Edgar Filing: REGAL BELOIT CORP

Registration No. 333-81968
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

REGAL-BELOIT CORPORATION
(Exact name of registrant as specified in its charter)

Wisconsin 39-0875718
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

Regal-Beloit Corporation
200 State Street
Beloit, Wisconsin 53511-6254
(608) 364-8800
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
-------------------------------------
James L. Packard
Chairman, President and Chief Executive Officer
Regal-Beloit Corporation
200 State Street
Beloit, Wisconsin 53511-6254
(608) 364-8800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------------------------
with a copy to:
Benjamin F. Garmer, III Charles M. Weber
Foley & Lardner Quarles & Brady LLP
777 East Wisconsin Avenue 411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202 Milwaukee, Wisconsin 53202
(414) 271-2400 (414) 277-5000
-------------------------------------

Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
-------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THIS OFFER OR SALE IS NOT PERMITTED.

Subject to Completion - March 7, 2002

[LOGO]

Regal-Beloit Corporation

3,000,000 Shares of Common Stock
-------------------------

We are offering 3,000,000 shares of our common stock. Our common stock is
listed on the American Stock Exchange under the symbol "RBC." The last reported
sale price of our common stock on March __, 2002 was $____ per share.

Investing in our common stock involves risks. See "Risk Factors" on page
7.

Per Share Total
------------- ---------
Public offering price................................ $ $

Underwriting discounts and commissions............... $ $

Proceeds to Regal-Beloit Corporation................. $ $

We have granted the underwriters a 30-day option to purchase up to an
additional 450,000 shares to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

-------------------------

Robert W. Baird & Co.

ABN AMRO Rothschild LLC

CIBC World Markets

, 2002

Outside Gatefold:

We're Best-Known By Our Brands
Ever since Regal-Beloit Corporation was founded in 1955, we've been aggressive
in expanding our presence in key markets. As we've acquired companies, we've
sought to build on their already established brand identities. Thus, most of our
customers know us best by one of our many well-known brand names.

Inside Gatefold - Left Side

Top of page: [Regal-Beloit Logo] "At the Heart of What Drives Your World"

Nine boxes with descriptions of products and major markets served for nine of
our businesses. Pictures of products also included in each box. Aligned as
follows:
Box 1 Box 2 Box 3
Box 4 Box 5 Box 6
Box 7 Box 8 Box 9

Box 1: "Foote Jones/Illinois Gear"; "PRODUCTS: Large-scale parallel shaft and
right-angle gear drives, custom gears up to 100" diameter"; "MAJOR MARKETS:
Mining, pulp and paper, aggregate, forestry, construction"; [Foote
Jones/Illinois Gear Logo]; [Picture of example product]

Box 2: "Regal Cutting Tools"; "PRODUCTS: High-speed steel and carbide rotary
cutting tools"; "MAJOR MARKETS: General industry, aerospace, agriculture,
automotive"; [Regal Cutting Tools Logo]; [Picture of example product]

Box 3: "Grove Gear"; "PRODUCTS: Standard and custom industrial gear reducers";
"MAJOR MARKETS: Material handling, food processing, robotics, healthcare, power
transmission"; [Grove Gear Logo]; [Picture of example product]

Box 4: "Durst"; "PRODUCTS: Standard and specialized industrial transmissions and
hydraulic pump drives"; "MAJOR MARKETS: Construction, agriculture, energy,
material handling, forestry, lawn & garden, and railroad maintenance"; [Durst
Logo]; [Picture of example product]

Box 5: "Marathon Electric"; "PRODUCTS: AC motors (to 800 HP)"; "MAJOR MARKETS:
Power transmissions, HVAC, pumps, fans & blowers, compressors, agriculture,
processing, industrial manufacturing"; [Marathon Electric Logo]; [Picture of
example product]

Box 6: "Richmond Gear"; "PRODUCTS: Ring & pinions and transmissions"; "MAJOR
MARKETS: High-performance automotive aftermarket"; [Richmond Logo]; [Picture of
example product]

Box 7: "Marathon Generators"; "PRODUCTS: AC generators from 5 to 4000 kW";
"MAJOR MARKETS: Standby power, prime power, refrigeration, irrigation, wind
power"; [Marathon Generators Logo]; [Picture of example product]

Box 8: "Opperman Mastergear, Ltd."; "PRODUCTS: Valve actuators and industrial
gear drives"; "MAJOR MARKETS: Material handling, agriculture, mining, liquid and
gas flow control"; [Opperman Mastergear, Ltd. Logo]; [Picture of example
product]

Box 9: "Lincoln Motors"; "PRODUCTS: AC motors (1/4 to 800HP)"; "MAJOR MARKETS:
Industrial and commercial pumps, compressors, HVAC, and specialty products";
[Lincoln Motors Logo]; [Picture of example product]

Inside Gatefold - Right Side

Top of page: [Regal-Beloit Logo] "At the Heart of What Drives Your World"

[Nine boxes with descriptions of products and major markets served for nine of
our businesses. Pictures of products also included in each box. Aligned as
follows:
Box 1 Box 2 Box 3
Box 4 Box 5 Box 6
Box 7 Box 8 Box 9]

Box 1: "Velvet Drive Transmissions"; "PRODUCTS: Marine and industrial
transmissions"; "MAJOR MARKETS: Pleasure boats, off-road vehicles, forestry";
[Velvet Drive Transmissions Logo]; [Picture of example product]

Box 2: "Marathon Special Products"; "PRODUCTS: Fuse holders, terminal blocks and
power blocks"; "MAJOR MARKETS: HVAC, telecommunications, transportation";
[Marathon Special Products Logo]; [Picture of example product]

Box 3: "Mastergear"; "PRODUCTS: Manual valve actuators for liquid and gas flow
control"; "MAJOR MARKETS: Petrochemical processing, fire protection,
wastewater"; [Mastergear Logo]; [Picture of example product]

Box 4: "Electra-Gear"; "PRODUCTS: Specialized aluminum gear reducers and
gearmotors"; "MAJOR MARKETS: Medical equipment, food processing, packaging,
material handling"; [Electra-Gear Logo]; [Picture of example product]

Box 5: "Hub City"; "PRODUCTS: Gear drives, sub-FHP gearmotors, mounted bearings,
and accessories"; "MAJOR MARKETS: Packaging, construction, material handling,
healthcare, food processing"; [Hub City Logo]; [Picture of example product]

Box 6: "Leeson Electric"; "PRODUCTS: AC motors (to 800 HP) and DC motors (to 5
HP), gear reducers, drives, and gearmotors"; "MAJOR MARKETS: Power transmission,
pumps, food processing, fitness equipment, industrial machinery & equipment";
[Leeson Logo]; [Picture of example product]

Box 7: "Ohio Gear"; "PRODUCTS: Gear reducers and gearmotors"; "MAJOR MARKETS:
Material handling, lawn and garden vehicles, food processing"; [Ohio Gear Logo];
[Picture of example product]

Box 8: "CML"; "PRODUCTS: Bevel gear valve actuators"; "MAJOR MARKETS: Oil, gas,
wastewater, water distribution"; [Costruzioni Meccaniche Legnanesi S.r.L Logo];
[Picture of example product]

Box 9: "Thomson Technology Inc."; "PRODUCTS: Automatic transfer switches, power
generation controls and switchgear"; "MAJOR MARKETS: Electrical power
generation"; [Thomson Technology Inc. Logo]; [Picture of example product]

TABLE OF CONTENTS

Page
Forward-Looking Statements.............................................. i
Prospectus Summary...................................................... 1
Risk Factors............................................................ 7
Use of Proceeds......................................................... 10
Price Range of Common Stock and
Dividend Policy...................................................... 11
Capitalization.......................................................... 12
Selected Consolidated Financial Data.................................... 13
Business................................................................ 14
Management's Discussion and Analysis
of Financial Statements.............................................. 22
Management and Board of Directors....................................... 26
Description of Common Stock.......................................... 28
Underwriting............................................................ 30
Where You Can Find More Information..................................... 32
Incorporation of Information by Reference............................... 32
Legal Matters........................................................... 32
Experts................................................................. 32
Index to Historical Consolidated
Financial Statements................................................. F-1

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information that is different
from that contained in this prospectus. We are offering to sell, and seeking
offers to buy, shares of our common stock only in jurisdictions where offers and
sales are permitted. You should assume that the information in this prospectus
is accurate only as of the date of this prospectus.

The underwriters are offering the shares subject to various conditions
and may reject all or part of any order. The shares should be ready for delivery
on or about ___________, 2002 against payment in immediately available funds.

We have registered the following trademarks, which are used in this
prospectus: Regal-Beloit(R), Electra-Gear(R), Mastergear(R), Leeson(R),
Marathon(R), Marathon Electric(R), Marathon Generators(R), Marathon Special
Products(R), Thomson Technology(R) and Velvet Drive(R). We also own the
following trademarks and trade names, which are used in this prospectus: Lincoln
Motors, Hub City, Grove Gear, Durst, Richmond, Ohio Gear, Foote-Jones/Illinois
Gear, New York Twist Drill and Regal Cutting Tools.

FORWARD-LOOKING STATEMENTS

All statements other than statements of historical facts included in this
prospectus, including statements regarding our future financial position,
business strategy, budgets, projected costs and plans and objectives for future
operations included in this prospectus are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements generally can be identified by the use of
forward-looking words such as "may," "will," "expect," "intend," "estimate,"
"anticipate," "believe," or "continue" or words of similar meaning. These
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those anticipated as of the date of this
prospectus. Factors that could cause such a variance are disclosed in the
section "Risk Factors" and elsewhere in this prospectus and include the
following for each of our business segments:

o cyclical downturns affecting the markets for capital goods

o our ability to achieve anticipated synergies in our acquired
businesses

o substantial increases in interest rates that impact the cost of
our outstanding debt o our ability to satisfy various covenant
requirements under our existing credit facility

o the success of our management in increasing sales and maintaining
or improving the operating margins of our businesses

o the availability of or material increases in the costs of select
raw materials or parts

o actions taken by our competitors

We urge you to consider these factors and to review carefully the section
"Risk Factors" for a more complete discussion of the risks of an investment in
our common stock. The forward-looking statements included in this prospectus are
made only as of the date of this prospectus, and we undertake no obligation to
update publicly these statements to reflect subsequent events or circumstances.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere or incorporated
by reference in this prospectus. Because this is a summary, it is not complete
and does not contain all of the information that may be important to you. For a
more complete understanding of us and this offering of our common stock, we
encourage you to read this prospectus in its entirety and the other documents to
which we have referred you. Unless the context requires otherwise, references in
this prospectus to "we," "us" or "our" refer collectively to Regal-Beloit
Corporation and its subsidiaries and references to "EBITDA" refer to our income
from operations plus depreciation and amortization. Unless otherwise stated, the
information contained in this prospectus assumes the underwriters do not
exercise the over-allotment option.

