly customer both do working component. a One OEM business, to and is is with package that with package excited than with full solution our the a of solution of to PTS to

come there's definitely runway opportunities, growth on to than PTS more So, but a there.

Operator

comes with question from next Jeff Hammond KeyBanc. The

Jeff Hammond

incremental can and you've sharpen to So, the the cost if to in back the saves million. think you cost what XXXX? gotten What want just maybe you come And just I XX to-date? think saves you are

Robert Rehard

told the had So, Jeff, was we you that in number We XXXX. haven't saves necessarily what annualized XXXX. quantified the for cost we've

However, then on that we bit fourth in, through, to from we'll second come that expect alluded commented quarter that a see saw if the of particularly after certainly said will in annualized on plant as benefit an XX I quarter. you More the enough of we million that earlier, QX, will, we basis, that through the of the greater just closures. portion come a XX the to million

So little sizes hopefully a bit. that helps you

Jeff Hammond

SG&A mentioned presentation million? I down that half down you captured SG&A this Is of X%, perspective up but and X%. I think XX then was there's and a good And that a in portion XX%, in of number more see being first quarter the that

Robert Rehard

cost certainly forward. we've include It it's No, at continue it discussed our, not did include that SG&A call -- to our going that and rate. that savings on down the we'll is does this on

Jeff Hammond

Okay.

So the that XX% forward captures down saves? go cost

Robert Rehard

No, we that thus cost saves just had far. the

Jeff Hammond

severe HVAC, And the there. generally you things because still we're commercial cited outside to stable. weakness some I then just understand And think want are we're weakness transport, of just there, pretty hearing I here

So transporters, is all there's there? something going else that on

Louis Pinkham

and chillers. refrigeration transport, mostly it's So commercial

XX/XX from have transport also out We mostly perspective, refrigeration. in market pruning low a but very some that space, action taking margin business, taken it's

Jeff Hammond

housekeeping the given be think of size or XQ? you you to one the share item, count counts kind us can And final just then in the going ending buyback share just what give the of

Robert Rehard

account. our have share we So

as as going the repurchase million. of with, will a repurchase to a old So new about we in we opportunistically, have past. replacing good place, expect shares we in continue And forward we do third we did talked we've the XXX for portion the our to said, had, in quarter authorization

expect our can allocation capital on forward. balance we to So going continue

Louis Pinkham

QX wrong, was correct looking were me bought Jeff, that think I'm I in what also, the we you X.X million and for question So, be. then if shares our share would count

Robert Rehard

end you fairly representative ended the and the months to XXXX. if of that the share at count our diluted would expect of at the account, current quarter. nine end of had We at of look be that the the three then end quarter So months number third share the at we fourth our

Jeff Hammond

guys. you, Thank Okay.

Robert Rehard

was Because just throughout of quite it purchased the quarter. a bit that most of as was of point a quarter, clarification, early the in

volume So you're get benefit from a to going of more basis, through. most weighted that

Operator

The next from question Global. Seaport of Walter comes Liptak

Walter Liptak

use share new million authorization cleaning XXX on prior this the the Just you Did a Was on up of the question Jeff's authorization? from follow-no any quarter? buyback.

Robert Rehard

replace authorization. Well, Rob. new didn't No, that and we did that the third millions of of authorization as thanks, in use XXth, the we any the previous was XXX quarter October

Walter Liptak

you And talking Okay. your million the balance, go aggressive then fairly aggressively you term you with quarter. comment or XXX that the be pretty we're reducing you're to going But with can repurchase about the this authorization? again, says are mean rate,

Robert Rehard

We'll to debt down well dividends and as look going forward. continue the And things. as paying repurchases at all paying share

on So, good previous authorization. authorization practice the we on new had it is only put left since a just million $XX to

opportunity to moving continue forward. will this look at we again, So,

Walter Liptak

I with need on Now, I'm carry the reward, more down you your guess researcher the I going if a came wonder to the to inventory me and plant inventory. question asked levels point to what inventory rate are can yet? there draw to at you is demand? producing going of be question the market down you are on and you your levels Or to continue

Robert Rehard

lever inventory do we working capital have a that of plenty low fruit source to organization. here Absolutely, and the cadence Is it practices new We of new certainly expect continue have reducing So, have cash across we on biggest moving good be will forward. we reduce and it. that we of continue hanging and focus review processes see sustainable? we implemented to will certainly the that

