SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission file number 1-7283
____________________________________
REGAL-BELOIT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
WISCONSIN 39-0875718
(State of Incorporation) (I.R.S. Employer Identification No.)
200 State Street
BELOIT, WISCONSIN 53511-6254
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (608) 364-8800
====================================================================
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
_______________________ _________________________________
Common Stock ($.01 Par Value) American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE
ACT..................................................... NONE
(Title of Class)
=======================================================================
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
____ ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
____
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 7,1997 was approximately $475,000,000.
On March 7, 1997 the registrant had outstanding 20,799,076 shares of
common stock, $.01 par value, which is registrant's only class of common stock.
===============================================================================
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENTS FORM 10-K REFERENCE
Annual Report to Shareholders for Year Ended
December 31, 1996..................................... I, II, IV
Proxy Statement for Annual Shareholder Meeting to be
Held on April 24, 1997................................ III
1
REGAL-BELOIT CORPORATION
____________________________
Index to
Annual Report on Form 10-K
For The Year Ended December 31, 1996
<PAGE>
PART I Page
______
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters To A Vote of Security Holders 5
PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters 6
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 8. Financial Statements and Supplementary Data 6
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 6
PART III
Item 10. Directors and Executive Officers of the Registrant 7
Item 11. Executive Compensation 7
Item 12 Security Ownership of Certain Beneficial Owners 7
and Management
Item 13. Certain Relationships and Related Transactions 8
PART IV
Item 14. Financial Statements, Financial Statement Schedule,
Exhibits and Reports on Form 8-K 8
Signatures 9
2
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
_______________________________
Regal-Beloit Corporation is a Wisconsin corporation founded in 1955.
The Company's initial business was the production of special metalworking
taps. Through 33 acquisitions and internal growth, the Company has become a
prominent manufacturer of a diversified line of power transmission products
and perishable, high-speed steel, rotary cutting tools.
The Company's power transmission products, manufactured by its Power
Transmission Group, include standard and custom gearboxes, transmissions,
rigid forklift axles, custom gearing, gear motors and manual valve actuators.
These products are sold to distributors, original equipment manufacturers and
end users across many industry segments.
Typical applications for the Company's power transmission products include
material handling systems such as conveyors, palletizers and packaging
equipment; off-highway vehicular equipment such as street pavers, graders,
airport/fire/crash/rescue equipment; farm implements; center pivot irrigation
systems; gas and liquid pipeline transmission systems; civic water and waste
treatment facilities; open-pit mining; paper making machinery;
high-performance, after-market automotive transmissions and ring/pinion sets;
and transmissions for luxury inboard powered craft.
Effective January 1, 1995, the Company acquired selected net assets of the
Marine and Industrial Transmission Division of Borg-Warner Automotive
Transmission and Engine Components Corporation for approximately $9,192,000.
This acquisition has been renamed the Velvet Drive Transmission Division of
Regal-Beloit Corporation. This Division produces both marine and industrial
transmissions.
The Company's perishable, high-speed steel, rotary cutting tool products are
manufactured by its Cutting Tool Group. Principal cutting tool products
include taps, drills, end mills, reamers and gages in thousands of standard
and popular non-standard styles and sizes, as well as a wide range of
specially designed products. Cutting tool products are sold to distributors
on both open line and select bases and to select end users throughout the
United States. Standard and most special items are shipped promptly, generally
within 24 hours to a few days of receipt of orders. These products are
mostly used in industrial metalworking applications where it is necessary to
remove metal to shape product into finished form or to prepare a metal
workpiece to receive a fastening device.
Regal-Beloit believes its consistent ability to provide products on a shorter
delivery schedule than other manufacturers gives it a competitive selling
advantage and that its extensive use of modern, up-to-date equipment which
is best suited for the job, along with its continued product redesign and
effective plant layout, often gives it a competitive cost advantage in both
power transmission products and cutting tools.
<PAGE>
MARKETING AND SALES
___________________
Power transmission products are sold to select distributors, original equipment
manufacturers and end users through field sales personnel and manufacturers'
representatives.
The Company's cutting tool products are sold through three distribution
channels. The Regal Cutting Tools Division's products are sold on a
non-exclusive, open line basis through independent industrial distributors
nationwide. The Company is the only significant producer of cutting tools
to employ the open line method of distribution. The balance of the cutting
tools are sold to select distributors and end users through the National
Twist Drill and New York Twist Drill Divisions, respectively.
3
Export sales accounted for approximately 3% of the Company sales in 1996, 1995
and 1994. No material part of the Company's business is dependent upon a single
customer or a group of customers. In fiscal 1996, 1995 and 1994, no single
customer accounted for as much as 5% of Company sales. Although the
Company's sales are predominantly not seasonal, they tend to vary with
general economic conditions and with the rate of industrial production, and
are affected by business climates in the many markets in which the Company
sells. However, because the Company's products are sold to many different
markets, the effects of weaker markets are frequently offset by strengths in
other markets.
Working capital requirements to properly serve the Company's customers are
generally typical of capital goods manufacturers. Accounts receivable and
inventory are generally not seasonal or at unusual levels by industry standards.
COMPETITION
___________
Competition in the power transmission equipment industry has historically been
from old line and captive manufacturers. In recent years, competition, in
general (including from foreign manufacturers), has intensified. Over the
past several years, niche product market opportunities have become more
prevalent due to changing market conditions described above and decisions by
larger manufacturers not to compete in lower volume or specialized markets.
Additionally, smaller companies have been sold due to lack of capital to
invest in more modern productive equipment. Many captive producers have
chosen, for economic reasons, to outsource their requirements to specialized
manufacturers like Regal-Beloit who can produce more cost effectively. The
Company has capitalized on this competitive climate by making acquisitions and
increasing its manufacturing efficiencies. Some of these acquisitions have
created new opportunities for the Company because the Company is now in new
markets in which it was not previously involved. The Company has also
continued to upgrade its manufacturing equipment and processes, including
increasing its use of computer aided manufacturing systems and redesigning
products to take full advantage of the more productive equipment along with
redoing plant layout to improve product flow. In practice, the Company has
sought out specific niche markets concentrating on a wide diversity of
customers and applications. Because of this approach, the Company is often
not the largest supplier in any specific market. The Company believes it
competes primarily on the basis of the promptness of delivery, price and
quality. Dominant domestic competitors in the power transmission equipment
industry include Sundstrand Corporation (Falk), Emerson Electric, Reliance
Electric, Winsmith, and IMO. Dominant foreign competitors would include SEW
Eurodrive, Flender, Sumitomo and Zahnrad Fabrik.
<PAGE>
The markets for most of the Company's cutting tool products are highly
competitive. The domestic cutting tool industry is a mature industry which
has been characterized for the past 10 to 15 years by excess capacity and
declining sales. Selling price increases have been minimal and the Company
believes that some additional but less severe contraction of the industry is
likely in the years ahead. Despite a mature market, the Company has been
able to minimize the effect this contraction has had on the Company,
primarily by eliminating the production of unprofitable products, developing
new products, adding new channels of distribution, improving manufacturing
capability and efficiency and providing fast product delivery.
Cutting tools produced abroad and imported, according to recent government
statistics, are estimated to represent less than 15% of the domestic
industrial market; however, that share is growing slightly. Most imported
tools are non-industrial quality and most are not sold in the commercial
markets in which the Company sells.