Regal-Beloit Corporation
Overview

During the last five years, our net sales have increased at a compound
annual growth rate of 18.4%, from $285.4 million in 1996 to $663.6 million in
2001. We have historically generated significant profits and cash flow. During
the last five years, our EBITDA as a percentage of net sales, or EBITDA margin,
has averaged 16.9%, and our cumulative cash flow from operations has been $333.3
million. In 2001, despite being adversely affected by the economic recession,
our EBITDA was $87.9 million, our EBITDA margin was 13.2% and our net income was
$19.6 million. Since we acquired Leeson Electric Corporation in September 2000
for $260 million in cash, we have reduced our debt by more than $50 million to
$345.8 million as of December 31, 2001.

Our business is organized in two segments: our electrical group, which
represented 69% of our 2001 net sales, and our mechanical group, which
represented 31% of our 2001 net sales. Our electrical group manufactures and
markets a full line of alternating current (AC) and direct current (DC)
industrial electric motors, electric power generation components and controls,
and electrical connecting devices. Our mechanical group manufactures and markets
a broad array of mechanical products, including gears and gearboxes, marine
transmissions, high-performance automotive transmissions and ring and pinions,
manual valve actuators, and cutting tools. Original equipment manufacturers and
end users in a variety of motion control and other industrial applications
increasingly combine the types of electrical and mechanical products we offer.
We seek to take advantage of this trend and to enhance our market penetration by
leveraging cross-marketing and product line bundling opportunities between
products in our electrical and mechanical groups.

We sell our products directly to original equipment manufacturers and
distributors across many markets. Our two business segments are divided into
multiple business units, with each unit typically having its own branded product
offering and sales organization. These sales organizations consist of varying
combinations of our own internal direct sales people as well as exclusive and
non-exclusive manufacturers' representative organizations. We manufacture the
vast majority of the products that we sell and have manufacturing, sales and
distribution facilities throughout the United States and Canada as well as in
Europe and the Far East.

Our Competitive Strengths

A Leader in Our Major Market Segments. With the acquisitions of Marathon
Electric Manufacturing Corporation in 1997, the Lincoln Motors business of
Lincoln Electric Holdings, Inc. in 1999 and Leeson Electric Corporation in 2000,
we believe we have become one of the largest producers of industrial electric
motors in the United States. We offer more than 5,500 stock models and a wide
assortment of custom AC and DC industrial electric motors ranging in size from
sub-fractional to large integral horsepower. In addition, we believe that we are
the
1

leading electric generator manufacturer in the United States that is not
affiliated with a diesel engine manufacturer. Furthermore, we believe that we
are the leading manufacturer in the United States of worm gear drives and bevel
gear drives.

Comprehensive Product Offering and Leading Brands. We believe we offer
one of the most comprehensive product lines in our markets. This breadth of
product offering enables us to provide a "one-stop shop" for our customers, who
increasingly require complete electrical and mechanical motion control
solutions, including electric motors, gearboxes and drives. Many of our brands
have an extensive history within our industry and are known for their quality,
reliability and performance, including Marathon Electric, Leeson Electric,
Lincoln Motors, Thomson Technology, Hub City, Grove Gear, Mastergear,
Foote-Jones/Illinois Gear, Durst, Electra-Gear, Richmond Gear, Ohio Gear, Velvet
Drive Transmissions and Regal Cutting Tools. We believe that our brand identity
has created customer loyalty and helps us capture additional business, as well
as maintain existing business, particularly as our customers look to procure
equipment from fewer manufacturers.

Multi-Channel/Multi-Brand Distribution Model. We use the strength of each
of our brand names and sales organizations to reach many customers across a
multitude of markets. Each of our business units maintains its own branded
product offering and its own sales and marketing organization. On a combined
basis, our individual business units' sales organizations consist of more than
120 direct sales employees and 430 exclusive and non-exclusive manufacturers'
representatives from 170 organizations as of January 2002. In 2001, across all
of our business units, we sold products to more than 6,500 original equipment
manufacturers and 11,000 distributors.

Rapid Response Capabilities. We focus on providing unparalleled customer
service and the timely delivery of both stock and custom products. Our business
units focus on coordinating their sales, application engineering and
manufacturing capabilities to compress the lead time necessary to produce stock
and, importantly, custom products. In many cases, we have reduced the lead time
for the delivery of custom products from weeks to days or even hours. Our
vertically integrated manufacturing operations, including our own cast iron
foundry and aluminum die casting and steel stamping operations, are an important
element of our rapid response capabilities. In addition, we have an extensive
internal logistics operation that consists of our own fleet of semi-tractors and
semi-trailers and a network of distribution facilities with the capability to
modify stock products to quickly meet specific custom requirements in many
instances. This operation reduces the risk of interruptions in our delivery
schedules, further improves our customer service and response times, and lowers
our overall distribution costs.

Product Development Focus. Each of our business units has its own product
development and design teams that continuously enhance our existing products and
develop new products for our growing base of customers that require custom
solutions. We have one of the electric motor industry's most sophisticated
product development and testing laboratories. We believe these capabilities
provide a significant competitive advantage in the development of high quality
motors and electric generators incorporating leading design characteristics such
as low vibration, low noise, improved safety, reliability and enhanced energy
efficiency. An example of the success of our research and development efforts is
our recently introduced line of microMAXTM AC inverter duty motors, which won
the 2001 "Product of the Year" award in its category from Plant Engineering
magazine.

Broad and Diverse Customer Base. We offer products to customers in dozens
of industries with no significant exposure to any one industry or any one
customer. We distribute our products almost equally to original equipment
manufacturers and distributors, many of whom have different purchasing patterns
and varying sensitivities to changes in the economy. In 2001, no customer
accounted for more than 3% of our net sales, and the top ten customers accounted
for less than 11% of our net sales. In addition, we believe that a portion of
our sales is tied to replacement demand, helping to offset varying demand within
the original equipment manufacturer sector.

Experienced Management Team. Our senior management team has significant
experience in industrial manufacturing, marketing and sales. In addition, this
team is skilled in the acquisition and integration of businesses, aggressive
cost management, and efficient manufacturing techniques, all of which represent
activities that are critical to our long-term growth strategy. Since 1979, our
current management team has completed and successfully integrated 22
acquisitions. We have a proven track record of acquiring complementary
businesses and product lines, integrating their activities into our organization
and aggressively managing their cost structures

to reduce waste and unnecessary expenditures.

Our Business Strategy

We have directed our business strategy, described below, at trends that
influence the markets we serve. These trends include:

o a consolidation of fragmented distribution channels, as companies
seek a single source of supply for their needs

o a growing demand for suppliers that can provide complete
electrical and mechanical motion control solutions

o an increasing need for more technically advanced products

o customer expectations for more rapid turn around times and lower
costs

These trends are contributing to a consolidation in our electrical and
mechanical markets as manufacturers are forced either to become more competitive
or seek stronger partners.

Grow Revenues Organically in Excess of Market Rates. We intend to use our
competitive advantages to grow our market share across all of our product lines.
Our growth initiatives are outlined below:

o Leverage Cross-Marketing and Product Line Bundling Opportunities.
We seek to enhance our market penetration through cross-marketing
and product line bundling opportunities between our business
units. For example, during 2001 we introduced 900 new models of
electric motors into our various distribution channels as a result
of integrating our respective motor offerings. In addition, we
design certain of our drive, motor and gear drive products to
connect to one another so that we can provide a
performance-matched, packaged solution that best suits our
customers' needs.

o Introduce New Products. We are continuing to expand our business
by developing new, differentiated products in each of our business
segments. We work closely with our customers to develop new
products or enhancements to existing products that improve
performance and meet their needs. For example, we have redesigned
more than 50% of our electric motor line to meet the new Premium
Compliant Electric Motor standards of the National Electrical
Manufacturers Association, or NEMA. These redesigned motors offer
increased efficiency that results in significant cost savings for
customers over previous models. In addition, we have recently
introduced many new product lines, including our microMAXTM AC
inverter duty motors, a line of high efficiency, low vibration
severe duty electric motors and large frame 1 1/2to 4 megawatt
electric generators. Furthermore, in 2002, we plan to introduce
various new products, including a line of high efficiency helical
worm, helical bevel and parallel shaft drives. This new line of
drives will complement our existing high efficiency helical
in-line drives and will allow us to compete more effectively in
this growing segment of the gear drive market.

o Capture Custom Product Sales. We will continue to leverage our
rapid response capabilities to capture additional custom product
business. Custom products generally provide higher margins than
stock products because they require additional engineering and
production effort and may involve the delivery of smaller
quantities often within limited timeframes. Our ability to provide
these products within very short lead times strengthens our
relationship with customers and enhances our ability to sell other
custom and stock products to these same customers. In addition, we
believe that some of our competitors may be reluctant to pursue
our existing or new custom product customers because of the
perceived high cost of supporting these customers, duplicating or
creating product designs and producing high quality products
within short timeframes.

o Grow Our Power Generation Business. Our power generation business,
which includes electric generators and other power generation
components and controls, represents a significant and growing
portion of our electrical group net sales. We intend to continue
to seek ways to take advantage of the growing market for prime and
standby power generation in the United States and overseas by
expanding our line

of generators to meet higher and more sophisticated power
generation requirements. With our June 2000 acquisition of Thomson
Technology, Inc., we specifically targeted the emerging power
generation controls market and now offer automatic transfer
switches, paralleling switchgear and controls, and systems
controls. When these control products are bundled with our
Marathon generators, we are able to provide critical components of
a system solution to power generation markets throughout the
world.

