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Regal Beloit Corporation August 7, 2013

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Page 1: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Regal Beloit Corporation

August 7, 2013

Page 2: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Safe Harbor Statement

This presentation contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements represent our management’s judgment regarding future events In many cases you canForward looking statements represent our management s judgment regarding future events. In many cases, you canidentify forward-looking statements by terminology such as “may,” “will,” “plan,” “expect,” “anticipate,” “estimate,”“believe,” or “continue” or the negative of these terms or other similar words. Actual results and events could differmaterially and adversely from those contained in the forward-looking statements due to a number of factors, including:uncertainties regarding our ability to execute our restructuring plans within expected costs and timing; actions taken byour competitors and our ability to effectively compete in the increasingly competitive global electric motor, powergeneration and mechanical motion control industries; our ability to develop new products based on technologicalinnovation and the marketplace acceptance of new and existing products; fluctuations in commodity prices and rawmaterial costs; our dependence on significant customers; issues and costs arising from the integration of acquiredcompanies and businesses, including the timing and impact of purchase accounting adjustments; unanticipated costsor expenses we may incur related to product warranty issues; our dependence on key suppliers and the potentialeffects of supply disruptions; infringement of our intellectual property by third parties challenges to our intellectualeffects of supply disruptions; infringement of our intellectual property by third parties, challenges to our intellectualproperty, and claims of infringement by us of third party technologies; increases in our overall debt levels as a result ofacquisitions or otherwise and our ability to repay principal and interest on our outstanding debt; product liability andother litigation, or the failure of our products to perform as anticipated, particularly in high volume applications;economic changes in global markets where we do business, such as reduced demand for the products we sell,currency exchange rates, inflation rates, interest rates, recession, foreign government policies and other externalcurrency exchange rates, inflation rates, interest rates, recession, foreign government policies and other externalfactors that we cannot control; unanticipated liabilities of acquired businesses; cyclical downturns affecting the globalmarket for capital goods; difficulties associated with managing foreign operations; and other risks and uncertaintiesincluding but not limited to those described in Item 1A-Risk Factors of the Company’s Annual Report on Form 10-K(A)filed on March 26, 2013 and from time to time in our reports filed with U.S. Securities and Exchange Commission. Allsubsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf areexpressly qualified in their entirety by the applicable cautionary statements. The forward-looking statements includedin this presentation are made only as of their respective dates, and we undertake no obligation to update thesestatements to reflect subsequent events or circumstances.

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Page 3: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Non-GAAP Financial Measures

We prepare financial statements in accordance with accounting principlesgenerally accepted in the United States (GAAP). We also disclose adjusteddil t d i h (EPS) dj t d fit dj t d fitdiluted earnings per share (EPS), adjusted gross profit, adjusted gross profit asa percentage of net sales, adjusted income from operations, free cash flow andfree cash flow as a percentage of net income attributable to Regal-BeloitCorporation (collectively, “non-GAAP financial measures”). We use thesep ( y, )measures in our internal performance reporting and for reports to the Board ofDirectors. We also periodically disclose certain of these measures in ourquarterly earnings releases, on investor conference calls, and in investorpresentations and similar events We believe that these non GAAP financialpresentations and similar events. We believe that these non-GAAP financialmeasures are useful measures for providing investors with additional insight intoour operating performance. This additional information is not meant to beconsidered in isolation or as a substitute for our results of operations preparedand presented in accordance with GAAP. These non-GAAP financial measuresexclude the effects of certain items that are not comparable from one period tothe next. Free cash flow is defined as net cash provided by operating activitiesless additions to property plant and equipmentless additions to property, plant and equipment.

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Page 4: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Overview

Getting to Know Regal Getting to Know Regal

Best in Class Industrial Performance

Growth Catalysts

Financial Performance

Building a Premier Global Enterprise

p 4

Page 5: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Overview

Getting to Know Regal Getting to Know Regal

Best in Class Industrial Performance

Growth Catalysts

Financial Performance

Building a Premier Global Enterprise

p 5

Page 6: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Company Overview

Drives Other

Founded 1955Beloit, WI

Sales by Product/Platform Percentage of Sales

Small MotorsLarge

GeneratorsMechanical

Blowers

Revenues$3.2B

Revenue Growth7 Y CAGR

39%34%

ResidentialIndustrial

MotorsLarge Motors

Total Shareholder Returns 7-Year TSR

7-Year CAGR 14.2% 27%

Commercial

111%

DividendsRaised 8 out

of last 9 years

Sales by Geography Cyclicality

EuropeRoW Canada

Late

ManagementExperienced, Credible,

Stable

y

Asia

p

USAEarly 37%

Mid

Late 16%

p 6

47%

Page 7: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Necessary and Innovative Products