Competition in the cutting tool industry is primarily on the basis of price,
product quality and promptness of delivery. The Company competes primarily
on the basis of promptness of delivery and quality including its expertise
in assisting customers to solve specific cutting tool problems. The Company
believes it is unique among the larger cutting tool manufacturers in its
ability to ship orders promptly, generally within 24 hours to a few days of
receipt of orders for standard and most special products. The Company is number
two of the two leading domestic full line manufacturers in terms of dollar
value of shipments of taps, end mills, reamers, gages and drills in total.
The other competitor in the category is Greenfield Industries, which is
larger than Regal-Beloit Corporation. The Company also has competition from
other manufacturers; however, these companies are typically regional in sales
and usually produce one or two types of products as opposed to a full line.
4
For further segment information required by Item 101 of Regulation S-K,
reference is made to Note 10 of the Notes to Consolidated Financial
Statements on page 14 of the Annual Report to Shareholders for the year
ended December 31, 1996, and such information is incorporated herein by
reference.
BACKLOG
________
As of December 31, 1996, the amount of the Company's power transmission backlog
believed to be firm was approximately $41,100,000 compared to approximately
$48,400,000 on December 31, 1995. Average delivery time for orders of the
Company's power transmission equipment (except for large, specially designed
products) varies from three days to two months. The Company believes that
virtually all of the backlog is shippable in 1997.
Because the Company ships cutting tool orders promptly, generally within a few
days of receiving the order, there are no material backlogs for cutting tools.
<PAGE>
TRADEMARKS AND LICENSES
_______________________
Regal-Beloit utilizes various registered and unregistered trademarks and the
Company believes these trademarks are significant in the marketing of most of
its products. However, the Company believes the successful manufacture and
sale of its products generally depends more upon its technological,
manufacturing and marketing skills. In addition, the Company believes its
engineering, test and development capabilities are significant factors in the
success of its business.
EMPLOYEES
__________
As of December 31, 1996, the Company employed approximately 2,450 persons, of
which approximately 23% are covered by collective bargaining agreements.
The Company considers its employee relations to be very good.
RAW MATERIALS
_____________
Base materials for the Company's products consist primarily of steel in various
types and sizes, castings, bearings and weldments. The Company purchases its
raw materials from many suppliers and is not dependent on any single supplier
for any of its base materials.
ENVIRONMENTAL MATTERS
______________________
The Company is subject to Federal, State and local environmental regulations.
The Company is currently involved with environmental cleanup proceedings
related to certain of its facilities. Based on available information, it is
believed that the outcome of these proceedings and future known environmental
compliance costs will not have a material adverse effect on the Company's
financial position or results of operations.
ITEM 2. PROPERTIES
The Company currently operates a corporate office and 20 manufacturing and
service/distribution facilities. Three each are located in Illinois and
Wisconsin; two each are located in Indiana, South Carolina and South
Dakota; and one each located in California, Massachusetts, New York,
North Carolina, Pennsylvania, Texas, Newbury (England), Neu Anspach (Germany)
and Legnano (Italy). The Company's present operating facilities contain a
total of approximately 1,510,000 square feet of space of which approximately
147,000 square feet are leased. The Company believes its equipment and
facilities are well maintained and adequate for its present needs. The
Company currently owns one manufacturing facility with a total of 53,000 square
feet that it intends to sell.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1996.
5
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Certain information required by Item 201 of Regulation S-K is set forth on
page 4 and the inside back cover of the Annual Report to Shareholders for
the year ended December 31, 1996, and such information is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information required by Item 301 of Regulation S-K is set forth on page 4 of
the Annual Report to Shareholders for the year ended December 31, 1996, and
such information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information required by Item 303 of Regulation S-K is set forth on pages
5 and 6 of the Annual Report to Shareholders for the year ended
December 31, 1996, and such information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
In the Annual Report to Shareholders for the year ended December 31, 1996,
there are set forth on pages 7 through 15, financial statements meeting the
requirements of Regulation S-X and information specified by Item 302 of
Regulation S-K and such financial statements are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has had no disagreements with its accountants subject to disclosure
by Item 304 of Regulation S-K nor has it had a change of accountants within the
last two fiscal years.
6
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by Item 401 of Regulation S-K is set forth on pages 3
through 5 of the definitive proxy statement for the Annual Meeting of
Shareholders to be held on April 24, 1997, a copy of which has been filed
within 120 days following the close of the fiscal year, and such information
is incorporated herein by reference.
<PAGE>
The names, ages, and positions of all of the executive officers of the Company
as of March 7, 1997, are listed below along with their business
experience during the past five years. Officers are elected annually by the
Board of Directors at the Meeting of Directors immediately following the
Annual Meeting of Shareholders in April. There are no family relationships
among these officers, nor any arrangements of understanding between any
officer and any other persons pursuant to which the officer was selected.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION BUSINESS EXPERIENCE DURING THE PAST 5 YEARS
_____________________ _______________________________________
<S> <C>
James L. Packard, 54 -Elected Chairman in 1986; Chief Executive Officer
Chairman, President and since 1984; President since 1980.
Chief Executive Officer
Henry W. Knueppel, 48 -Elected Executive Vice President-Operations in 1987,
Executive Vice President - prior to which he was Vice President-Operations
Operations since 1985.
Robert C. Burress, 58 -Elected Secretary in 1996; Vice President - Chief Financial
Vice President - Treasurer, Officer 1994 - 1996; Vice President - Treasurer since
Secretary 1980.
Kenneth F. Kaplan, 51 -Joined Company in September, 1996. Elected Vice
Vice President - Chief President - Chief Financial Officer in October, 1996.
Financial Officer Previously he was employed by Gehl Company, West
Bend, Wisconsin, as Vice President - Finance and
Treasurer from 1987.
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
Information required by Item 402 of Regulation S-K is set forth on pages 6
through 9 of the definitive proxy statement for the Annual Meeting of
Shareholders to be held on April 24, 1997, a copy of which has been filed
within 120 days following the close of the fiscal year, and such information
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required pursuant to Item 403 of Regulation S-K is set forth on
pages 2, 3, 4, 5, 9 and 10 of the definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 24, 1997, a copy of which has
been filed within 120 days following the close of the fiscal year, and such
information is incorporated herein by reference.
7
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required pursuant to Item 404 of Regulation S-K is set forth on
pages 5 and 7 of the definitive proxy statement for the Annual Meeting of
Shareholders to be held on April 24, 1997, a copy of which has been filed
within 120 days following the close of the fiscal year, and such information
is incorporated herein by reference.
PART IV
ITEM 14. FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULE, EXHIBITS AND
REPORTS ON FORM 8-K
(a) 1. AND 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Reference is made to the separate index to the Company's Consolidated
Financial Statements and Schedule contained on Page 10 hereof.
3. EXHIBITS
Reference is made to the separate exhibit index contained on Page 13
hereof.
(b) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K by the Company during the
quarter ended December 31,1996.