Continuously Lower Manufacturing Costs. We have continuously sought ways
to lower costs, enhance product quality, reduce manufacturing inefficiencies and
increase productivity. The major initiatives that we have in process include the
following:

o Complete the Integration of Leeson Electric and Capitalize on
Operating Synergies. At the time of the Leeson Electric
acquisition in September 2000, we targeted and still expect to
achieve cost savings and synergies of at least $12 to $15 million
annually by the end of 2003. Today, we have substantially
integrated Leeson Electric into our business and have begun to
capitalize on the significant operating and financial benefits of
this acquisition. We expect to achieve continued cost savings and
synergies as a result of leveraging raw material purchases,
operational improvements, freight and distribution synergies, and
the cross-selling of our products.

o Further Improve Operational Efficiency. We have a culture that
seeks out and eliminates unnecessary costs at all levels of the
organization and drives continuous improvement in our
manufacturing operations. In 2001, we created, within the
electrical group, our motor technologies group to fully leverage
potential efficiencies across our electric motor operations. This
motor technologies group will centralize and manage the
manufacturing, purchasing, engineering, accounting, information
technology and quality control activities of our Marathon, Lincoln
and Leeson electric motor businesses. Furthermore, the motor
technologies group is specifically fostering the sharing of best
practices across each of the three motor businesses and creating
focused centers of excellence in each of our motor manufacturing
functions.

o Focus on Sourcing and Logistics Opportunities. During the past
decade, we have aggressively pursued global sourcing initiatives,
particularly in the Far East, and now have several strategic
sourcing partners. As a result of our established relationships in
these markets, we sourced more than $33 million of components and
finished products from China in 2001, including castings, machined
parts and a variety of complete motors and generators. We also
have a rapidly growing joint venture in China that manufactures
electric generators. We are currently evaluating various
opportunities to further leverage these relationships. Moreover,
we believe that our internal logistics operation will
significantly reduce costs by allowing us to further capture
backhaul efficiencies, reduce inventory and consolidate freight
costs.

Pursue Strategic Acquisitions. We are a consolidator in our fragmented
markets and will continue to pursue complementary strategic acquisitions to grow
our business. In evaluating potential acquisitions, we focus on opportunities to
broaden our market coverage, expand our customer base, broaden and round out our
product lines, realize operating synergies and enter new markets. We believe
that the current market environment creates a good opportunity to acquire
smaller, complementary businesses or product lines at attractive terms. Our
ability to finance cash acquisitions is currently limited under the terms of our
bank credit agreement. We believe our completion of this offering will enhance
our ability to finance cash acquisitions in the future. Under our credit
agreement, we currently need bank approval before making any single acquisition
for more than $15 million in cash or any acquisitions for more than $30 million
in cash in the aggregate. The credit agreement provides for a release of this
restriction on acquisitions if our ratio of funded debt to EBITDA is below 3.00
to 1 at the end of two consecutive calendar quarters.

Corporate Information

Our principal executive offices are located at 200 State Street, Beloit,
Wisconsin 53511-6254, and our telephone number is (608) 364-8800. Our website
address is www.regal-beloit.com. However, the information contained on our
website is not part of this prospectus.

The Offering

Common stock offered by
Regal-Beloit Corporation................................3,000,000 shares

Common stock to be outstanding after the offering...........23,877,249 shares

Use of proceeds.............................................We expect to use the
net proceeds of the
offering to reduce
debt under our
credit facility.

American Stock Exchange symbol..............................RBC

Risk factors................................................See the section
entitled "Risk
Factors" on page 7
for a discussion of
factors you should
consider carefully
before deciding to
buy our common
stock.

The number of shares of common stock outstanding after this offering is
based on the actual number of shares outstanding as of December 31, 2001, and
excludes:

o 1,460,124 shares of common stock issuable upon exercise of options
outstanding as of December 31, 2001, at a weighted average
exercise price of $18.49 per share; and

o 294,600 shares of common stock available for future grants under
our stock option plans.

The number of shares of common stock offered and to be outstanding
assumes that the underwriters have not exercised their over-allotment option. If
the underwriters exercise their over-allotment option in full, then we will
issue and sell an additional 450,000 shares of our common stock and will have
24,327,249 shares of our common stock outstanding after the offering.

Summary Consolidated Financial Data

We have derived the summary historical financial data as of and for each
of the past five years from our audited consolidated financial statements. You
should read this information together with "Selected Consolidated Financial
Data," "Management's Discussion and Analysis of Financial Statements" and our
consolidated financial statements, including the related Notes to Consolidated
Financial Statements, included elsewhere in this prospectus.

Summary Historical Financial Data

For the Years Ended December 31,
1997(1) 1998 1999 2000(2) 2001
------- ---- ---- ------- ----
(In Thousands of Dollars, Except Shares Outstanding and Per Share Data)
Statement of Income Data:

Net Sales........................ $ 493,174 $ 550,277 $ 550,661 $ 598,203 $ 663,571
Cost of Sales.................... 355,473 396,665 406,493 440,774 497,694
--------- --------- --------- --------- ---------
Gross Profit.................. 137,701 153,612 144,168 157,429 165,877
Operating Expenses............... 63,320 72,499 71,728 85,821 109,817
--------- --------- --------- --------- ---------
Income From Operations........ 74,381 81,113 72,440 71,608 56,060
Interest Expense................. 10,804 11,479 9,406 15,332 22,239
Interest Income.................. 810 306 220 274 221
--------- --------- --------- --------- ---------
Income Before Income Taxes.... 64,387 69,940 63,254 56,550 34,042
Provision For Income Taxes....... 25,490 26,979 25,187 22,779 14,452
--------- --------- --------- --------- ---------
Net Income.................... $ 38,897 $ 42,961 $ 38,067 $ 33,771 $ 19,590
========= ========= ========= ========= =========
Earnings Per Share............... $ 1.87 $ 2.06 $ 1.82 $ 1.61 $ .94
========= ========= ========= ========= =========
Earnings Per Share-Assuming Dilution $ 1.83 $ 2.02 $ 1.80 $ 1.61 $ .93
========= ========= ========= ========= =========
Average Number of Shares
Outstanding................... 20,805,844 20,893,182 20,959,182 20,984,423 20,868,896
========== ========== ========== ========== ==========
Average Number of Shares-Assuming
Dilution...................... 21,275,061 21,278,497 21,169,580 20,996,189 21,124,204
========== ========== ========== ========== ==========
Balance Sheet Data:
Cash and Cash Equivalents....... $ 3,351 $ 3,548 $ 1,729 $ 2,612 $ 6,629
Working Capital................. 100,627 117,305 131,370 185,781 161,044
Total Assets.................... 488,699 485,070 508,165 792,407 746,599
Long-term Debt.................. 192,261 166,218 148,166 393,510 345,667
Shareholders' Investment........ 189,427 224,497 252,626 273,889 280,150

--------------------
(1) Includes the results of Marathon Electric Manufacturing Corporation from
March 26, 1997, the date of its acquisition.

(2) Includes the results of Leeson Electric Corporation from September 29, 2000,
the date of its acquisition.

(3) EBITDA consists of income from operations plus depreciation and
amortization. We have presented EBITDA information solely as a supplemental
disclosure because management believes that it is commonly used as an
analytical indicator and also as a measure of leverage capacity and debt
service ability. EBITDA should not be construed as an alternative to income
from operations as determined in accordance with accounting principles
generally accepted in the United States as an indicator of our operating
performance, or as an alternative to cash flows from operating activities as
determined in accordance with accounting principles generally accepted in
the United States as a measure of liquidity. We have significant uses of
cash flows, including capital expenditures and debt principal repayments,
that are not reflected in EBITDA. It should also be noted that not all
companies that report EBITDA information calculate EBITDA in the same manner
as we do.

RISK FACTORS

You should carefully consider the risk factors set forth below and all
other information contained in this prospectus, including the documents
incorporated by reference, before making a decision to buy our common stock. If
any of the events contemplated by the following risks actually occur, then our
business, financial condition or results of operations could be materially and
adversely affected. As a result, the trading price of our common stock could
decline, and you may lose all or part of your investment.

Cyclicality adversely affects us.

Our business is cyclical and dependent on industrial and consumer
spending and is therefore impacted by the strength of the economy generally,
interest rates and other factors. Economic factors adversely affecting original
equipment manufacturer production and consumer spending could adversely impact
us. During periods of expansion in original equipment manufacturer production,
we generally have benefited from increased demand for our products. Conversely,
during recessionary periods, we have been adversely affected by reduced demand
for our products. Original equipment manufacturer production is currently
experiencing a downturn, which is adversely affecting demand for our products.
This downturn may continue or become more severe. The cyclical nature of our
business is partially offset by replacement demand for our products as well as
the diversity of our customer base.

Our leverage could adversely affect our financial health, make us vulnerable to
adverse economic and industry conditions and prevent us from fulfilling our
obligations under our credit facility.

We have incurred indebtedness that is substantial in relation to our
shareholders' investment. As of December 31, 2001, we had approximately $345.8
million of total debt outstanding and $280.2 million of total shareholders'
investment. Our indebtedness has important consequences. For example, it could:

o make it difficult for us to fulfill our obligations under our
credit facility

o increase our vulnerability to interest rate changes and general
adverse economic and industry conditions

o require us to dedicate a substantial portion of our cash flow from
operations to service our indebtedness, thereby reducing the
availability of our cash flow to finance acquisitions and to fund
working capital, capital expenditures, research and development
efforts and other general corporate activities

o limit our flexibility in planning for, or reacting to, changes in
our business and our markets

o place us at a competitive disadvantage relative to our competitors
that have less debt

A continuing economic recession may impact substantially leveraged companies,
such as us, more than competing companies with less leverage and may have a
material adverse effect on our financial condition, results of operations and
cash flows.

In addition, our credit facility requires us to maintain specified
financial ratios and satisfy certain financial condition tests, which may
require that we take action to reduce our debt or to act in a manner contrary to
our business objectives. At December 31, 2001, we were in compliance with these
ratios and tests. We are specifically subject to a covenant that requires us to
have a ratio of funded debt to trailing 12-month EBITDA that is below the
following: 4.00 to 1 at March 31, 2002; 3.75 to 1 at June 30, 2002; 3.50 to 1 at
September 30, 2002; 3.25 to 1 at December 31, 2002; and 3.00 to 1 at March 31,
2003 and thereafter. Funded debt under our credit agreement is defined as all
indebtedness for borrowed money plus specified debt equivalents, including
capitalized leases. At December 31, 2001, our funded debt was equal to our
long-term debt plus current maturities of long-term debt as reflected on our
balance sheet. If we complete the offering as contemplated, then we believe we
will be in a position to satisfy the financial ratios and tests specified by our
credit agreement for the foreseeable future, absent unexpected changes in
general business and economic conditions. Based on an assumed offering price of
$21.00 per share, we estimate that we will raise approximately $59.2 million of
net proceeds in this offering that we intend to use to pay down our existing
debt. In January 2002, in anticipation that we would not, as of March 31, 2002,
satisfy the required funded debt to EBITDA ratio specified by our credit
agreement if we failed to complete this offering by that date, we amended our
credit facility to provide what we believe to be sufficient relief from the
funded debt covenant through May 30, 2002. If, after May 30,

2002, we fail for any reason to meet the required ratios and tests, then we will
need to seek additional covenant waivers from our lenders or be in default under
our credit agreement. Although we believe that we would be able to obtain
additional covenant relief, if necessary, we cannot assure you that our lenders
would waive any future failure to meet those ratios and tests. If an event of
default under our credit facility occurs, then the lenders could elect to
declare all amounts outstanding under the credit facility, together with accrued
interest, to be immediately due and payable.