Louis Pinkham

move. plan the with Even

Rob's plant on need stocks to to here make naturally you where comment, increase able moves and safety add just the even move. opportunity is be there I'll to So to with successfully

We reduction a for path at Regal. have inventory

Walter Liptak

Okay, couple do margins your the done for based mentioned, great, be the of at business like opening data remarks, decisions a I down think and Regal the if you've once could what last wondered you review you a years just you're the point. one road? for of this now full data optimized Beloit? then on a me. And In you've operating doing

Robert Rehard

I That's on a March great one March be out it's will path as absolutely coming will question forward analysis with But you're That's hold our our Xrd. is some until and right. Walt, where that clarity Xrd. and

Operator

The Longbow next with question Research. comes Dankert from Chris

Chris Dankert

said the into is savings as falls it. at You missed you plan kind I of if to a predominantly like but closes all? from of where there But have the could chunk that is Apologies, C&I, any split be? going PTS far as

Robert Rehard

expect forward give savings Thanks, Chris. I any that you we across integral But This we those plant We didn't Rob. by on tell to segments. segments move visibility is closures. all it's, as see can

Chris Dankert

XX is approach? you as again, completely you similar fair? sense your this in But that as of announced, soon the the to already the get waiting like million separate is and Or

Robert Rehard

It's completely separate.

savings was closures. plant the the from and million certainly of would realignment perspective if the from the organization more XX evenly you will, spread related towards first be a The was segments, across and more then it

Chris Dankert

pushed on half then in of into the they order power the kind any got update first And from generation half. back just the

to just first 'XX or cancellation, be expected assume that the or risk any is of there show update still half on that's the Now in helpful? up

Louis Pinkham

data we projects. well in we really cases Again, been space, orders in a the the we is by But of share historically and and expected lumpy impacting as QX in Capacity large But data is what's this delayed And a course, in is or great is it's have market been are orders business center change. QX XXXX originally the for growing us. this either driven you tell in I'll driver, is that rather business, center the which positioned, canceled. are forecasted, for into anyways. not several constrained that few which of business, have

Operator

with Robert [Operator McCarthy Stephens. Instructions] comes question from The next

Robert McCarthy

some within the and segments? provide think, and it? have other the you'll across add you of all fast X, And who better narrative than good some the Just businesses? XXXX, guess, a you it's pruning year, a pricing or you a a qualitatively maybe question a sense value Pricing comment anything quarter March we relative say do your historical of going more knows. across in for follow-up around to are the to measures improve forward And the how use sub-segments when of so I -- of question we businesses, these kind

Rob Rehard

Rob, this you Thank question. is Rob. the for

and positive price to the yes, remain positive. quarter, expected was in we So cost

with well. XXXX, and price As in go future in deploying, that exit also row we as XX/XX The expect we impact had on that positive having it's quarters a we're positive process X we've the price a cost. to

Louis Pinkham

add of those it. XX/XX I is detail. ton gross tell to I'd I mean improvement. going can And Robert, give you to is, us for for helping B detail. particularly B margins I are approach of analytical We're in sure. looking getting into around What That's a It's Regal's grow all familiar there. driving with doubt at margin customers, we're what you that XX/XX the opportunity you X, doing and to products Quad our today.

Perhaps that unit. business customer talked of the scatter as and And I and today. on month from the is It a received in we in margins chart every every focus much a sales in future detail. past. about wasn't

success. management price, to absolutely our margin, we critical see customer forward so, product, And looking

Operator

would session. the to I for back turn to conference question-and-answer Pinkham over closing any Louis our like remarks. concludes This

Louis Pinkham

and you, comps, those delivered feel challenges the in we faced also that difficult some conditions. quarter, To but operator. challenging met end summarize market Thank We well. we

also deliver even the will we We believe fourth quarter. in better that

energized with out are profitable business customer organic growth. our Looking XX/XX driving service driving approach about product, needs improvement throughout and the profitability cost focused and on in our reorganization, while we differentiated forward, solutions laser while through executing staying exceeding

plan and to Thank interest management. you and portfolio your details the Lastly, on additional joining and in I March our our X, Investor Regal. call on Day, for strategy XXXX, provide

Operator

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

disconnect. now may You

Regal Rexnord (RRX) 4 Nov 192019 Q3 Earnings call transcript