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
REGAL-BELOIT CORPORATION
By: Robert C. Burress
_________________
Robert C. Burress
Secretary
March 7, 1997
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
James L. Packard
__________________Chairman, President, Chief March 7, 1997
James L. Packard Executive Officer and Director
Kenneth F. Kaplan
_________________ Vice President - CFO March 7, 1997
Kenneth F. Kaplan (Principal Accounting & Financial Officer)
Henry W. Knueppel
________________ Executive Vice President March 7, 1997
Henry W. Knueppel and Director
John A. McKay
_______________ Director March 7, 1997
John A. McKay
John M. Eldred
_______________ Director March 7, 1997
John M. Eldred
J. Reed Coleman
______________ Director March 7, 1997
J. Reed Coleman
Frank Bauchiero
_______________ Director March 7, 1997
Frank Bauchiero
9
<PAGE>
REGAL-BELOIT CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Page(s) In
Annual Report *
__________
The following documents are filed as part of this report:
(1) Financial Statements:
Consolidated Statements of Income for the three years
ended December 31, 1996 7
Consolidated Balance Sheets at December 31, 1996 and 1995 8
Consolidated Statements of Shareholders' Investment for
the three years ended December 31, 1996 9
Consolidated Statements of Cash Flows for the three years
ended December 31, 1996 10
Notes to Consolidated Financial Statements 11 - 14
Report of Independent Public Accountants 15
* Incorporated by reference from the indicated pages of the Regal-Beloit
Corporation 1996 Annual Report to Shareholders
Page In
Form 10-K
___________
(2) Financial Statement Schedule:
Report of Independent Public Accountants on Financial
Statement Schedule 11
Consent of Independent Public Accountants 11
For the three years ended December 31, 1996,
Schedule II - Valuation and Qualifying Accounts 12
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Regal-Beloit Corporation:
We have audited, in accordance with generally accepted auditing standards, the
financial statements included in Regal-Beloit Corporation's Annual Report to
Shareholders, incorporated by reference in this Form 10-K, and have issued
our report thereon dated January 29, 1997. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
schedule listed in the index to financial statements is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 29, 1997
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Regal-Beloit Corporation:
As independent public accountants, we hereby consent to the incorporation of
our reports, included and incorporated by reference in this Form 10-K, into
Regal-Beloit Corporation's previously filed Registration Statements, File
Nos. 33-25480, 33-25233, 33-82076 and 33-8934.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
March 13, 1997
11
<PAGE>
SCHEDULE II
REGAL-BELOIT CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
<TABLE>
<CAPTION>
(In Thousands Of Dollars)
________________________________________________________
Balance Additions Write-offs, Balance
Beginning Charged To Net Of End
Of Year Net Income Recoveries Of Year
_________ __________ ___________ ________
<S> <C> <C> <C> <C>
Year Ended December 31, 1996 $ 1,140 $ 125 $ (75) $ 1,190
========= ========== =========== ========
Year Ended December 31, 1995 $ 1,161 $ 62 $ (83) $ 1,140
========= ========== =========== =========
Year Ended December 31, 1994 $ 1,077 $ 191 $ (107) $ 1,161
========= ========== ============ ==========
</TABLE>
12
<PAGE>
EXHIBITS INDEX
The following exhibits are required to be filed by Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit
Number Description Incorporated by Reference Herein
_______ ____________ __________________________________
<S> <C> <C>
2 Agreement and Plan of Merger by Filed as Exhibit A to Annual Meeting Proxy
and between the Registrant and Statement of Regal-Beloit Corporation
Regal-Beloit Corporation, dated as dated March 11, 1994
of April 18, 1994
3.1 Articles of Incorporation of the Filed as Exhibit B to the 1994 Proxy Statement
Registrant
3.2 Bylaws of the Registrant Filed as Exhibit C to the 1994 Proxy Statement
4 Articles of Incorporation and Bylaws Filed as Exhibits 3.1 and 3.2 hereto
of the Registrant
10.1 Short-Term Incentive Compensation Filed as Exhibit 10.1 to Regal-Beloit Corporation's
Plan, as amended Annual Report on Form 10-K dated
March 29, 1993
10.2 1982 Incentive Stock Option Plan Filed as Exhibit 10.4 to 1986 S-1
10.3 1987 Stock Option Plan Filed as Exhibit 10.3 to 1988 S-1
10-4 1991 Flexible Stock Incentive Plan Filed as Exhibit 10.4 to Regal-Beloit Corporation's
Annual Report on Form 10-K dated
March 29, 1993 (1994 S-8 Registration
No. 33-82076)
10.5 Change In Control Agreement Filed as Exhibit 10.6 to Regal-Beloit Corporation's
Annual Report on Form 10-K dated
March 29, 1993
10.6 Disability Insurance Agreement Filed as Exhibit 10.6 to Regal-Beloit Corporation's
between Regal-Beloit Corporation Annual Report on Form 10-K dated
and Continental Casualty Company March 29, 1993
<PAGE>
13 Annual Report to Shareholders Regal-Beloit Corporation's Annual
for the year ended December 31, Report on Form 10-K dated March 7, 1997.
1996 (Filed herewith)
21 Subsidiaries of Regal-Beloit Regal-Beloit Corporation's Annual
Corporation Report on Form 10-K dated March 7, 1997.
(Filed herewith)
23 Consent of Independent Public Regal-Beloit Corporation's Annual
Accountants Report on Form 10-K dated March 7, 1997.
(Filed herewith)
99 Annual Meeting Proxy Statement of
Regal-Beloit Corporation dated
March 17, 1997
</TABLE>
13
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGAL-BELOIT CORPORATION
Regal-Beloit International Sales Corporation, a Delaware Corporation
200 State Street
Beloit, Wisconsin
Acquired - May, 1979
Regal-Beloit Corporation FSC, a Virgin Islands Corporation
200 State Street
Beloit, Wisconsin
Acquired - December, 1984
New York Twist Drill, Inc., a Delaware Corporation
30 Montauk Boulevard, Suite B
Oakdale, NY 11769
Acquired - March, 1988
Opperman Mastergear Limited
Hambridge Road
Newbury, Berkshire, United Kingdom (England)
Acquired - July, 1991
Mastergear GmbH
SiemensstraBe 16
Neu Anspach, Germany
Acquired - July, 1991
Hub City, Inc.
2914 Industrial Drive
Aberdeen, South Dakota
Acquired - April, 1992
Costruzioni Meccaniche Legnanesi S.r.L.
Via San Bernardino 129
Legnano, Italy
Acquired - December, 1994
27
<PAGE>
EX-13.1
SELECTED FINANCIAL INFORMATION REGAL-BELOIT CORPORATION
____________________________________________________________________________
<TABLE>
<CAPTION>
FIVE YEAR HISTORICAL DATA
(In Thousands of Dollars, Except Per Share Data)
________________________________________________
Year Ended December 31,
________________________________________________
1996 1995 1994 1993 1992
__________ _________ __________ __________ ________
<S> <C> <C> <C> <C> <C>
Net Sales........................ $ 281,508 $ 295,891 $ 242,650 $ 219,833 $199,769
Income from Operations........... 51,120 53,607 38,982 25,081 16,906
Net Income....................... 32,276 32,818 23,129 14,246 9,451
Total Assets..................... 196,996 175,480 167,665 139,317 145,132
Long-term Debt................... 2,168 2,884 16,022 19,612 34,442
Shareholders' Investment......... 160,023 135,873 110,545 92,746 83,924
Per Share of Common Stock:
Net Income.................... 1.57 1.60 1.13 .70 .47
Cash Dividends Declared....... .48 .39 .31 .27 .26
Shareholders' Investment...... 7.75 6.61 5.40 4.55 4.13
Average Number of Shares 20,616,825 20,508,890 20,437,655 20,374,454 20,306,148
Outstanding
<FN>
NOTE: All per share amounts are stated giving retroactive effect of a 2 for 1 stock split in
1994. Net income per share is based on the weighted average number of shares outstanding (as
adjusted) during the respective periods.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
1996 1995
__________________________ ____________________________
Price Range Dividends Price Range Dividends
___________ ___________
High Low Paid High Low Paid
_____ ____ _____ _____ ____ _____
<S> <C> <C> <C> <C> <C> <C>
1st Quarter....................... $ 21 7/8 $ 18 $ .10 $ 15 7/8 $ 12 1/8 $ .08
2nd Quarter....................... 22 3/8 18 1/4 .12 16 1/4 14 .09
3rd Quarter....................... 19 3/4 15 1/2 .12 20 1/2 14 3/4 .10
4th Quarter....................... 20 1/4 16 3/8 .12 23 1/8 17 1/2 .10
<FN>
Regal-Beloit has paid 146 consecutive quarterly dividends through January, 1997. The approximate
number of holders of common stock as of December 31, 1996 is 1,263.