Our future success depends on our ability to integrate effectively acquired
companies and manage our growth.

Our growth has placed, and will continue to place, significant demands on
our management and operational and financial resources. Realization of the
benefits of acquisitions often requires integration of some or all of the
acquired companies' sales and marketing, distribution, manufacturing,
engineering, finance and administrative organizations. The integration of the
companies will demand substantial attention from senior management and the
management of the acquired companies. We cannot assure you that we will be able
to integrate successfully our recent acquisitions or any future acquisitions,
that these acquired companies will operate profitably, or that we will realize
the potential benefits from these acquisitions.

We may be adversely impacted by an inability to identify acquisition candidates
and finance acquisitions.

A substantial portion of our growth in the past five years has come
through acquisitions and our growth strategy is based in part upon acquisitions.
We may not be able to identify and successfully negotiate suitable acquisitions,
obtain financing for future acquisitions on satisfactory terms or otherwise
complete acquisitions in the future. Even if we are able to identify acquisition
candidates and otherwise complete future acquisitions, our current leverage may
limit our ability to finance future acquisitions with cash. For example, our
current credit facility limits our ability to borrow funds to finance our
activities, including the financing of future acquisitions. On a pro forma basis
at December 31, 2001, assuming that we are able to raise $59.2 million in net
proceeds in this offering, we would have been entitled to borrow $64.4
million under our amended credit agreement. Limitations on our borrowing
capacity could impact our ability to make future acquisitions or otherwise take
advantage of other business opportunities that may arise.

We operate in highly competitive electric motor, power generation and mechanical
motion control markets.

The electric motor, power generation and mechanical motion control
markets are highly competitive. Some of our competitors are larger and have
greater financial and other resources than we do. In addition, with respect to
certain of our products, we compete with divisions of our original equipment
manufacturer customers. There can be no assurance that our products will be able
to compete successfully with the products of these other companies. Our
competitive position in the markets in which we compete could be adversely
affected by many factors, including, but not limited to, our inability to be
successful in making strategic acquisitions or establishing alliances that will
enable us to expand our global presence. If we are unable to complete these
actions successfully, then our competitive position may be adversely affected.

The failure to obtain new business from new products or to retain or
increase business with redesigned existing or customized products could also
adversely affect our business. It may be difficult in the short-term for us to
obtain new sales to replace any unexpected decline in the sale of existing or
customized products. We may incur significant expense in preparing to meet
anticipated customer requirements, which may not be recovered.

There is substantial and continuing pressure from the major original
equipment manufacturers and larger distributors to reduce costs, including the
cost of products purchased from outside suppliers such as us. If we are unable
to generate sufficient production cost savings in the future to offset price
reductions, then our gross margin could be adversely affected.

We have implemented and Wisconsin law contains anti-takeover provisions that may
adversely affect your rights as a holder of our common stock.

Our articles of incorporation contain provisions that could have the
effect of discouraging or making it more difficult for someone to acquire us
through a tender offer, a proxy contest or otherwise, even though such an
acquisition might be economically beneficial to our shareholders. These
provisions include a board of directors divided into three classes of directors
serving staggered terms of three years each and the removal of directors only
for cause and only with the affirmative vote of a majority of the votes entitled
to be cast in an election of directors. These provisions may make the removal of
management more difficult, even in cases where removal would be favorable to the
interests of our shareholders. See "Description of Common Stock - Certain
Anti-Takeover Provisions."

Each currently outstanding share of our common stock includes, and each
newly issued share of our common stock will include, a common share purchase
right. The rights are attached to and trade with the shares of common stock and
generally are not exercisable. The rights will become exercisable if a person or
group acquires, or announces an intention to acquire, 15% or more of our
outstanding common stock. The rights have some anti-takeover effects and
generally will cause substantial dilution to a person or group that attempts to
acquire control of us without conditioning the offer on either redemption of the
rights or amendment of the rights to prevent this dilution. The rights could
have the effect of delaying, deferring or preventing a change of control. See
"Description of Common Stock - Common Share Purchase Rights."

We are subject to the Wisconsin Business Corporation Law, which contains
several provisions that could have the effect of discouraging non-negotiated
takeover proposals or impeding a business combination. These provisions include:

o requiring a supermajority vote of shareholders, in addition to any
vote otherwise required, to approve business combinations not
meeting adequacy of price standards

o prohibiting some business combinations between us and an
interested shareholder for a period of three years, unless the
combination was approved by our board of directors prior to the
time the shareholder became a 10% or greater beneficial owner of
our shares or under some other circumstances

o limiting actions that we can take while a takeover offer for us is
being made or after a takeover offer has been publicly announced

o limiting the voting power of shareholders who own more than 20% of
our stock

USE OF PROCEEDS

Based on an assumed offering price of $21.00 per share, we estimate that
we will raise approximately $59.2 million of net proceeds in this offering
(assuming no exercise of the underwriters' over-allotment option), after
deducting the underwriting discount and estimated offering expenses payable by
us. We intend to use the net proceeds raised in this offering to repay debt
under our credit facility. The interest rate we pay under our credit facility
varies monthly with the London Interbank Offered Rate, or LIBOR, and our funded
debt to EBITDA ratio. As of December 31, 2001, we had $342.0 million of total
debt outstanding under our credit facility bearing interest at that date at the
rate of 4.2% per annum. The debt outstanding under our credit facility matures
on December 31, 2005.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock is traded on the American Stock Exchange under the
symbol "RBC." The following table sets forth the high and low sale prices of our
common stock as reported by the American Stock Exchange for the stated calendar
quarter.

Price of Common Stock
High Low
Calendar 2000
First Quarter.................................... $ 21.63 $ 16.50
Second Quarter................................... 19.00 15.63
Third Quarter.................................... 17.78 15.25
Fourth Quarter................................... 19.35 14.60
Calendar 2001
First Quarter.................................... $ 22.30 $ 16.40
Second Quarter................................... 21.35 16.10
Third Quarter.................................... 22.50 16.90
Fourth Quarter................................... 22.90 17.05
Calendar 2002
First Quarter (through March ___, 2002).......... $ _____ $ _____

On March ____, 2002, the last reported sale price for our common stock
on the American Stock Exchange was $_____.

In 2000 and 2001, we paid quarterly cash dividends of $0.12 per share on
our common stock.

We have paid cash dividends in each of the preceding 166 quarterly
periods through January 2002. We currently intend to declare and pay dividends
on a regular basis at the current rate. However, the payment and amount of
future dividends is at the discretion of our board of directors and will depend
upon future earnings, capital requirements, our general financial condition,
general business conditions and other factors. In addition, the terms of our
credit agreement restrict our ability to pay quarterly dividends on our common
stock in excess of $0.12 per share. The credit agreement provides for a release
of this dividend restriction if our ratio of funded debt to EBITDA is below 3.00
to 1 at the end of two consecutive calendar quarters.

Our board of directors has declared a quarterly cash dividend of $0.12
per share on our common stock payable April 15, 2002 to shareholders of record
on March 8, 2002. Holders of shares purchased in this offering will not be
entitled to receive this dividend on the purchased shares.

CAPITALIZATION

The following table sets forth our consolidated capitalization as of
December 31, 2001 on an actual basis, and as adjusted to give effect to our sale
of 3,000,000 shares of common stock at an assumed public offering price of
$21.00 per share, after deducting the underwriting discount and estimated
offering expenses and after applying the net proceeds in this offering as we
intend. You should read this table together with "Management's Discussion and
Analysis of Financial Statements," "Description of Common Stock" and our
consolidated financial statements, including the related Notes to Consolidated
Financial Statements, included elsewhere in this prospectus.

As of December 31, 2001
Actual As Adjusted
(dollars in thousands)

Total debt (1).................................... $ 345,787 $ 286,577
========== ========

Shareholders' investment:
Common stock, $.01 par value; 50,000,000
shares authorized; 20,877,249
shares issued and outstanding; 23,877,249
shares issued and outstanding as adjusted.... $ 210 $ 240
Additional paid-in capital...................... 41,967 101,147
Retained earnings............................... 244,564 244,564
Accumulated other comprehensive loss............ (3,864) (3,864)
Treasury stock, at cost, 159,900 shares......... (2,727) (2,727)
---------- --------
Total shareholders' investment............. 280,150 339,360
---------- --------
Total capitalization..................... $ 625,937 $ 625,937
========== ========

--------------------
(1) Total debt includes long-term debt plus current maturities of long-term
debt.

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected historical consolidated financial and other data
presented for the past five years are derived from our historical consolidated
financial data for these periods. You should read the selected financial
information together with "Management's Discussion and Analysis of Financial
Statements" and our consolidated financial statements, including the related
Notes to Consolidated Financial Statements, included elsewhere in this
prospectus (except for the consolidated financial statements as of and for the
years ended December 31, 1997 and 1998, which are not included in this
prospectus).

