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, 1995 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 The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 20, 1996 was approximately $407,000,000. On March 20, 1996 the registrant had outstanding 20,600,707 shares 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, 1995.................................... I, II, IV Proxy Statement for Annual Shareholder Meeting to be Held on April 24, 1996............................... III
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, mini-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.
Marketing and Sales Power transmission products are sold to select distributors, original equipment manufacturers and end users through field sales personnel and manufacturers' representatives. Approximately 70% of the Company's cutting tool sales by dollar volume represents products 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. Export sales accounted for approximately 3% of the Company sales in 1995, 1994 and 1993. No material part of the Company's business is dependent upon a single customer or a group of customers. In fiscal 1995, 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. Competition Competition in the power transmission equipment industry has historically been from old line and captive manufacturers. In recent years, competition, in general, (including 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 it was not previously involved in. 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, Philadelphia Gear, and IMO. Dominant foreign competitors would include SEW Eurodrive, Flender, Sumitomo and Leroy Somer.
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, 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. For further segment information required by Item 101 of Regulation S-K, reference is made to Note 10 of the Financial Statements on page 14 of the Annual Report to shareholders for the year ended December 31, 1995, a copy of which is attached hereto, and such information is incorporated herein by reference. Backlog As of December 31, 1995, the amount of the Company's power transmission backlog believed to be firm was approximately $48,400,000 compared to approximately $45,300,000 on December 31, 1994. Year end 1995 includes backlog from the Velvet Drive Transmission acquisition which was not included in year end 1994. 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. 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.
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, 1995, the Company employed approximately 2,600 persons, of which approximately 28% 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 steels in various 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. 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 fourth quarter of 1995.
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, 1995, a copy of which is attached hereto, and such information is incorporated herein by reference. The loan covenants relating to the long-term debt agreements of the Company contain, among other things, restrictions on the payment of dividends and redemption or retirement of shares of common stock. Under the terms of these covenants, $19,400,000 of retained earnings was available for distribution as of December 31, 1995. 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, 1995, a copy of which is attached hereto, and such information is incorporated herein by reference. ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operation 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, 1995, a copy of which is attached hereto, 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, 1995, a copy of which is attached hereto, 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.
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, 1996, 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. The names, ages, and positions of all of the executive officers of the Company as of March 20, 1996, are listed below along with their business experience during the past five years. Officers are appointed 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> <S> <C> Name, Age and Position Business Experience During the Past 5 Years - ------------------------- ------------------------------------------------- James L. Packard, 53 Elected Chairman in 1986; Chief Executive Officer Chairman, President and since 1984; President since 1980. Chief Executive Officer Henry W. Knueppel, 47 Elected Executive Vice President-Operations in Executive Vice President 1987, prior to which he was Vice President- Operations Operations since 1985. Robert C. Burress, 57 Elected Secretary in 1996; Vice President - Chief Vice President - Chief Financial Officer since 1994; Vice President - Financial Officer, Secretary Treasurer since 1980. Financial Officer, Secretary </TABLE> ITEM 11. Executive Compensation Information required by Item 402 of Regulation S-K is set forth on pages 7 through 9 of the definitive proxy statement for the Annual Meeting of Shareholders to be held on April 24, 1996, 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, 4, 5 and 10 of the definitive proxy statement for the Annual Meeting of Shareholders to be held on April 24, 1996, 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 13. Certain Relationships and Related Transactions The Company had no relationships or transactions that are subject to disclosure by Item 404 of Regulation S-K. PART IV ITEM 14. Financial Statements, Financial Statement Schedule, Exhibits and Reports on Form 8-K 1. Financial Statements The following Financial Statements of the Company are included on pages 7 through 15 of the Annual Report to shareholders for the year ended December 31, 1995, a copy of which is attached hereto, and such Financial Statements are incorporated herein by reference. - Consolidated Statement of Income for the years ended December 31, 1995, 1994, and 1993. - Consolidated Balance Sheet as of December 31, 1995, and 1994. - Consolidated Statement of Shareholders' Investment for the years ended December 31, 1995, 1994, and 1993. - Consolidated Statement of Cash Flows for the years ended December 31, 1995, 1994, and 1993. - Notes to Consolidated Financial Statements for the three years ended December 31, 1995. - Report of Independent Public Accountants. 2. Financial Statement Schedule and Auditors' Report The following Financial Statement Schedule and Report of Independent Public Accountants should be read in conjunction with the Financial Statements included in the 1995 Annual Report to shareholders. <TABLE> <CAPTION> <S> <C> Page - Report of Independent Public Accountants 11 - Schedule II - Valuation and Qualifying Accounts 12 </TABLE> All other schedules have been omitted because they are not applicable or not required or because the required information is shown in the Financial Statements or Notes thereto.