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL INFORMATION
(In Thousands of Dollars, Except for Per Share Data)
_________________________________________________________________
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
______________ _____________ _____________ _____________
1996 1995 1996 1995 1996 1995 1996 1995
_____ _____ _____ _____ _____ _____ _____ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............. $75,119 $74,340 $71,817 $76,265 $68,149 $71,551 $66,423 $73,735
Gross Profit.......... 22,339 21,160 21,853 22,217 19,758 21,692 18,976 21,392
Income From Operations 14,136 12,357 13,771 13,880 11,748 13,839 11,465 13,531
Net Income............ 8,805 7,381 8,669 8,375 7,412 8,433 7,390 8,629
Net Income Per Share.. .43 .36 .42 .41 .36 .41 .36 .42
Average Number of
Shares Outstanding.. 20,587 20,471 20,614 20,505 20,631 20,522 20,634 20,537
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL STATEMENTS
REGAL-BELOIT CORPORATION
_____________________________________________________________________________
RESULTS OF OPERATIONS
OVERVIEW
Net income in 1996 of $32,276,000 was 1.7% less than 1995 record net income of
$32,818,000, following a 41.9% 1995 increase from 1994 net income of
$23,129,000. Net sales decreased 4.9% to $281,508,000 in 1996 from
$259,891,000 in 1995, which in turn was a 21.9% increase from 1994 net sales of
$242,650,000. Despite the decline in 1996 sales, net income as a percentage of
net sales increased for the fifth consecutive year to 11.5% from 11.1% in 1995
and 9.5% in 1994. On a per share basis, 1996 net income was $1.57 per share,
as compared to $1.60 in 1995 and $1.13 in 1994.
Cash flow from operations increased 50.4% to a record $53,667,000 in 1996 from
$35,680,000 in 1995, which has been a 29.3% increase from 1994 cash flow from
operations of $27,591,000. Return on average assets declined in 1996 to 17.3%
from 19.1% in 1996, but was above the 1994 return of 15.1%. Return on average
shareholders' investment continued above 20% at 21.8% in 1996, following the
record 26.6% return 1995 and 22.8% in 1994.
SALES
The Company experienced a broadbased slowdown in most of its markets
commencing in the second quarter of 1996 and continuing through the balance
of the year. The Company's distributor and original equipment manufacturer
(OEM) customers worked down their inventory levels, reflecting a more
cautious business approach as business activity slowed in the market segments
served by the Company. Sales were also impacted by the end of two long-term
contracts at one of the Company's divisions. In 1995, approximately half of
the 21.9% sales increase over 1994 resulted from an early 1995 acquisition.
The balance of the 1995 sales gains were attributable to volume gains and
selective selling price increases which approximated 7.0% and 3.0% respectively.
The Power Transmission Group represented 86.4% of Company net sales as
compared to 87.3% in 1995 and 86.2% in 1994. Net sales for this group in
1996 of $243,226,000 were 5.8% below 1995 net sales of $258,325,000 which in
turn were 23.6% greater than 1994 net sales of $209,048,000.
Cutting Tool Group net sales in 1996 of $38,282,000 were 1.9% greater than
1995 net sales of $37,566,000 which in turn were 11.8% above 1994 net sales
of $33,602,000. Despite slowing business conditions, new channels of
distribution were added, permitting the modest increase in sales in 1996.
COSTS AND EXPENSES
Gross profit as a percentage of sales increased to 29.5% in 1996 from 29.2% in
1995 and equalled the 29.5% of 1994. The Company was able to improve margins
in 1996 despite a sales decline due to continued improvement in manufacturing
efficiencies. Since the early 1990's, when gross profit margins were in the
low 20%'s, the Company has continually invested in state-of-the-art equipment
and automated manufacturing processes. Additionally, ongoing redesign of
products has eliminated costs and utilized the upgraded manufacturing
equipment capabilities.
<PAGE>
While operating expenses did increase slightly to 11.3% of net sales in 1996
from 11.1% in 1995, they remained below the 13.4% in 1994. In 1996,
operating expenses were reduced 3.2% to $31,806,000 from $32,854,000 in 1995,
following $32,609,000 in 1994. The Company has continued its long-standing
philosophy of close control of costs at all levels of the Company's operations.
As a result of the Company's cost control and improved manufacturing
efficiencies, and despite the 1996 sales decrease, income from operations as
a percentage of sales rose slightly in 1996 to 18.2% from 18.1% in 1995 and
more significantly above 16.1% in 1994. Power Transmission Group
profitability held basically steady in 1996 versus 1995 with income from
operations as a percentage of sales being at 20.2%, 20.1% and 18.9% for 1996,
1995, and 1994, respectively. Cutting Tool Group income from operations as a
percentage of sales was 15.0% of sales in 1996, down from 17.0% in 1995, but
above 13.0% in 1994. competitive pricing pressures and a shift in product
mix were responsible for the 1996 sales decline. The increase in 1995 over 1994
had resulted from prior consolidation of manufacturing and distribution
facilities and concentration on more profitable products.
Interest expense in 1996 of $357,000 compared favorably to $776,000 in 1995 and
$962,000 in 1994. The reduced expense was due to lower levels of debt
outstanding. Interest income, generated by short-term investments of the
Company's cash balances, increased to $1,052,000 in 1996 from $309,000 and
$144,000 in 1995 and 1994, respectively.
The Company's effective tax rate decreased one-half point in 1996 to 37.7% of
income before taxes from 38.2% in 1995 and following 39.4% in 1994. The 1996
effective rate decrease was due primarily to lower effective state income tax
rates, net of federal benefits.
15
The Company is party to environmental cleanup proceedings related to certain of
its facilities. Based upon information available, it is believed that the
outcome of these proceedings will not have a material adverse effect on the
Company s's financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's free cash flow, defined as cash flow from operating activities
less net capital spending and dividends, was a record $33,466,000 in 1996,
an increase of 90.5% from 1995 free cash flow of $17,571,000 and following
$14,882,000 in 1994. Of the 1996 free cash flow, $12,507,000 was due to
reductions in accounts receivable and inventories resulting from improved
turnovers and lower sales.
Working capital increased to $92,613,000 at December 31, 1996, a 31.6% increase
from $70,377,000 a year earlier. The increase was reflected in the increase in
cash and cash equivalents to $38,402,000 at December 31, 1996, from $7,458,000
at the end of 1995. Current ratio increased to 4.1:1 at the end of 1996 from
3.2:1 a year previously.