For the Years Ended December 31,
1997(1) 1998 1999 2000(2) 2001
------- ---- ---- ------- ----
(In Thousands of Dollars, Except Shares Outstanding and Per Share Data)

Statement of Income Data:
Net Sales........................ $ 493,174 $ 550,277 $ 550,661 $ 598,203 $ 663,571
Cost of Sales.................... 355,473 396,665 406,493 440,774 497,694
-------- -------- -------- -------- --------
Gross Profit.................. 137,701 153,612 144,168 157,429 165,877
Operating Expenses............... 63,320 72,499 71,728 85,821 109,817
-------- -------- -------- -------- --------
Income From Operations........ 74,381 81,113 72,440 71,608 56,060
Interest Expense................. 10,804 11,479 9,406 15,332 22,239
Interest Income.................. 810 306 220 274 221
-------- -------- -------- -------- --------
Income Before Income Taxes.... 64,387 69,940 63,254 56,550 34,042
Provision For Income Taxes....... 25,490 26,979 25,187 22,779 14,452
-------- -------- -------- -------- --------
Net Income.................... $ 38,897 $ 42,961 $ 38,067 $ 33,771 $ 19,590
======== ======== ======== ======== ========
Earnings Per Share............... $ 1.87 $ 2.06 $ 1.82 $ 1.61 $ .94
======== ======== ======== ======== ========
Earnings Per Share-Assuming
Dilution...................... $ 1.83 $ 2.02 $ 1.80 $ 1.61 $ .93
======== ======== ======== ======== ========
Average Number of Shares
Outstanding................... 20,805,844 20,893,182 20,959,182 20,984,423 20,868,896
========== ========== ========== ========== ==========
Average Number of Shares -
Assuming Dilution............. 21,275,061 21,278,497 21,169,580 20,996,189 21,124,204
========== ========== ========== ========== ==========
Balance Sheet Data:
Cash and Cash Equivalents....... $ 3,351 $ 3,548 $ 1,729 $ 2,612 $ 6,629
Working Capital................. 100,627 117,305 131,370 185,781 161,044
Total Assets.................... 488,699 485,070 508,165 792,407 746,599
Long-term Debt.................. 192,261 166,218 148,166 393,510 345,667
Shareholders' Investment........ 189,427 224,497 252,626 273,889 280,150

Other Financial Data:
Capital Expenditures............. $ 16,076 $ 14,836 $ 11,422 $ 16,994 $ 15,426
Depreciation and Amortization.... 18,874 22,039 23,052 25,549 31,798
EBITDA(3)........................ 93,255 103,152 95,492 97,157 87,858
--------------------
(1) Includes the results of Marathon Electric Manufacturing Corporation from
March 26, 1997, the date of its acquisition.

(2) Includes the results of Leeson Electric Corporation from September 29, 2000,
the date of its acquisition.

BUSINESS

Our Company

We believe our competitive strengths include our:

o leadership in our major market segments

o comprehensive product offering and leading brands

o multi-channel and multi-brand distribution model

o rapid response capabilities

o product development focus

o broad and diverse customer base

o experienced management team

Our business strategy includes growing revenues organically in excess of
market rates, continuously lowering our manufacturing costs and pursuing
strategic acquisitions. Our specific revenue growth initiatives include:

o leveraging cross-marketing and product line bundling opportunities

o introducing new products

o capturing custom product sales

o growing our power generation business

Major initiatives in process to lower our manufacturing costs include
completing the integration of Leeson Electric and capitalizing on operating
synergies from the acquisition; further improving our operational

efficiencies; and focusing on sourcing and logistics opportunities. We will also
seek to broaden our market coverage by acquiring businesses and product lines
that provide a strategic fit with our existing businesses.

Electrical Group

Our electrical group manufactures and markets a full line of AC and DC
industrial electric motors, electric power generation components and controls,
and electrical connecting devices. We entered the industrial electric motor and
electric power generation markets in March 1997 with our acquisition of Marathon
Electric. Subsequent acquisitions of Lincoln Motors in 1999, Thomson Technology
in 2000 and Leeson Electric in 2000 have been integrated to form our current
electrical group. Our expansion into the electric motor and electric power
generation markets in 1997 was part of our strategy to leverage our core
competencies in industrial manufacturing and to complement our existing
mechanical businesses. We estimate that a substantial portion of the mechanical
motion control products that we manufacture are powered by an electric motor.

Our electrical group manufactures and markets AC and DC industrial
electric motors ranging in size from sub-fractional to large integral
horsepowers through 800 horsepower in AC and from sub-fractional through small
integral horsepowers in DC. We offer approximately 5,500 stock models of
electric motors in addition to the motors we produce to specific customer
specifications. We also produce and market precision servo motors, electric
generators ranging in size from five kilowatts through four megawatts, automatic
transfer switches and paralleling switchgear to interconnect and control
electric power generation equipment and electrical connecting devices such as
terminal blocks, fuse holders and power blocks. Additionally, our electrical
group markets a line of AC and DC adjustable speed drives. We sell our
electrical group products to distributors, original equipment manufacturers and
end users across many markets.

In 2001, we created, within the electrical group, our motor technologies
group to fully leverage potential efficiencies across our electric motor
operations. This motor technologies group will centralize and manage the
manufacturing, purchasing, engineering, accounting, information technology and
quality control activities of our Marathon, Lincoln and Leeson electric motor
businesses. Furthermore, the motor technologies group is specifically fostering
the sharing of best practices across each of the three motor businesses and
creating focused centers of excellence in each of our motor manufacturing
functions.

Our power generation business, which includes electric generators and
power generation components and controls, represents a significant and growing
portion of our electrical group net sales. The market for electric power
generation components and controls is growing as a result of a desire on the
part of end users to reduce losses due to power disturbances. We intend to
continue to seek ways to take advantage of the growing market for prime and
standby power generation in the United States and overseas by expanding our line
of generators to meet higher and more sophisticated power generation
requirements. With our June 2000 acquisition of Thomson Technology, we
specifically targeted the emerging power generation controls market and now
offer automatic transfer switches, paralleling switchgear and controls, and
systems controls. When these control products are bundled with our Marathon
generators, we are able to provide critical components of a system solution to
power generation markets throughout the world.

The following is a description of our major electrical group businesses
and the primary products that they manufacture and market:

Leeson Electric. Manufactures AC motors up to 800 horsepower and DC
motors up to five horsepower, gear reducers, gearmotors and drives primarily for
the power transmission, pump, food processing, fitness equipment and industrial
machinery markets.

Lincoln Motors. Manufactures AC motors from 1/4 horsepower to 800
horsepower primarily for industrial and commercial pumps, compressors, elevator
and machine tools, and specialty products.

Marathon Electric. Manufactures AC motors up to 800 horsepower primarily
for HVAC, pumps, power transmissions, fans and blowers, compressors, agriculture
products, processing and industrial

manufacturing equipment.

Marathon Generators. Manufactures AC generators from five kilowatts to
four megawatts that primarily serve the standby power, prime power,
refrigeration, irrigation and wind power markets.

Marathon Special Products. Manufactures fuse holders, terminal blocks,
and power blocks primarily for the HVAC, telecommunications, electric control
panel, utilities and transportation markets.

Thomson Technology. Manufactures automatic transfer switches, paralleling
switchgear and controls, and systems controls primarily for the electric power
generation market.

Mechanical Group

Our mechanical group manufactures and markets a broad array of mechanical
motion control products and cutting tools. Our products include: standard and
custom worm gear, bevel gear, helical gear and concentric shaft gearboxes;
marine transmissions; high-performance after-market automotive transmissions and
ring and pinions; custom gearing; gearmotors; manual valve actuators and
cutting tools. Our gear and transmission related products primarily control
motion by transmitting power from a source, such as a motor or engine, to an end
use, such as a conveyor belt, usually reducing speed and increasing torque in
the process. Our valve actuators are used primarily in oil and gas, water
distribution and treatment and chemical processing applications. Our high-speed
steel and carbide rotary perishable cutting tools are used in metalworking
applications. Mechanical group products are sold to original equipment
manufacturers, distributors and end users across many industry segments.

The following is a description of our major mechanical group businesses
and the primary products they manufacture and market:

CML (Costruzioni Meccaniche Legananesi S.r.L.). Manufactures bevel gear
valve actuators primarily for the oil, gas, wastewater and water distribution
markets.

Durst. Manufactures standard and specialized industrial transmissions and
hydraulic pump drives primarily for the construction, agriculture, energy,
material handling, forestry, lawn and garden and railroad maintenance markets.

Electra-Gear. Manufactures specialized aluminum gear reducers and
gearmotors primarily for the food processing, medical equipment, material
handling and packaging markets.

Foote-Jones/Illinois Gear. Manufactures large-scale parallel shaft and
right-angle gear drives and custom gears up to 100 inches in diameter primarily
for the mining, oil, pulp and paper, forestry, aggregate, construction and steel
markets.

Grove Gear. Manufactures standard and custom industrial gear reducers
primarily for the material handling, food processing, robotics, healthcare and
power transmission markets.

Hub City. Manufactures gear drives, sub-fractional horsepower gearmotors,
mounted bearings and accessories primarily for the packaging, construction,
material handling, healthcare and food processing markets.

Mastergear. Manufactures manual valve actuators for liquid and gas flow
control primarily for the petrochemical processing, fire protection and
wastewater markets.

New York Twist Drill. Manufactures a full line of industrial quality
cutting tools in high speed steel and carbide primarily for the aerospace,
automotive, railroad and general manufacturing markets.

Ohio Gear. Manufactures gear reducers and gearmotors primarily for the
material handling, lawn and garden vehicle and food processing markets.

Opperman Mastergear, Ltd. Manufactures valve actuators and industrial
gear drives primarily for the material handling, agriculture, mining and liquid
and gas flow control markets.

Regal Cutting Tools. Manufactures high-speed steel and carbide rotary
cutting tools primarily for the aerospace, agriculture, automotive and general
industrial markets.

Richmond Gear. Manufactures ring and pinions and transmissions primarily
for the high-performance automotive aftermarket.

Velvet Drive Transmissions. Manufactures marine and industrial
transmissions primarily for the pleasure boat, off-road vehicle and forestry
markets.

The Building of Our Business

Our growth from our founding as a producer of high-speed cutting tools in
1955 to our current size and status has largely been the result of the
acquisition and integration of 37 businesses to build a strong multi-product
offering. Our senior management has substantial experience in the acquisition
and integration of businesses, aggressive cost management, and efficient
manufacturing techniques, all of which represent activities that are critical to
our long-term growth strategy. Since 1979, our current management team has
completed and successfully integrated 22 acquisitions. We have a proven track
record of acquiring complementary businesses and product lines, integrating
their activities into our organization and aggressively managing their cost
structures to reduce waste and unnecessary expenditures. The history of our
major electrical and mechanical group acquisitions since 1990 is outlined below.