3. Reports on Form 8-K There were no reports filed on Form 8-K by the Company during the fourth quarter of 1995.
4. Exhibits The following exhibits are required to be filed by Item 601 of Regulation S-K. <TABLE> <CAPTION> <S> <C> Exhibit Incorporated by Filed Seq. No. Number Description Reference to: Herewith Page - ------- --------------------------------------- ------------------------------------------ -------- -------- 2 Agreement and Plan of Merger by and Exhibit A to Annual Meeting Proxy between the Registrant and Regal-Beloit Statement of Regal-Beloit Corporation Corporation, dated as of April 18, 1994 dated March 11, 1994 3.1 Articles of Incorporation of the Exhibit B to the 1994 Proxy Statement Registrant 3.2 Bylaws of the Registrant Exhibit C to the 1994 Proxy Statement 4.1 Articles of Incorporation and Bylaws Exhibits 3.1 and 3.2 hereto of the Registrant 4.2 Loan Agreement between the Registrant Exhibit 4.2 to Regal-Beloit Corporation's and M&I Marshall & Ilsley Bank, dated as Annual Report on Form 10-K dated of April 22, 1992 ("M&I Loan Agreement") March 29, 1993 10.1 Short-Term Incentive Compensation Plan, Exhibit 10.1 to Regal-Beloit Corporation's as amended Annual Report on Form 10-K dated March 29, 1993 10.2 1982 Incentive Stock Option Plan Exhibit 10.4 to 1986 S-1 10.3 1987 Stock Option Plan Exhibit 10.3 to 1988 S-1 10.4 1991 Flexible Stock Incentive Plan 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 Exhibit 10.5 to Regal-Beloit Corporation's Annual Report on Form 10-K dated March 29, 1993 10.6 Disability Insurance Agreement between Exhibit 10.6 to Regal-Beloit Corporation's Regal-Beloit Corporation and Continental Annual Report on Form 10-K dated Casualty Company March 29, 1993 13.1 Annual Report to Security Holders for the Exhibit 13.1 to Regal-Beloit Corporation's X 13 year ended December 31, 1995 Annual Report on Form 10-K dated March 20, 1996 21.1 Subsidiaries of the Regal-Beloit Exhibit 21.1 to Regal-Beloit Corporation's X 33 Corporation Annual Report on Form 10-K dated March 20, 1996 23.1 Consent of Independent Public Accountants Exhibit 23.1 to Regal-Beloit Corporation's X 11 Annual Report on Form 10-K dated March 20, 1996
Exhibit Incorporated by Filed Seq. No. Number Description Reference to: Herewith Page - ------- ----------------------------------------- ------------------------------------------- -------- -------- 28.1 Form 11-K Annual Report of Regal-Beloit Corporation Personal Savings Plan for the year ended December 31, 1995 (to be filed within 180 days after the end of the Plan's fiscal year) 99.1 Annual Meeting Proxy Statement of Regal-Beloit Corporation dated March 14, 1996 99.2 Agreement and Plan of Merger by and Exhibit A to the 1994 Proxy Statement between the Registrant and Regal-Beloit Corporation, dated as of April 18, 1994 </TABLE>
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 20, 1996 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: <TABLE> <CAPTION> <S> <C> <C> James L. Packard - ------------------------------ Chairman, President, Chief March 20, 1996 James L. Packard Executive Officer and Director -------------- Robert C. Burress - ------------------------------ Vice President - CFO March 20, 1996 Robert C. Burress (Principal Accounting & Financial Officer) -------------- Henry W. Knueppel - ------------------------------ Executive Vice President March 20, 1996 Henry W. Knueppel and Director -------------- John A. McKay - ------------------------------ Director March 20, 1996 John A. McKay -------------- John M. Eldred - ------------------------------ Director March 20, 1996 John M. Eldred -------------- J. Reed Coleman - ------------------------------ Director March 20, 1996 J. Reed Coleman -------------- Frank Bauchiero - ------------------------------ Director March 20, 1996 Frank Bauchiero --------------
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 31, 1996. 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 ------------------------------------- ARTHUR ANDERSEN LLP Milwaukee, Wisconsin, January 31, 1996
EXHIBITS AND SCHEDULES Exhibit 23.1 Consent of Independent Public Accountants Schedule II Valuation and Qaulifying Accounts Exhibit 21.1 Subsidiaries of Regal-Beloit Corporation Exhibit 13.1 Annual Report to Shareholders
Exhibit 23.1 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 ----------------------------------- ARTHUR ANDERSEN LLP Milwaukee, Wisconsin, March 20, 1996.
SCHEDULE II REGAL-BELOIT CORPORATION VALUATION AND QUALIFYING ACCOUNTS Allowance for Doubtful Accounts: </TABLE> <TABLE> <CAPTION> <S> <C> <C> <C> <C> (In Thousands Of Dollars) --------------------------------------------- Balance Additions Write-offs, Balance Beginning Charged To Net Of End Of Year Net Income Recoveries Of Year --------- ---------- ---------- ------- Year Ended December 31, 1995 $ 1,161 $ 62 $ (83) $ 1,140 Year Ended December 31, 1994 $ 1,077 $ 191 $ (107) $ 1,161 Year Ended December 31, 1993 $ 905 $ 387 $ (215) $ 1,077 </TABLE>
EXHIBIT 21.1 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 Island Corporation 200 State Street Beloit, Wisconsin Acquired - December, 1984 New York Twist Drill, Inc., a Delaware Corporation 25 Howard Place Ronkonkoma, New York Acquired - March, 1988 Opperman Mastergear Limited Hambridge Road Newbury, Berkshire, England, United Kingdom 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