As of December 31, 1996, the Company maintained two short-term credit lines of
$5,000,000 and $2,500,000. There were no borrowings against these facilities
in 1996. At December 31, 1996, long-term debt totalled $2,168,000, down from
$2,884,000 a year ago. Capitalization ratio was 1.3% at the end of 1996
versus 2.1% at the end of 1995.
<PAGE>
The Company believes it can adequately finance internally generated growth
from cash generated from operations and its short-term credit facilities.
The Company further believes that future external growth from acquisitions
can be adequately funded from the capacity to further leverage its equity
with additional long-term indebtedness.
16
CONSOLIDATED STATEMENTS OF INCOME REGAL-BELOIT CORPORATION
In Thousands of Dollars, Except Shares Outstanding
___________________________________________________________________________
<TABLE>
<CAPTION>
For The Year Ended December 31,
_______________________________________
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Net Sales.............................................. $ 281,508 $ 295,891 $ 242,650
Cost of Sales.......................................... 198,582 209,430 171,059
__________ __________ __________
Gross Profit........................................... 82,926 86,461 71,591
Operating Expenses..................................... 31,806 32,854 32,609
__________ __________ __________
Income From Operations................................ 51,120 53,607 38,982
Interest Expense....................................... 357 776 962
Interest Income........................................ 1,052 309 144
__________ __________ _________
Income Before Income Taxes............................ 51,815 53,140 38,164
Provision For Income Taxes............................. 19,539 20,322 15,035
__________ __________ _________
Net Income............................................ 32,276 32,818 23,129
========== ========== =========
Net Income Per Share................................... $ 1.57 $ 1.60 $ 1.13
========== ========== =========
Average Number of Shares Outstanding................... 20,616,825 20,508,890 20,437,655
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
17
<PAGE>
CONSOLIDATED BALANCE SHEETS REGAL-BELOIT CORPORATION
In Thousands of Dollars
_____________________________________________________________________________
<TABLE>
<CAPTION>
ASSETS
December 31,
___________________________
1996 1995
______________ ___________
<S> <C> <C>
Current Assets:
Cash and cash equivalents..................................... $ 38,402 $ 7,458
Receivables, less allowance for doubtful accounts of
$1,190,in 1996 and $1,140 in 1995........................... 32,796 41,172
Future income tax benefits.................................... 4,532 4,109
Inventories................................................... 45,908 49,263
Prepaid expenses.............................................. 393 399
Total Current Assets....................................... 122,031 102,401
____________ __________
Property, Plant and Equipment:
Land and land improvements.................................. 6,783 6,538
Buildings and improvements.................................. 27,174 26,511
Machinery and equipment..................................... 108,783 97,844
_____________ __________
Property, Plant and Equipment, at cost.................... 142,740 130,893
Less - Accumulated depreciation............................. (68,124) (58,201)
_____________ __________
Net Property, Plant and Equipment......................... 74,616 72,692
Other Noncurrent Assets........................................ 349 387
_____________ __________
Total Assets $ 196,996 $ 175,480
============= ============
<PAGE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable.............................................. $ 9,481 10,874
Dividend payable.............................................. 2,477 2,055
Accrued compensation and employee benefits.................... 12,082 11,366
Other accrued expenses........................................ 3,816 3,723
Federal and state income taxes................................ 886 1,333
Current maturities of long-term debt.......................... 676 2,673
_____________ ___________
Total Current Liabilities.................................. 29,418 32,024
Long-term Debt.................................................. 2,168 2,884
Deferred Income Taxes........................................... 5,387 4,699
Shareholders' Investment:
Common stock, $.01 par value, 50,000,000 shares authorized,
20,644,843 issued and outstanding in 1996 and 20,553,968
issued and outstanding in 1995.............................. 206 206
Additional paid-in capital.................................... 37,695 37,133
Retained earnings............................................. 121,453 99,079
Cumulative translation adjustment............................. 669 (545)
___________ _________
Total Shareholders' Investment 160,023 135,873
___________ _________
Total Liabilities and Shareholders' Investment $ 196,996 $ 175,480
=========== =========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
18
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
REGAL-BELOIT CORPORATION
In Thousands of Dollars, Except Per Share Data
____________________________________________________________________________
<TABLE>
<CAPTION>
Common
Common Stock Additional Cumulative
Stock $.01 Par Paid-In Retained Translation
No Par Value Value Capital Earnings Adjustment Total
_____________ _________ ____________ _________ ___________ _____
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993
(10,203,056 shares)................ $ 36,543 $ -- $ -- $ 57,371 $ (1,168) $ 92,746
Net Income.......................... -- -- -- 23,129 -- 23,129
Stock Options Exercised prior to
Conversion (15,945 shares)......... 138 -- -- -- -- 138
Conversion of Common Stock to $.01
par value.......................... (36,681) 102 36,759 -- -- --
Stock Options Exercised prior to
stock split (200 shares).......... -- -- 2 -- -- 2
2- for-1 stock split in form of 100%
stock dividend (10,219,201 shares) -- 102 (102) -- -- --
Dividends Declared
($.31 per share).................. -- -- -- (6,235) -- (6,235)
Translation Adjustment............. -- -- -- -- 648 648
Stock Options Exercised after stock
split (16,550 shares)............. -- 1 116 -- -- 117
_________ ________ _________ _________
Balance, December 31, 1994
(20,454,952 shares)............... -- 205 36,595 74,265 (520) 110,545
Net Income......................... -- -- -- 32,818 -- 32,818
Dividends Declared
($.39 per share).................. -- -- -- (8,004) -- (8,004)
Translation Adjustment............. -- -- -- -- (25) (25)
Stock Options Exercised
(99,016 shares)................... -- 1 538 -- -- 539
____________ ____________ ____________ ______________ ___________ ____________
Balance, December 31, 1995
(20,553,968 shares)................ -- 206 37,133 99,079 (545) 135,873
Net Income.......................... -- -- -- 32,276 -- 32,276
Dividends Declared
($.48 per share).................. -- -- -- (9,902) -- (9,902)
Translation Adjustment............. -- -- -- -- 1,214 1,214
Stock Options Exercised
(90,875 shares).................. -- -- 562 -- -- 562
_____________ ____________ ____________ ______________ ____________ ____________
Balance, December 31, 1996
(20,644,843 shares).............. -- $ 206 $ 37,695 $ 121,453 $ 669 $ 160,023
============= ============ ============ ============== ============ ========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
19
CONSOLIDATED STATEMENTS OF CASH FLOWS REGAL-BELOIT CORPORATION
In Thousands of Dollars
_____________________________________________________________________________
<TABLE>
<CAPTION>
For The Year Ended December 31,
________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995 1994
___________ ___________ __________
<S> <C> <C> <C>
Net income....................................... $ 32,276 $ 32,818 $ 23,129
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization................. 10,578 10,176 8,991
Provision for deferred income taxes........... (54) (767) (530)
Change in assets and liabilities, net of
acquisitions:
Receivables................................. 8,799 (10,559) (3,228)
Inventories................................. 3,708 (936) (3,558)
Current liabilities and other, net.......... (1,640) 4,948 2,787
___________ ___________ __________
Net cash provided from operating activities.. 53,667 35,680 27,591
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment..... (11,112) (13,784) (7,535)
Advance payment for acquisition................ -- -- (9,853)
Sale of property, plant and equipment.......... 391 3,260 853
Other, net..................................... (525) (281) (200)
__________ __________ ________
Net cash used in investing activities.......... (11,246) (10,805) (16,735)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to short-term debt................... -- -- 10,000
Repayment of short-term debt................... -- (10,511) --
Additions to long-term debt.................... -- -- 9,853
Repayment of long-term debt.................... (2,721) (13,242) (13,780)
Stock issued under option and compensation plans 562 539 257
Dividends to shareholders...................... (9,480) (7,585) (6,027)
__________ __________ _________
Net cash (used in) provided from financing
activities.................................... (11,639) (30,799) 303
EFFECT OF EXCHANGE RATE ON CASH................... 162 4 26
___________ __________ __________
Net increase (decrease) in cash and cash
equivalents.................................... 30,944 (5,920) 11,185
Cash and cash equivalents at beginning of year.. 7,458 13,378 2,193
__________ ____________ ___________
Cash and cash equivalents at end of year........ $ 38,402 $ 7,458 $ 13,378
========== ============= ===========
<PAGE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest........................................ $ 413 $ 821 $ 981
Income Taxes.................................... $ 19,728 $ 20,254 $ 14,554
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS REGAL-BELOIT CORPORATION
____________________________________________________________________________
For The Three Years Ended December 31, 1996
(1) NATURE OF OPERATIONS
Regal-Beloit Corporation (the "Company") is a United States-based multinational
corporation. The Company's principal lines of business are power transmission
systems and perishable high speed steel rotary cutting tools. The principal
market for the Company's products and technologies are U.S. manufacturers. The
operations of the Company in any one foreign country are not significant in
relation to the Company's overall operations.