Year Annual Revenues
Business/Product Line Acquired at Acquisition Product Listing at Acquisition
--------------------- -------- --------------- ------------------------------
(in millions)
Electrical Group

Leeson Electric Corporation 2000 $175 AC motors (to 350 horsepower) and DC motors
(to 3 horsepower) gear reducers, gearmotors,
and drives

Thomson Technology, Inc. 2000 $14 Automatic transfer switches, paralleling
switchgear and controls, and systems controls

Lincoln Motors 1999 $50 AC motors (1/4 to 800 horsepower)

Marathon Electric Manufacturing 1997 $245 AC motors (to 500 horsepower), AC generators
Corporation (5 kilowatt to 2.5 megawatt), fuse holders,
terminal blocks and power blocks

Mechanical Group

Spiral bevel gear product line of
Philadelphia Gear 2001 $4 Spiral bevel gears

Velvet Drive Transmissions 1995 $27 Marine and industrial transmissions

Hub City, Inc. 1992 $44 Gear drives, sub-fractional horsepower gearmotors,
mounted bearings and accessories

Opperman Mastergear, Ltd. (U.K.,
U.S. and Germany) 1991 $20 Manual valve actuators and industrial gear drives

Sales, Marketing and Distribution

We sell our products directly to original equipment manufacturers and
distributors across many markets. Our two business segments are divided into
multiple business units, with each unit typically having its own branded product
offering and sales organization. These sales organizations consist of varying
combinations of our own internal direct sales people as well as exclusive and
non-exclusive manufacturers' representative organizations. On a combined basis,
our individual business units' sales organizations consist of more than 120
direct sales employees and 430 exclusive and non-exclusive manufacturers'
representatives from 170 organizations as of January 2002. In 2001, across all
of our business units, we sold products to more than 6,500 original equipment
manufacturers and 11,000 distributors.

We believe that our effective use of information technology significantly
enhances our ability to provide customer focused quality and further
differentiates us from many of our competitors. Our website allows

customers easy access to business and product information, and contains the
latest product introductions, distributor information, installation manuals,
technical bulletins and customer service. For example, through our electrical
group websites, we have an e-commerce portal that provides our independent
manufacturers' representatives, distributors and employees with constant access
to real-time information such as account status, order status, engineering and
competitive information, stock product availability, pricing and order entry. In
addition, customers are able to search our stock catalogs for motor, gearmotor,
drive, part or catalog number.

Markets and Competitors

The overall market for our electrical products is estimated at $8 billion
annually, although we believe that we compete primarily in the industrial sector
of the domestic electric motor market, a $2.5 billion segment of the overall
market. We believe approximately 60% of all electricity generated in the U.S.
runs through electric motors. With the acquisitions of Marathon Electric in
1997, Lincoln Motors in 1999 and Leeson Electric in 2000, we believe we have
become one of the largest producers of industrial electric motors in the United
States and hold a market position in this segment close to Baldor Electric
Company, the current market leader. In addition, we believe that we are the
largest electric generator manufacturer in the United States that is not
affiliated with a diesel engine manufacturer. Major domestic competitors for the
electrical group other than Baldor Electric include U.S. Electrical Motors (a
division of Emerson Electric Co.), Reliance Electric Company (a division of
Rockwell International), General Electric Company and Newage (a division of
Cummins, Inc). Major foreign competitors include Siemens AG, Toshiba
Corporation, Weg S.A., Leroy-Somer, Inc. and ABB Ltd.

Our mechanical group serves various markets and competes with a number of
different companies depending on the particular product offering. We believe
that we are the leading manufacturer of several products offered by our
mechanical group and that we are the leading manufacturer in the United States
of worm gear drives and bevel gear drives. Our competitors in these markets
include Boston Gear (a division of Colfax Corporation), Reliance Electric
Company (a division of Rockwell International), Emerson Electric Co. and
Winsmith (a division of Peerless-Winsmith, Inc.). Major foreign competitors
include SEW Eurodrive GmbH & Co., Flender GmbH, Sumitomo Corporation and Zahnrad
Fabrik GmbH & Co.

During the past several years, niche product market opportunities have
become more prevalent due to changing market conditions. Our markets have also
been impacted by decisions by larger manufacturers not to compete in lower
volume or specialized markets. Other manufacturers, which historically may have
made component products for inclusion in their finished goods, have chosen to
outsource their requirements to specialized manufacturers like us because we can
make these products more cost effectively. In addition, we have capitalized on
this competitive climate by making acquisitions and increasing our manufacturing
efficiencies. Some of these acquisitions have created new opportunities by
allowing us to enter new markets in which we had not been involved. In practice,
our operating units have sought out specific niche markets concentrating on a
wide diversity of customers and applications. We believe that we compete
primarily on the basis of the quality, price, service and our promptness of
delivery.

Product Development and Engineering

Each of our business units has its own product development and design
teams that continuously enhance our existing products and develop new products
for our growing base of customers that require custom solutions. We have one of
the electric motor industry's most sophisticated product development and testing
laboratories. We believe these capabilities provide a significant competitive
advantage in the development of high quality motors and electric generators
incorporating leading design characteristics such as low vibration, low noise,
improved safety, reliability and enhanced energy efficiency. An example of the
success of our research and development efforts is our recently introduced line
of microMAXTM AC inverter duty motors, which won the 2001 "Product of the Year"
award in its category from Plant Engineering magazine.

We are continuing to expand our business by developing new,
differentiated products in each of our business segments. We work closely with
our customers to develop new products or enhancements to existing

products that improve performance and meet their needs. For example, we have
redesigned more than 50% of our electric motor line to meet the new NEMA Premium
Compliant Electric Motor standards. These redesigned motors offer increased
efficiency that results in significant cost savings for customers over previous
models. In addition, we have recently introduced many new product lines,
including a line of AC inverter duty motors, a line of high efficiency, low
vibration severe duty electric motors and large frame 1 1/2 to 4 megawatt
electric generators. Furthermore, in 2002, we plan to introduce various new
products, including a line of high efficiency helical worm, helical bevel and
parallel shaft drives. This new line of drives will complement our existing high
efficiency helical in-line drives and will allow us to compete more effectively
in this growing segment of the gear drive market.

Manufacturing and Operations

Our vertically integrated manufacturing operations, including our own
cast iron foundry and aluminum die casting and steel stamping operations, are an
important element of our rapid response capabilities. In addition, we have an
extensive internal logistics operation that consists of 56 semi-tractors and 90
semi-trailers and a network of distribution facilities with the capability to
modify stock products to quickly meet specific custom requirements in mahy
instances.

We manufacture a majority of the products that we sell but also
strategically outsource components and finished goods to an established global
network of suppliers. Although we have aggressively pursued global sourcing to
reduce our overall costs, we still maintain a dual sourcing capability in our
existing domestic facilities to ensure a reliable supply source for our
customers. Most of our operating units conduct their manufacturing operations
independently in one or more facilities. Our electrical group businesses, other
than Marathon Special Products and Thomson Technology, are operated as part of
our motor technologies group, which also has responsibility for all power
generation operations, including sales and marketing. We regularly invest in
machinery and equipment and other improvements to, and maintenance of, our
facilities. Additionally, we have typically obtained significant amounts of
quality capital equipment as part of our acquisitions, often increasing overall
capacity and capability.

The manufacturing operations of both our electrical group and mechanical
group are highly integrated. Although raw materials and selected parts such as
bearings and seals are purchased, this vertical integration permits us to
produce most of our required component parts when needed. We believe this
results in lower production costs, greater manufacturing flexibility and higher
product quality, as well as reducing our reliance on outside suppliers. Base
materials for our products consist primarily of: steel in various types and
sizes, including bearings and weldments; copper magnet wire; and ferrous and
non-ferrous castings. We purchase our raw materials from many suppliers and,
with few exceptions, do not rely on any single supplier for any of our base
materials.

We have also continued to upgrade our manufacturing equipment and
processes, including increasing our use of computer aided manufacturing systems,
developing our own testing systems, redesigning plant layout and redesigning
products to take full advantage of our more productive equipment and to improve
product flow. We believe that our continued product redesign and efficient plant
layout often provide us with a competitive cost advantage in our manufacturing
operation. Our goal is to be a low cost producer in our core product areas.

Facilities

We have manufacturing, sales and service facilities throughout the United
States and Canada and in Europe and the Far East. Our electrical group currently
operates 38 manufacturing and service and distribution facilities. The
electrical group's present operating facilities contain a total of approximately
2,091,000 square feet of space of which approximately 622,000 square feet are
leased. Our mechanical group currently operates 19 manufacturing and service and
distribution facilities. The mechanical group's present operating facilities
contain a total of approximately 1,530,000 square feet of space of which
approximately 57,000 square feet are leased. Our principal executive offices are
located in Beloit, Wisconsin in an owned approximately 24,000 square foot office
building. We believe our equipment and facilities are well maintained and
adequate for our present needs. The following table provides information
regarding our principal facilities.

Square
Location Footage Status Description of Use
------------------------------------- ----------- ----------- ----------------------------------------

Electrical Group(1)

Wausau, WI 498,000 Owned Manufacturing
Grafton, WI 230,000 Owned Manufacturing
Lebanon, MO 187,000 Owned Manufacturing
Indianapolis, IN 186,000 Leased Warehouse
Lima, OH 107,000 Owned Manufacturing
Blytheville, TX 107,000 Leased Manufacturing
West Plains, MO 100,000 Owned Manufacturing
Black River Falls, WI 83,000 Owned Manufacturing
Lincoln, MO 80,000 Owned Manufacturing
Bowling Green, OH 67,000 Owned Manufacturing
Langley, British Columbia 58,000 Leased Manufacturing
Mississauga, Ontario 58,000 Owned Manufacturing
Niellsville, WI 50,000 Owned Manufacturing
Wausau, WI 36,000 Owned Warehouse
West Plains, MO 33,000 Leased Warehouse
Saukville, WI 30,000 Owned Manufacturing
Grafton, WI 20,000 Leased Manufacturing
Brownsville, TX 18,000 Leased Warehouse

Mechanical Group
Chicago, IL 283,000 Owned Manufacturing
Aberdeen, SD 165,000 Owned Manufacturing
New Bedford, MA 145,000 Owned Manufacturing
Shopiere, WI 132,000 Owned Manufacturing
Liberty, SC 114,000 Owned Manufacturing
Newbury, England 95,000 Owned Manufacturing
Anaheim, CA 89,000 Owned Manufacturing
Union Grove, WI 86,000 Owned Manufacturing
Maxton, NC 83,000 Owned Manufacturing
Mitchell, IN 83,000 Owned Manufacturing
South Beloit, IL 80,000 Owned Manufacturing
South Beloit, IL 45,000 Owned Manufacturing
Loris, SC 43,000 Owned Manufacturing
Brookings, SD 30,000 Owned Manufacturing
Legnano, Italy 19,000 Leased Manufacturing
Oakdale, NY 10,000 Leased Manufacturing
Allentown, PA 10,000 Leased Warehouse
Fort Wayne, IN 10,000 Leased Warehouse
Neu-Anspach, Germany 8,000 Leased Manufacturing

--------------------
(1) In addition, we have 20 service and distribution facilities totaling 143,000
square feet throughout the United States and Canada and in Europe and the Far East.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL STATEMENTS

The following discussion and analysis should be read together with
"Selected Consolidated Financial Data" and our consolidated financial
statements, including the related notes, included elsewhere in this prospectus.