Electric Motors Power Generation

Power TransmissionElectric Controls

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Page 8: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Diverse Applications

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Page 9: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Global Foot Print

Abl t M t C t D d A h I th W ld

p 9

Able to Meet Customer Demands Anywhere In the WorldAligning with Faster Growing Economies

Page 10: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

One Regal

Unifies Employees with a Simple, Bold, Dynamic Corporate Brand

Presents One Face to the Customer, with Strong Global Product Brands

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Page 11: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Overview

Getting to Know Regal Getting to Know Regal

Best in Class Industrial Performance

Growth Catalysts

Financial Performance

Building a Premier Global Enterprise

p 11

Page 12: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Total Shareholder ReturnsSeven Year Historyy

n

200%

136.4%Best in Class Industrials1

(AME, DHR, EMR, ROP, IEX)

hare

hold

er R

etur

n

100%

150%

R C

umul

ativ

e Sh

50%67.6% Regal Beloit

28.9% S&P 500

Tota

l 7-Y

R

(50%)

0%

Performance Consistent With Best in Class Industrials

(50%)6/28/06 8/28/07 10/27/08 12/27/09 2/26/11 4/27/12 6/28/13

Performance Consistent With Best in Class Industrials_____________________(1) Best In Class Industrials includes Ametek, Inc., Danaher Corporation, Emerson Electric Co., IDEX Corporation, and Roper Industries, Inc.

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Page 13: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Financial Performance Profile

2007 – 2012 Sales CAGR

11 9% 10 6%20.0% 11.9% 10.6% 9.3% 7.5% 7.3%

1.7%0.0%

10.0%

RBC DHR AME IEX ROP EMR

2007 – 2012 Free Cash Flow / NI

137.5% 134.8% 133.3% 120.0% 116.0% 108.1%

0.0%

200.0%

ROP RBC IEX AME DHR EMR

Performance Consistent With Best In Class Industrials

ROP RBC IEX AME DHR EMR

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_____________________Source: Capital IQ and BloombergNotes: CAGR represents cumulative annual growth rate for the 2007 – 2012 calendar periods.Free cash flow as a percentage of net income is defined as cash flow from operations less capital expenditures divided by net income. Represents the median percentage for the 2007 – 2012 calendar periods.

Page 14: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Regal Compass Operating System

Lean Six Sigma Tools Leadership Tools

Quality Cost

Delivery

Talent Management Long Range Plans

Compliance/Safetyy

Cap Ex

Cash Cycle

N P d t

p y

Risk Management

Customer Care

Integrations New Products Integrations

Near Term Income Statement

Long Term Growth

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Page 15: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Overview

Getting to Know Regal Getting to Know Regal

Best in Class Industrial Performance

Growth Catalysts

Financial Performance

Building a Premier Global Enterprise

p 15

Page 16: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Energy Efficiency Mega-Trend

$700

Energy Efficient Product Sales*

$300

$400

$500

$600

$0

$100

$200

$300

$02005 2006 2007 2008 2009 2010 2011 2012

Regional SEER Update US Small Motor Standard UpdateF t Effi i St d d A ti i t d Eff ti 2015 Future Efficiency Standards Under Review

Anticipated Effective 2015 Expands NEMA Requirements to

Estimated 20% of N.A. of C&I Sales

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Expect DOE to Publish Official Requirement Spring 2013

* Management Estimate

Page 17: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

New Products

New Product Introductions

5060

5060

2220304050 Aluminum Wound

HVAC MotorVariable Speed

Pool Motor

1020

2008 2011 2012

Large Frame IEC MotorHERA-MAXGear Motor

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Gear Motor

Develop New Products with Focus on Energy Efficiency

Page 18: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Successful Acquirer and Integrator

Acquisition Strategy2013

Technology and Energy Efficiency Expand Geographic Footprint Margin Improvement

2012

Rigorous Evaluation and Integration Process Drives

2011

HARGIL PTY.LTD

gReturn On Investment

A i iti Pi li C ti

2010

DYNAMICSLTD.