(2) ACCOUNTING POLICIES
Principles of Consolidation
The financial statements include the accounts of the Company and its wholly
owned subsidiaries.
Revenue Recognition
Sale and related cost of sales for all products are recognized upon shipment of
the products.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions, in
certain circumstances, that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expense
during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
Net assets of non-U.S. subsidiaries whose functional currencies are other than
the U.S. Dollar, are translated at the rates of exchange in effect as of year
end. Income and expense items are translated at the average exchange rates in
effect during the year. The translation adjustments relating to net assets
are recorded directly into a separate component of shareholders' investment.
Certain other translation adjustments continue to be reported in net income
and were not significant in any of the three years ended December 31, 1996.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of highly liquid investments with
insignificant interest rate risk and original maturities of three months or
less at date of acquisition. The carrying value of cash equivalents closely
approximates their fair market value.
<PAGE>
Inventories
The approximate percentage distribution between major classes of inventory is
as follows:
<TABLE>
<CAPTION>
December 31,
_____________
1996 1995
______ _____
<S> <C> <C>
Raw Material......................................... 17% 17%
Work In Process...................................... 19% 21%
Finished Goods and Purchased Parts................... 64% 62%
</TABLE>
Inventories are stated at cost, which is not in excess of market. Cost for
approximately 67% of the Company's inventory at December 31, 1996 and 1995 was
determined using the last-in, first-out (LIFO) method. If all inventories were
valued on the first-in first-out (FIFO) method, they would have increased by
$8,875,000 and $8,045,000 as of December 31, 1996 and 1995, respectively.
Material, labor and factory overhead costs are included in the inventories.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Maintenance and repairs are
charged to expense as incurred and major renewals and improvements are
capitalized.
The cost of property retired or otherwise disposed of is removed from the
property accounts, the accumulated depreciation is removed from related
reserves, and the net gain or loss is reflected in income.
The provisions for depreciation are based on the estimated useful lives of plant
and equipment from the dates of acquisition and are calculated primarily using
the straight-line method for financial reporting purposes and accelerated
methods for income tax purposes. The estimated useful lives are:
Description Life
_________________________________________________________ ______________
Buildings and Improvements............................... 10 to 45 years
Machinery and Equipment.................................. 3 to 10 years
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long -lived Assets
to be Disposed Of" during the first quarter of 1996. The adoption of this
standard did not have a material effect on the Company's financial position
or results of operations.
<PAGE>
Common Stock and Net Income Per Share
Pursuant to a shareholder approved agreement and plan of merger, effective June
30, 1994, the Company changed its state of incorporation from Delaware to
Wisconsin. To accomplish this, each share of existing no par value,
Regal-Beloit stock was automatically converted into one share of $.01 par
value stock in the new company incorporated in Wisconsin. This change
resulted in the transfer of $36,579,000 from Common Stock to Additional
Paid-In Capital.
Net income per share is based on the weighted average number of shares
outstanding during each period. Shares issuable upon the exercise of stock
options have not been included in the per share computation because the
effect of the inclusion would not be material.
Common stock per share and average share information for years 1994 and prior
have been retroactively restated for the 2 for 1 stock split effected in the
form of a 100% stock dividend which was distributed to shareholders in
August 1994.
21
(3) ACQUISITIONS
Effective January 1, 1995, the Company acquired selected net assets of the
Marine and Industrial Transmission Division of Borg-Warner Automotive
Transmission and Engine Components Corporation for approximately $9,192,000.
This acquisition has been renamed the Velvet Drive Transmission Division of
Regal-Beloit Corporation. This Division produces both marine and industrial
transmissions. The acquisition was accounted for as a purchase and the cash
consideration paid approximated the fair market value of the net identifiable
assets acquired. Results of operations of the Velvet Drive Transmission
Division have been consolidated in the Company's statements from the
acquisition date.
On December 20, 1994, for approximately $36,000, the Company purchased the
capital stock and assumed liabilities of Costruzioni Meccaniche
Legnanesi, S.r.L. of Legnano, Italy which manufactures manual bevel gear
valve actuators. This acquisition was also accounted for as a purchase.
<PAGE>
(4) LONG-TERM DEBT AND BANK CREDIT FACILITIES
<TABLE>
<CAPTION>
(In Thousands of Dollars)
Long-term debt consists of the following: December 31,
__________________________
1996 1995
_____ _____
<S> <C> <C>
9% Note with quarterly installments of $500,000 through November, 1996....... $ -- $ 2,000
7-3/4% Industrial Revenue Bonds with annual payments of $342,353 to
September 30, 1999.......................................................... 1,027 1,370
Industrial Development Bonds with semi-annual payments of $150,000 through
May, 2001, with an interest rate of 4.6% as of December 31, 1996............ 1,350 1,650
Other........................................................................ 467 537
2,844 5,557
_______ _______
Less-Current maturities...................................................... 676 2,673
Noncurrent portion........................................................... $ 2,168 $ 2,884
=========== ========
</TABLE>
The Company also maintains two short-term lines of credit totalling $7,500,000
at December 31, 1996 and 1995. These lines of credit were not activated in
either year.
The loan covenants covering the Industrial Revenue Bonds contain restrictions
on the payment of dividends, redemption or retirement of shares of common stock
and the issuance of additional funded indebtedness. Under the terms of these
covenants, $26,000,000 of retained earnings were available for distribution
as of December 31, 1996.
ased on the borrowing rates currently available to the Company for bank loans
with similar terms and average maturities, the fair value of long-term debt
is not materially different than the carrying value. All long-term debt is
unsecured as of December 31, 1996.