Overview

We are a leading manufacturer and marketer of industrial electric motors,
electric power generation components and controls, mechanical motion control
products, and cutting tools, serving markets predominantly in the United States
as well as throughout the world. Our business is organized in two segments. Our
electrical group manufactures and markets a full line of alternating current
(AC) and direct current (DC) industrial electric motors, electric power
generation components and controls, and electrical connecting devices. Our
mechanical group manufactures and markets a broad array of mechanical products,
including gears and gearboxes, marine transmissions, high-performance automotive
transmissions and ring and pinions, manual valve actuators and cutting tools. We
have grown our business in part during the past several years through a series
of acquisitions, including the acquisitions of the spiral bevel gear product
line of Philadelphia Gear Company in January 2001, Leeson Electric Corporation
in September 2000, Thomson Technology, Inc. in June 2000 and the Lincoln Motors
business of Lincoln Electric Holdings, Inc. in May 1999. See Note 4 of Notes to
Consolidated Financial Statements.

Our business is cyclical and dependent on industrial and consumer
spending and is therefore impacted by the strength of the economy generally,
interest rates and other factors. The economic slowdown that began in mid-2000
and became an economic recession in 2001 was the most significant factor in our
reduced performance in 2001. Our net sales, while reaching a record $663,571,000
in 2001, 10.9% greater than in 2000, were down 11.4% when the impact of the two
acquisitions we made in 2000 is excluded. Net income in 2001 was $19,590,000, a
42.0% reduction from the previous year.

We improved our operating cash flow by more than $29,600,000 in 2001,
primarily as a result of reductions in receivables and inventories. Combined
with cash flow from net income, depreciation, and amortization, we generated
nearly $82,000,000 of operating cash flow in 2001. This enabled us, after
funding capital expenditures and paying shareholder dividends, to reduce our
outstanding total debt by nearly $48,000,000 during 2001.

Results of Operations

2001 versus 2000

Net sales in 2001 were $663,571,000, a 10.9% increase from 2000 net sales
of $598,203,000. Excluding those net sales from the 2000 acquisitions of Leeson
Electric and Thomson Technology necessary for comparability purposes, our 2001
net sales were 11.4% below 2000 net sales. This decrease was primarily due to
reduced sales volumes as a result of the economic recession that impacted both
of our operating groups. Electrical group net sales increased 29.1% to
$456,956,000 in 2001 from $353,954,000 in 2000. Excluding the two acquisitions
we made in 2000, electrical group net sales in 2001 were 8.6% below comparable
2000. Mechanical group net sales decreased 15.4% to $206,615,000 in 2001 from
$244,249,000 in 2000.

Our gross profit increased 5.4% to $165,877,000 in 2001 from $157,429,000
in 2000. Gross profit as a percentage of net sales (gross profit margin)
declined to 25.0% in 2001 from 26.3% in 2000 due primarily to lower production
volumes resulting from decreasing sales and planned inventory reductions and to
increased price competition. Income from operations declined 21.7% to
$56,060,000 in 2001, or 8.4% of net sales, from $71,608,000, or 12.0% of net
sales, in 2000. The decrease in income from operations as a percentage of net
sales (operating income margin) was due to a combination of the decrease in
gross profit margin and an increase in operating expenses as a percentage of net
sales to 16.5% in 2001 from 14.3% in 2000. The increase in operating expenses as
a percentage of net sales was due primarily to the fact that Leeson Electric
selling expenses, as a percentage of net sales, were greater than those we have
historically incurred. In addition, a large part of our

operating expenses are relatively fixed and our goodwill amortization increased
by $3.4 million in 2001. Electrical group operating income margin decreased to
8.8% in 2001 from 11.5% in 2000 and mechanical group operating income margin
declined to 7.7% in 2001 from 12.6% in 2000. The decrease in electrical group
operating income margin was due primarily to the increase in operating expenses
as a percentage of net sales described above. The decrease in mechanical group
operating income margin resulted from a combination of higher operating expenses
as a percentage of net sales and to a lower 2001 gross profit margin. See Note
10 of Notes to Consolidated Financial Statements.

Interest expense increased to $22,239,000 in 2001 from $15,332,000 in
2000, primarily as a result of debt incurred to finance our acquisition of
Leeson Electric at the end of September 2000. Interest expense decreased
steadily by quarter in 2001, due to declining interest rates and as a result of
our reducing total debt by nearly $48,000,000 during 2001. The average rate of
interest we paid on outstanding debt in 2001 was 5.9% as compared to 7.4% in
2000. Because our income before income taxes decreased in 2001 from 2000, the
impact of non-deductible goodwill amortization resulted in an increase in our
effective tax rate in 2001 to 42.5% of income before income taxes from 40.3% in
2000.

Net income decreased 42.0% to $19,590,000 in 2001 from $33,771,000 in
2000. As a percentage of net sales, net income decreased to 3.0% in 2001 from
5.6% in 2000. Basic earnings per share were $.94 and diluted earnings per share
were $.93 in 2001, as compared to $1.61 (both basic and diluted) in 2000,
representing a 41.6% and 42.2% decrease, respectively.

2000 versus 1999

Our net sales increased 8.6% to $598,203,000 in 2000 from $550,661,000 in
1999. Electrical group net sales increased 19.7% to $353,954,000 in 2000 from
$295,694,000 in 1999. This increase reflects a full year of sales from Lincoln
Motors, which we acquired in 1999. Excluding the Leeson Electric and Thomson
Technology acquisitions, the increase in 2000 from 1999 was 3.8%. Mechanical
group net sales decreased 4.2% to $244,249,000 in 2000 from $254,967,000 in
1999. This decrease was due primarily to broad-based weakness in the
agriculture, transportation, marine, construction equipment and industrial
machinery markets, particularly in the second half of 2000. We consider the
diversity of markets served by our two operating groups as a key asset; however,
new product introductions and increased market penetration achieved in 2000 did
not offset the broad-based market slowdown.

All net sales, cost of sales and operating expenses have been restated to
reflect the required accounting change, adopted October 1, 2000, for shipping
and handling billings and costs. As a result of this accounting change, 2000 net
sales increased $7,919,000, cost of sales increased $17,930,000, and operating
expenses decreased $10,011,000. Similarly, 1999 net sales increased $6,029,000,
cost of sales increased $13,321,000 and operating expenses decreased $7,292,000.
This change had no impact on net income or income from operations in any period.
All prior periods have been restated to reflect this accounting change.

Gross profit increased 9.2% to $157,429,000 in 2000 from $144,168,000 in
1999. As a percentage of net sales, gross profit margin of 26.3% in 2000 was
slightly higher than 26.2% in 1999. Income from operations decreased 1.1% to
$71,608,000 in 2000, or 12.0% of net sales, from $72,440,000, or 13.2% of net
sales, in 1999. The decrease in operating income margin was due to an increase
in operating expenses as a percentage of net sales to 14.3% in 2000 from 13.0%
in 1999. The increased percentage resulted primarily from higher selling
expenses during 2000 and to Leeson Electric's selling expenses as a percentage
of net sales being greater than those we have historically incurred. Electrical
group operating income margin decreased to 11.5% in 2000 from 12.4% in 1999,
while the mechanical group operating income margin declined to 12.6% in 2000
from 14.0% in 1999. The operating income margin decrease in the electrical group
resulted primarily from increased selling expenses as a percentage of net sales,
which were partly offset by improvement in gross profit margin from 1999.
Favorable product mix of sales and improved manufacturing productivity enabled
the electrical group to more than offset the impact of higher manufacturing
costs in 2000. The mechanical group decrease was primarily due to a combination
of lower sales volume, higher raw material, fuel and labor costs, reduced
production levels and higher selling expenses as a percentage of net sales.

Interest expense increased 63.0% to $15,332,000 in 2000 from $9,406,000
in 1999, virtually all as a result of the Leeson Electric acquisition. The
higher interest expense was due to a combination of borrowing approximately
$260,000,000 to finance the Leeson Electric acquisition, an increase in the
interest rate paid on virtually all our debt from 6.9% to 7.9% effective
September 29, 2000 and increases during the first half of 2000 in the London
Interbank Offered Rate, or LIBOR, the rate upon which the interest rate we pay
is based. The average rate of interest we paid on outstanding debt in 2000 was
7.4% as compared to 5.6% in 1999. Our effective tax rate in 2000 increased to
40.3% of income before taxes from 39.8% in 1999. The increase was due primarily
to miscellaneous foreign tax-related items in 2000.

Net income decreased 11.3% to $33,771,000 in 2000 from $38,067,000 in
1999. Net income as a percentage of net sales decreased to 5.6% in 2000 from
6.9% in 1999. The reduced percentage was due in part to the impact on the fourth
quarter of the Leeson Electric acquisition, which added net sales but was
approximately neutral to net income as we had expected, and in part to lower
earnings in 2000 from our other operations. Basic and diluted earnings per share
in 2000 were $1.61, 11.5% and 10.6% below, respectively, 1999's basic earnings
per share of $1.82 and diluted earnings per share of $1.80.

Liquidity and Capital Resources

Our working capital decreased 13.3% to $161,044,000 at December 31, 2001
from $185,781,000 at December 31, 2000. The decrease resulted primarily from an
aggregate reduction of more than $33,000,000 in our receivables and inventories
in 2001. The reduction in our receivables was due primarily to the impact of the
U.S. economic recession on our sales volume and operations and occurred
primarily in the fourth quarter of 2001. The decrease in inventories was due in
part to planned reductions in production levels and was made primarily in the
first nine months of 2001. Despite the reduction in our working capital, our
current ratio at December 31, 2001 remained substantially the same as it was at
December 31, 2000.