Acquisition Pipeline Continues to Be Active

Consistent and Successful Acquirerp 18

Page 19: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Synergy Program Update

$38 $38 ($ in millions)

$35

Gross Synergy Run Rate - As Presented 8/23/2011($ in millions)

Gross Synergy Run Rate – Current View

$12

$25

$10

$20

$30

Yr 1 Yr 2 Yr 3 Yr 4Yr 1 Yr 2 Yr 3 Yr 4

Capital and Expense – As Presented 8/23/2011($ in millions)

$5 8

Capital and Expense – Current View$7.0($ in millions)

$5.8

$2.2 $2.2

$5.6

$0.0

Yr 1 Yr 2 Yr 3 Yr 4

$0.0 $0.0

Yr 1 Yr 2 Yr 3 Yr 4

19

Deliver More Savings Earlier

Page 20: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Simplification Initiative

Reduction Targets 2011 Next 3 Years2012Reduction TargetsERPs Factories

201132

Next 3 Years~ 6~ 6

201234

WarehousesDesign Platforms

02

~ 10~ 8

62

EntitiesSuppliersB d

10502

~ 30~ 500

10

20120

2Brands 2 ~ 10

Improve Margins Easier to do Business

2

Improve Margins, Easier to do Business

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Page 21: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Investing in Emerging Markets

Hermetic Motors - Taicang Generators - Shanghai

Visual Management Lean Production

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Page 22: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Growth Catalyst Summary

Energy Efficiency Trends Energy Efficiency Trends Introducing New Products Consistent and Successful AcquirerConsistent and Successful Acquirer Simplification Initiative Investing in Emerging Marketsg g g

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

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Page 23: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Overview

Getting to Know Regal Getting to Know Regal

Best in Class Industrial Performance

Growth Catalysts

Financial Performance

Building a Premier Global EnterpriseBuilding a Premier Global Enterprise

p 23

Page 24: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Sales and EPS Growth

$4.50

$5.00

$3 000

$3,500

$3.00

$3.50

$4.00

$2,000

$2,500

$3,000

EPSSales

ds

$1.50

$2.00

$2.50

$1,000

$1,500

$2,000

$ T

hous

and

$0.00

$0.50

$1.00

$0

$500

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20122001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

St T k R d f G th

2011 and 2012 are adjusted EPS. See Non-GAAP reconciliation in Appendix

Strong Track Record of Growth

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Page 25: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Balance Sheet Strength

60%

40%

50%

pita

l

20%

30%

ebt /

Tot

al C

ap

10%

20%

Tota

l D

Current Debt/Cap at 27% LTM Debt / EBITDA at 1.9x

0%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2004 2005 2006 2007 2008 2009 2010 2011 2012

p 25

Strong Free Cash Flow to Reduce Debt

Page 26: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Consistent Cash Flow and Growth Investment

300%$400

Free Cash Flow Capex FCF% of Net Income

200%

250%

$300

$350

150%

200%

$150

$200

$250

50%

100%

$50

$100

$150

.

0%$0 2005 2006 2007 2008 2009 2010 2011 2012

Cash Div($M) $14.7 $16.6 $18.1 $19.4 $21.6 $25.1 $26.8 $30.8

_____________________Note: Free Cash Flow, see Non-GAAP reconciliation in Appendix.

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Page 27: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Investment Thesis

Global Balanced Business Model– “Best in Class” PerformanceBest in Class Performance– Innovative Product Leadership– Operating System Driving Results

A l ti G th D i Accelerating Growth Drivers– Energy Efficiency and New Products– Consistent and Successful Acquirerq– Well Positioned in Emerging Markets– Driving Simplification

Consistent Financial Performance Consistent Financial Performance– Seven Year Sales Growth ≈ 14%– Seven Year TSR ≈ 123% – Consistently Strong Free Cash Flow

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Page 28: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Thank YouMark GliebeChairmanChief Executive Officer

Chuck Hinrichs

Jon SchlemmerChief Operating Officer

Chuck HinrichsVice PresidentChief Financial Officer

J h P iJohn PerinoVice President Investor Relations

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Page 29: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Appendix Non-GAAP Reconciliations

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Fiscal Year

ADJUSTED DILUTED EARNINGS PER SHARE

Quarter Quarter Quarter Quarter Year2012 GAAP Diluted Earnings Per Share $ 1.16 $ 1.49 $ 1.29 $ 0.70 $ 4.64Purchase Accounting Costs 0.01 — — — 0.01Restructuring Costs — 0.01 0.08 0.06 0.15Gain on Disposal of Real Estate (0 02) (0 02)Gain on Disposal of Real Estate (0.02) — — — (0.02)Prior Year Tax Benefit — — (0.05) — (0.05)2012 Adjusted Diluted Earnings Per Share $ 1.15 $ 1.50 $ 1.32 0.76 $ 4.73

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Fiscal Year

2011 GAAP Diluted Earnings Per Share $ 0.99 $ 0.88 $ 1.13 $ 0.80 $ 3.79Acquisition and Purchase Accounting Costs 0.12 0.06 0.28 0.26 0.73Warranty Expense Item — 0.44 — (0.23) 0.19Restructuring Costs — — — 0.10 0.10Gain on Divestiture (0 10) (0 10)