Maturities of long-term debt are as follows:
Year (In Thousands of Dollars)
______ ___________________________
1997 $ 676
1998 681
1999 685
2000 348
2001 and thereafter 454
___________________________
Total $2,844
===========================
(5) LEASES AND RENTAL COMMITMENTS
Rental expenses charged to operations amounted to $1,158,000 in 1996, $1,218,000
in 1995, and $1,094,000 in 1994. Future minimum rental commitments for
noncancelable operating leases having a remaining term in excess of one year as
of December 31, 1996 are not material.
<PAGE>
(6) RETIREMENT PLANS
The Company has a number of retirement plans that cover most of its employees.
The primary plan of the Company is a qualified discretionary profit-sharing plan
covering substantially all domestic employees except those covered by collective
bargaining agreements. Total expense for all profit-sharing and retirement
plans was $4,041,000, $4,477,000 and $3,798,000 in 1996, 1995 and 1994,
respectively.
22
(7) STOCK OPTION PLANS
The Company has four stock option plans available for officer, directors, and
key employees. Under the Company's 1982 and 1987 Stock Option Plans,
qualified incentive stock options for 614,946 and 450,000 shares,
respectively, have been made available for grant and 609,760 and
435,500 shares, respectively, have been granted. Options under these plans
were granted at a price that equaled the market value on the date of grant
and an option's maximum term is 10 years.
In 1991, the shareholders approved a Flexible Stock Incentive Plan. This
plan permits the Company to award options from a single pool of 1,000,000
shares. Non-qualified options for 462,294 shares have been granted under
this plan. These options were granted at prices that equal the market value
on the date of grant and an option's maximum term is 10 years.
In 1992, the Outside Directors of the Company were awarded a one time grant of
non-qualified options for an aggregate 140,000 shares. These options were
granted at market value on the date of grant and expire five years from date
of grant.
A summary of the status of the Company's four stock options plans as of
December 31, 1996,1995 and 1994, and changes during the years then ended is
presented below:
<TABLE>
<CAPTION>
1996 1995 1994
___________ ___________ ___________
Weighted Average Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
_____________________ _____________________ ______________________
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year... 873,086 $ 7.84 955,420 $ 7.25 976,970 $ 7.23
Granted............. 107,700 18.85 33,364 14.75 29,562 13.59
Exercised........... (96,368) 5.84 (108,448) 4.98 (50,112) 5.12
Forfeited........... (18,000) 19.00 (7,250) 13.94 (1,000) 8.13
_________ ________ _________ ______ ________ ______
Outstanding at
end of year......... 866,418 $ 8.88 873,086 $ 7.84 955,420 $ 7.25
Options exercisable
at year-end......... 713,668 653,736 654,920
</TABLE>
<PAGE>
The following table summarizes information about the Company's four stock
option plans outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Range of Number Number
Exercise Outstanding at Exercisable at
Prices 12/31/96 12/31/96
_______________________________________________________________________
<S> <C> <C> <C>
$ 3.50 - 5.24 19,486 19,486
5.25 - 7.89 540,150 480,150
7.90 - 11.84 158,906 158,906
11.85 - 17.79 85,226 46,626
17.80 - 20.13 62,650 8,500
__________ _________
866,418 713,668
</TABLE>
In 1995, The Financial Accounting Standards Board issued SFAS No. 123
"Accounting for Stock-Based Compensation," which established financial
accounting and reporting standards for stock-based employee compensation.
The statement allows for companies to continue to apply the accounting
treatment under the provisions of Accounting Principles Board Opinion No. 25.
Effective December 31, 1996, the Company has chosen to adopt the disclosure
requirement of SFAS No. 123; however, in the opinion of management, the
pro-forma impact of compensation expense for stock-based employee compensation
arrangements is not material to the financial statements.
(8) CONTINGENCIES
The Company is, from time to time, party to lawsuits arising from its normal
business operations. In addition, the Company is party to certain environmental
cleanup proceedings. It is believed that the outcome of these lawsuits and
cleanup proceedings will have no material effect on the Company's financial
position or its results of operations.
23
(9) INCOME TAXES
The provision for income taxes is summarized as follows:
(In Thousands of Dollars)
__________________________
1996 1995 1994
_______ _______ ________
Current
Federal.......... $16,232 $17,499 $ 12,968
State............ 2,712 3,089 2,365
Foreign.......... 649 501 232
_______ _______ ________
19,593 21,089 15,565
Deferred........... (54) (767) (530)
_______ _______ ________
$19,539 $20,322 $ 15,035
======= ======= ========
<PAGE>
A reconciliation of the statutory Federal income tax rate and the effective rate
reflected in the statements of income follows:
1996 1995 1994
______ ______ ______
Federal statutory rate........................ 35.0% 35.0% 35.0%
State income taxes, net of Federal benefit.... 3.4 3.8 4.0
Other,net..................................... (.7) (.6) .4
______ ______ ______
Effective tax rate............................ 37.7% 38.2% 39.4%
====== ====== ======
Deferred taxes arise primarily from differences in amounts reported for tax and
financial statement purposes. The Company's net deferred tax liability as of
December 31, 1996 of $855,000 is classified on the consolidated balance sheet
as a current income tax benefit of $4,532,000 and a long-term deferred income
tax liability of $5,387,000. The December 31, 1995 net deferred tax liability
was $590,000, consisting of a current income tax benefit of $4,109,000 and a
long-term deferred income tax liability of $4,699,000. The components of
this net deferred tax liability are as follows:
(In Thousands of Dollars)
December 31,
_________________________
1996 1995
________ ________
Operating loss carry forward..................... $ 1,022 $ 1,022
Inventory........................................ 1,510 1,271
Accrued employee benefits........................ 1,724 1,676
Bad debt reserve................................. 334 336
Other............................................ 1,096 1,000
________ ________
Deferred tax assets............................ 5,686 5,305
Property related................................. (6,012) (5,425)
Other............................................ (529) (470)
_______ ________
Deferred tax liabilities....................... (6,541) (5,895)
________ ________
Net deferred tax liability....................... $ (855) $ (590)
======== ========
(10) INDUSTRY SEGMENT INFORMATION
<PAGE>
Pertinent data for each industry segment in which the Company operated for the
three years ended December 31, 1996 is as follows:
<TABLE>
<CAPTION>
(In Thousands of Dollars)
________________________________________________________________
Net Income From Identifiable Capital
Sales Operations Assets Expenditures Depreciation
_______ __________ ___________ ____________ ____________
<S> <C> <C> <C> <C> <C>
1996
Power Transmission Group...... $ 243,226 $ 49,104 $ 135,841 $ 9,262 $ 9,509
Cutting Tool Group............ 38,282 5,749 15,837 1,556 847
Corporate/Unallocated......... --- (3,733) 45,318 294 197
_________ _________ __________ _________
$ 281,508 $ 51,120 $ 196,996 11,112 10,553
========= ========= ========== =========
1995
Power Transmission Group...... $ 258,325 $ 51,815 $ 145,730 $ 17,557 $ 8,908
Cutting Tool Group............ 37,566 6,390 16,193 648 954
Corporate/Unallocated......... --- (4,598) 13,557 1,694 287
--------- ---------- ---------- -----------
$ 295,891 $ 53,607 $ 175,480 19,899 $ 10,149
========= ========= ========== ===========
1994
Power Transmission Group...... $ 209,048 $ 39,529 $ 128,144 $ 7,258 $ 7,277
Cutting Tool Group............ 33,602 4,383 20,519 197 1,074
Corporate/Unallocated......... --- (4,930) 19,002 80 350
---------- ---------- ----------- -----------
$ 242,650 $ 38,982 $ 167,665 7,535 $ 8,701
========== ========== =========== ============
</TABLE>
The Company's European operations contributed net sales of $18,746,000,
$18,639,000 and $14,108,000 and income from operations of $2,529,000, $1,948,000
and $1,081,000 in 1996, 1995 and 1994, respectively. Total assets of these
operations as of December 31, 1996, 1995 and 1994 were $19,422,000, $18,288,000,
and, $16,000,000, respectively. Export sales from U. S. operations were
approximately 3% of sales in 1996, 1995 and 1994.
