Regal Beloit Corporation has reported financial results for the third quarter 2014. Net sales for the third quarter 2014 were $829.8 million compared to $768.2 million for the third quarter 2013. Net income for the third quarter 2014 was $47.5 million compared to $52.6 million for the third quarter 2013. Diluted earnings per share for the third quarter 2014 were $1.05 compared to $1.16 for the third quarter 2013. Adjusted diluted earnings per share were $1.15 for the third quarter 2014 compared to $1.18for the third quarter 2013.
"Overall we performed as expected in the third quarter with strong growth in our residential HVAC and mechanical businesses," says Regal Chairman and CEO Mark Gliebe. "During the quarter, we continued to execute on our simplification initiative and we also divested an underperforming joint venture in China. We remain focused on actions to improve our operating profit margins across the company.
"We generated free cash flow of 135% of net income," continues Gliebe. "Additionally, we repurchased 500,000 shares in the quarter. Our strong financial position enables us to both return value to shareholders through share repurchases and pursue strategic acquisitions that add long term value to the company."
Electrical segment net sales in the third quarter 2014 included $42.6 million from businesses acquired within the last year. North American residential HVAC net sales increased 8.4% for the third quarter 2014 compared to the third quarter 2013 driven primarily by improving market conditions and an HVAC OEM pre-build of SEER 13 product. North American commercial and industrial motor net sales decreased 1.3% for the third quarter 2014 compared to the third quarter 2013.
Mechanical segment net sales in North America increased 18.0% for the third quarter 2014 compared to the third quarter 2013, primarily driven by growth in the power transmission distribution channel and the energy end market.
Excluding the impact of the recently acquired businesses, foreign currency exchange rates positively impacted total net sales by 0.1% for the third quarter 2014 compared to the third quarter 2013.
Excluding the impact of the recently acquired businesses, net sales to regions outside the United States for the third quarter 2014 increased 8.2% compared to the third quarter 2013, and represented 35.0% of net sales. In the third quarter 2014, sales of high efficiency products increased 7.0% compared to the third quarter 2013 and represented 21.5% of total net sales.
Electrical segment gross profit for the third quarter 2014 included $3.0 million of restructuring expenses and $1.2 million of purchase accounting adjustments related to the recently acquired businesses. Third quarter 2013 Electrical segment gross profit included $1.2 million of restructuring expenses.
For the third quarter 2014, Electrical segment operating expenses included an incremental $8.3 million from the recently acquired businesses and a $1.9 million loss from the sale of a joint venture in China.
The effective tax rate for the third quarter 2014 was 27.1% compared to 21.6% for the third quarter 2013. The increase was primarily driven by favorable adjustments recorded in 2013 related to the finalization of the 2012 U.S. Federal income tax return and the increase in the Mexican tax rate in 2014.
For the third quarter 2014, net cash provided by operating activities was $81.8 million. For the third quarter 2014, free cash flow represented 135.2% of net income attributable to Regal Beloit. During the third quarter 2014, the company repurchased 500,000 shares of its common stock for a total cost of $35.0 million.
"In the fourth quarter, we expect continued growth in both our HVAC and mechanical businesses and relatively flat performance in our commercial and industrial motor business," continues Gliebe. "In the fourth quarter, we expect diluted earnings per share to be $0.83 to $0.91. Adding back $0.06 of estimated restructuring expenses and $0.01 of purchase accounting adjustments, adjusted diluted earnings per share is expected to be $0.90 to $0.98. Finally, we anticipate 2014 will be the fourth consecutive year that free cash flow exceeds 100% of net income."