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Gain on Divestiture — — (0.10) — (0.10)2011 Adjusted Diluted Earnings Per Share $ 1.11 $ 1.38 $ 1.31 0.93 $ 4.71

Page 30: Regal Beloit Corporations22.q4cdn.com/.../2013/RBC-Presentation-8-7-2013.pdf · 8/7/2013  · This presentation contains “forward-looking statements” as defined in the Private

Appendix Non-GAAP ReconciliationsADJUSTED DILUTED EARNINGS PER SHARE*

Jun 29, 2013

Jun 30, 2012

Jun 29, 2013

Jun 30, 2012

GAAP Diluted Earnings Per Share 1 13$ 1 49$ 2 22$ 2 65$

Three Months Ended Six Months Ended

GAAP Diluted Earnings Per Share 1.13$ 1.49$ 2.22$ 2.65$ Purchase Accounting Costs — — — 0.01Restructuring Costs 0.02 0.01 0.03 0.01Gain on Disposal of Real Estate — — — (0.02)Retroactive Tax Credit (0 02) (0 04)Retroactive Tax Credit (0.02) — (0.04) —Adjusted Diluted Earnings Per Share 1.13$ 1.50$ 2.21$ 2.65$

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Appendix Non-GAAP Reconciliations

EBITDA Reconciliation

(Dollars in Millions) 1Q 2012 2 Q2012 3Q 2012 4Q 2012 FY 2012(Dollars in Millions) 1Q 2012 2 Q2012 3Q 2012 4Q 2012 FY 2012

Net Income $ 48.7 $ 62.7 $ 54.3 $ 29.9 $ 195.6

Plus: Minority Interest 1.2 1.6 0.9 1.0 4.7

Plus: Taxes 17.8 28.2 17.9 5.7 69.6

Plus: Interest Expense 11.8 11.2 10.6 10.9 44.5

Plus: Interest Income (0.4) (0.4) (0.4) (0.4) (1.6)

Plus: Depreciation 20.1 21.3 20.9 19.7 82.0

Plus: Amortization 10.8 10.9 11.0 11.3 44.0

EBITDA $ 110.0 $ 135.5 $ 115.2 $ 78.1 $ 438.8

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Appendix Non-GAAP Reconciliations

EBITDA Reconciliation

D ll i Milli 3Q 2012 4Q 2012 1Q 2013 2Q 2013 LTMDollars in Millions 3Q 2012 4Q 2012 1Q 2013 2Q 2013 LTM Net Income $54.3 $29.9 $49.5 $51.1 $184.8 Plus: Minority Interest 0.9 1.0 1.2 2.5 5.6 Plus: Taxes 17.9 5.7 15.3 17.9 56.8 Plus: Interest Expense 10.6 10.9 10.6 10.7 42.8 Less: Interest Income (0.4) ‐0.4 ‐0.7 ‐1.1 ‐2.6 Plus: Depreciation 20.9 19.7 20.5 20.7 81.8

Plus: Amortization 11 0 11 3 11 1 11 1 44 5 Plus: Amortization 11.0 11.3 11.1 11.1 44.5 EBITDA $115.2 $78.1 $107.5 $112.9 $413.7

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Appendix Non-GAAP Reconciliations

Free Cash Flow Reconciliation

(Dollars in Millions) 2005 2006 2007 2008 2009 2010 2011 2012

Cash Flow from Operation $ 112.2 $ 93.5 $ 200.6 $ 154.2 $ 314.9 $ 175.4 $ 265.3 $ 351.7

Capital Expenditures (28.3) (52.5) (36.6) (52.2) (33.6) (45.0) (57.6) (91.0)

Grants Received for Capital Expenditures - - - - - - - 8.7

Free Cash Flow $ 83.9 $ 41.0 $ 164.0 $ 102.0 $ 281.3 $ 130.4 $ 207.7 $ 269.4

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Appendix Non-GAAP Reconciliations

Free Cash Flow*Jun 29 Jun 30 Jun 29 Jun 30Three Months Ended Six Months Ended

Jun 29, 2013

Jun 30, 2012

Jun 29, 2013

Jun 30, 2012

GAAP Net Cash Provided by Operating Activities 91.3$ 135.9$ 157.3$ 204.4$ Additions to Property Plant and Equipment (26.6) (25.0) (47.2) (44.8)Free Cash Flow 64 7$ 110 9$ 110 1$ 159 6$

Dollars in Millions

Free Cash Flow 64.7$ 110.9$ 110.1$ 159.6$ Free Cash Flow as a Percentage of Net Income Attributable to Regal Beloit 126.6 % 176.9 % 109.4 % 143.3 %