Corporate assets of cash and cash equivalents, notes receivable, prepaid
expenses and certain property, plant and equipment have not been associated with
industry segments. Capital expenditures in 1995 include significant amounts
applicable to acquired businesses in 1995. Segment income from operations
includes segment revenues and applicable other income items less operating
expenses directly associated with each segment. Corporate expenses which
benefit more than one segment have not been allocated.
24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Regal-Beloit Corporation:
We have audited the accompanying consolidated balance sheets of REGAL-BELOIT
CORPORATION (a Wisconsin Corporation) and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of income,
shareholders investment and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Regal-Beloit
Corporation and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Arthur Anderson LLP
___________________
Arthur Andersen LLP
Milwaukee, Wisconsin,
January 29, 1997.
RESPONSIBILITIES FOR FINANCIAL STATEMENTS
The preceding financial statements of Regal-Beloit Corporation and related
footnotes were prepared by management which is responsible for their
integrity and objectivity. The statements have been prepared in conformity
with generally accepted accounting principles, which have been applied on a
consistent basis.
<PAGE>
The system of internal controls of Regal-Beloit Corporation is designed to
assure that the books and records reflect the transactions of the Company and
that its established policies and procedures are carefully followed. The
internal control system is augmented by careful selection and training of
qualified employees, proper division of responsibilities, and the development
and dissemination of written policies and procedures.
Arthur Andersen LLP, whose audit report is shown on this page, is engaged by the
Board of Directors to audit the financial statements of Regal-Beloit Corporation
and issue reports thereon. Their audit is conducted in accordance with
generally accepted auditing standards which require obtaining an
understanding of the Company's systems and procedures and performing tests
and other procedures sufficient to provide reasonable assurance that the
financial statements are neither materially misleading nor contain material
errors.
The Audit Committee of the Board of Directors, which committee consists entirely
of outside directors, meets regularly with the independent public accountants
and management to review the scope and results of audits. In addition, the
Audit Committee meets with Arthur Andersen LLP, without management
representatives present, to discuss the results of their audit including a
discussion of internal accounting controls, financial reporting and other
audit matters.
James L. Packard Kenneth F. Kaplan
________________ _________________
James L. Packard Kenneth F. Kaplan
Chairman, President, Vice President, Chief Financial
Chief Executive Officer Officer
25
<PAGE>
DIVISIONS & SUBSIDIARIES REGAL-BELOIT CORPORATION
________________________________________________________________________________
U. S. Operations
*REGAL-BELOIT CORPORATION
CORPORATE OFFICE
Beloit, WI 53511
*DURST
Shopiere,WI 53525
*ELECTRA-GEAR
Anaheim, CA 92801
*FOOTE-JONES/ILLINOIS GEAR
Chicago, IL 60707
*GROVE GEAR
Union Grove, WI 53182
*HUB CITY, INC.
Aberdeen, SD 57402
*MASTERGEAR U.S.A.
Roscoe, IL 61073
*OHIO GEAR/RICHMOND GEAR
Liberty, SC 29657
*VELVET DRIVE TRANSMISSIONS
New Bedford, MA 02745
*REGAL CUTTING TOOLS
South Beloit, IL 61080
*NATIONAL TWIST DRILL
South Beloit, IL 61080
*NEW YORK TWIST DRILL, INC.
South Beloit, IL 61080
International Operations
*COSTRUZIONI MECCANICHE LEGANESI S.r.L.
20025 Legnano (MI)r
Italy
*MASTERGEAR (GmbH)
D-61260 Neu-Anspach
Germany
*OPPERMAN MASTERGEAR, Ltd.
Newbury, Berkshire
England
<PAGE>
SHAREHOLDER INFORMATION
______________________________________________________________________________
Corporate Headquarters Stock Purchases
Regal-Beloit Corporation A shareholder should make sure
200 State Street, Beloit, WI 53511-6254 that newly purchased shares are
608/364-8800 Fax: 608/364-8818 registered the same way each time
they add to their holdings in order
to prevent the creation of
Transfer Agent, Registrar and Dividend duplicate accounts. Such accounts
Disbursing Agent are not only an inconvenience to
Boston Equiserve, L.P. the shareholder, but also increase
Bank of Boston Shareholder Services your Company's administrative
P. O. Box 644 Mail Stop: 45-02-64 costs.
Boston, MA 02102-0644
617/575-3400 Notice of Annual Meeting
The Annual Meeting of stockholders
Have you received your cash dividends? will be held at 10:30 a.m.,C.D.T.,
During 1996, four quarterly cash dividends on Thursday, April 24,1997, at the
were declared on Regal-Beloit Corporation Corporate Offices, 200 State Street
common stock. If you have not received Beloit, Wisconsin.
all dividends to which you are entitled,
please write or call the Bank of Form 10.K
Boston at the address above. A copy of the report filed by the
Company with the Securities and
Exchange Commission is available
to shareholders upon request.
Please direct requests to:
Stock Listing Regal-Beloit Corporation
Regal-Beloit stock was first traded Attn: Investor Relations
publicly in 1969. The Corporation began 200 State Street, Beloit, WI
trading on the American Stock Exchange 53511-6254
in 1976 under the symbol RBC.
Auditors
Arthur Andersen LLP,
Milwaukee, Wisconsin.
Cash Dividends and Stock Splits
Regal-Beloit Corporation paid its first cash
dividend in January 1961. Since that date,
Regal-Beloit has paid 146 consecutive
quarterly dividends through January, 1997.
The Company has raised cash dividends 33
times in the 36 years these dividends have
been paid. The dividend has never been
reduced. The Company has also declared and
issued 15 stock splits/dividends since
inception.
Regal-Beloit Corporation is a Wisconsin Corporation listed on the American
Stock Exchange under the symbol RBC.
26
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 38,402,000
<SECURITIES> 0
<RECEIVABLES> 32,796,000
<ALLOWANCES> 1,190,000
<INVENTORY> 45,908,000
<CURRENT-ASSETS> 122,031,000
<PP&E> 142,740,000
<DEPRECIATION> 68,124,000
<TOTAL-ASSETS> 196,996,000
<CURRENT-LIABILITIES> 29,418,000
<BONDS> 0
0
0
<COMMON> 206,000
<OTHER-SE> 159,817,000
<TOTAL-LIABILITY-AND-EQUITY> 196,996,000
<SALES> 281,508,000
<TOTAL-REVENUES> 281,508,000
<CGS> 198,582,000
<TOTAL-COSTS> 198,582,000
<OTHER-EXPENSES> 31,806,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357,000
<INCOME-PRETAX> 51,815,000
<INCOME-TAX> 19,539,000
<INCOME-CONTINUING> 32,276,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,276,000
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 0
</TABLE>