Cash flow from operations increased 57.0% to $81,769,000 in 2001 from
$52,089,000 in 2000. The major factors contributing to the increased operating
cash flow were $16,673,000 from reduced receivables and $17,014,000 from reduced
inventories. Cash flow used in investing activities was $18,246,000 in 2001 and
$285,020,000 in 2000. The 2000 investing activities included the acquisition of
Leeson Electric. In 2001, capital expenditures were $15,426,000 compared to
$16,994,000 in 2000. The capital expenditure figures in any year do not include
the amounts of property, plant and equipment obtained in connection with our
acquisitions. Such capital additions are included as part of acquisition costs
under the heading "Business acquisitions" in the Consolidated Statements of Cash
Flows. We currently expect capital expenditures for 2002 to be approximately
$20,000,000, although our commitments for property, plant and equipment as of
December 31, 2001 were $431,000. We believe that our present facilities,
augmented by planned capital expenditures, are sufficient to provide adequate
capacity for our operations in 2002. Cash flow used in financing activities in
2001 totaled $59,474,000, of which $48,598,000 on a net basis was used to repay
debt, $10,022,000 was used to pay shareholder dividends and $1,042,000 was used
in January 2001 to repurchase 60,700 shares of our common stock at a weighted
average purchase price of $17.17 per share. We have not repurchased any shares
of our common stock since January 2001.

Our primary financing source is our $375,000,000 long-term revolving
credit facility that expires on December 31, 2005. Based on our anticipated
borrowing needs, we reduced in 2001 the availability under the credit facility
from its initial level of $450,000,000. If we complete this offering, the
maximum amount of our credit facility will be further reduced to $350,000,000.
During August 2001, we also amended our credit facility to revise certain
financial and other covenants, which resulted in an increase to the interest
rate we currently pay under the credit facility. Our credit facility requires us
to maintain specified financial ratios and to satisfy certain financial
condition tests. We were in compliance with all of these ratios and tests as of
December 31, 2001. If we complete this offering, we believe we will be able to
satisfy the financial ratios and tests specified by our credit facility for the
foreseeable future, absent unexpected changes in general business and economic
conditions. In January 2002, in anticipation that we would not, as of March 31,
2002, satisfy the required funded debt to EBITDA ratio specified by our credit
agreement if we did not complete this offering by that date, we amended our
credit facility to provide what we believe to be sufficient relief from the

funded debt covenant through May 30, 2002. If, after May 30, 2002, we fail for
any reason to meet the required ratios and tests, then we will need to seek
additional covenant waivers from our lenders or be in default under our credit
agreement. Although we believe that we would be able to obtain additional
covenant relief, if necessary, we cannot assure you that our lenders would waive
any future failure to meet those ratios and tests. If an event of default under
our credit facility occurs, then the lenders could elect to declare all amounts
outstanding under the credit facility, together with accrued interest, to be
immediately due and payable.

At December 31, 2001, we had, after deducting approximately $2,800,000 of
standby letters of credit, $30,200,000 of available borrowing capacity. We
believe that the combination of borrowing availability under our credit
facility, operating cash flow and our ability to access other financial markets
and to obtain any additional covenant waivers under the credit facility if
needed will provide sufficient cash availability to finance our existing
operations for the foreseeable future. Our outstanding total debt of
$345,787,000 at December 31, 2001 reflected a reduction of $47,829,000 from
$393,616,000 at December 31, 2000. The debt reduction was due primarily to the
application of cash generated from operations by the above-mentioned receivables
and inventory reductions. See Note 5 of Notes to Consolidated Financial
Statements.

As a result of our capital structure, we are exposed to interest rate
risk. Virtually all of our debt is under a credit facility with a variable
interest rate based on a margin above LIBOR. As a result, interest rate changes
impact our future earnings and cash flows assuming other factors are constant. A
hypothetical 10% change in our weighted average borrowing rate on the
outstanding debt at December 31, 2001, would result in a change in after-tax
annual earnings of approximately $900,000. We have no material foreign currency
rate risk. In addition, we do not have any material derivative instruments.

Recent Accounting Pronouncements

On June 30, 2001, the Financial Accounting Standards Board finalized
Statements of Financial Accounting Standards No. 141, "Business Combinations",
and No. 142, "Goodwill and Other Intangible Assets". Statement No. 141 requires
all business combinations initiated after June 30, 2001 to use the purchase
method of accounting. Under the requirements of Statement No. 142, intangible
assets meeting specific criteria will be separately identified from goodwill
acquired in future acquisitions and amortized over their individual useful
lives. Also, our existing goodwill at June 30, 2001 will no longer be amortized,
effective January 1, 2002. This will eliminate approximately $8,400,000 of
annual goodwill amortization and have a favorable annual impact on net income of
approximately $6,700,000. As of December 31, 2001, we had goodwill on our
balance sheet of $312,735,000, relating to our acquisitions of Leeson Electric,
Marathon Electric and, to a lesser extent, Thomson Technology. The amount of
goodwill constituted approximately 42.0% of our total assets. An assessment of
fair value will be used to test for impairment of goodwill on an annual basis or
when circumstances indicate a possible impairment. We have not yet determined
what the effect of these tests will be on our earnings and financial position,
however we do not expect the impact to be material.

Additionally, Statement No. 143, "Asset Retirement Obligations", and
Statement No. 144, "Impairment or Disposal of Long-Lived Assets", have been
issued by the FASB. Adoption of these Statements on January 1, 2002 will not
have a material adverse effect on our consolidated financial statements.

MANAGEMENT AND BOARD OF DIRECTORS

The following table sets forth information as of December 31, 2001
concerning our executive officers and directors. All of our officers serve
terms of one year and until their successors are elected and qualified. Our
board of directors is divided into three classes, with three directors in each
class serving staggered terms of three years each and until their successors are
elected and qualified.

Name Age Position Business Experience and Principal Occupation
---- --- -------- --------------------------------------------

James L. Packard............. 59 Chairman, President Elected Chairman in 1986; Chief Executive Officer since
and Chief Executive 1984; President since 1980; joined the company in 1979
Officer

Henry W. Knueppel............ 53 Executive Vice Elected Executive Vice President in 1987; from
President and September, 1997 until December 1999, he also served as
Director President of the Company's Marathon Electric
Manufacturing Corporation Subsidiary

Kenneth F. Kaplan............ 56 Vice President, Joined Company in September, 1996; elected Vice President,
Chief Financial Chief Financial Officer in October, 1996 and Secretary in
Officer and Secretary April, 1997; previously employed by Gehl Company, West
Bend, Wisconsin, as Vice President-Finance and Treasurer
from 1987

David L. Eisenreich.......... 58 Vice President and Elected Vice President and named President of Motor Technologies
President, Motor Group in 2001; Senior Vice President of Operations at Marathon
Technologies Group Electric from 1997 until 2001; former Senior Vice President of
Administration, Vice President of Administration and Vice
President of Corporate Industrial Relations at Marathon Electric

Gary M. Schuster............. 46 Vice President and Elected Vice President and named President of Mechanical
President, Mechanical Components Group in 2001; Vice President of Manufacturing at
Components Group Marathon Electric from 1999 until 2001; Vice President and General
Manager and Manager at Lincoln Electric from 1978 until 1999

Fritz Hollenbach............. 47 Vice President, Named Vice President, Administration and Human Resources in
Administration and 2001; Vice President Human Resources in Mechanical Group
Human Resources from 1994 until 2001; Human Resource Manager at Foote-Jones/
Illinois Gear from 1991 until 1994; Human Resource Manager
at Cutting Tools from 1987 until 1991

Frank E. Bauchiero........... 67 Director President and CEO, MKC WorldWide; former President and CEO,
Walbro Corporation; former President, Industrial, Dana North
America; Director, Rockford Products Corporation, M&I Bank
South and Madison-Kipp Corporation

J. Reed Coleman.............. 68 Director Chairman, MKC WorldWide; Chairman and Director, Madison-Kipp
Corporation; Director, Xeruca Corp. and NIBCO, Inc.

John M. Eldred............... 71 Director Chairman and Director, The First National Bank & Trust
Company of Beloit

Stephen N. Graff............. 67 Director Retired Milwaukee Office Managing Partner, Arthur Andersen
LLP and Andersen Worldwide S.C.; Director, Northwestern Mutual
Series Fund, Inc., Mason Street Funds, Inc., Northwestern
Mutual Life Insurance Co., Northwestern Mutual Trust Company,
Super Steel Schenectady, Inc., and Super Steel Products
Corporation

Paul W. Jones................ 53 Director Chairman, President and CEO, U.S. Can Company; former
President and CEO, Greenfield Industries, Inc.; Director,
Federal Signal Corporation

G. Frederick Kasten, Jr...... 63 Director Chairman and Director, Robert W. Baird & Co. Incorporated

John A. McKay................ 68 Director Former President and COO, Harnischfeger Industries, Inc.;
Director, The First National Bank & Trust Company of Beloit
and Reserve Properties, Inc.

DESCRIPTION OF COMMON STOCK

Our articles of incorporation provide that we have authority to issue
50,000,000 shares of common stock.

The following summary of some provisions of our common stock is not
complete. You should refer to our articles of incorporation and our rights
agreement, which are incorporated by reference as exhibits to the registration
statement of which this prospectus is a part, and applicable law for more
information.

Common Stock

All of the issued and outstanding shares of our common stock are fully
paid and nonassessable, and the shares of common stock being sold by us will,
upon completion of the offering, be fully paid and nonassessable, except in each
case for statutory liability under Section 180.0622(2)(b) of the Wisconsin
Business Corporation Law for unpaid employee wages.

Our common stock is entitled to such dividends as may be declared from
time to time by our board of directors in accordance with applicable law. Our
ability to pay dividends is dependent upon a number of factors, including our
future earnings, capital requirements, general financial condition, general
business conditions and other factors.

Except as provided under Wisconsin law, only the holders of common stock
will be entitled to vote for the election of members to our board of directors
and on all other matters. Holders of our common stock are entitled to one vote
per share of common stock held by them on all matters properly submitted to a
vote of shareholders, subject to Section 180.1150 of the Wisconsin Business
Corporation Law. See "-Statutory Provisions." Shareholders have no cumulative
voting rights, which means that the holders of shares entitled to exercise more
than 50% of the voting power are able to elect all of the directors to be
elected. Our board of directors is divided into three classes, with staggered
terms of three years each.

All shares of common stock are entitled to participate equally in
distributions in liquidation. Holders of common stock have no preemptive rights
to subscribe for or purchase our shares. There are no conversion rights, sinking
fund or redemption provisions applicable to our common stock. We do not have the
authority to issue any shares of preferred stock.

The transfer agent for our common stock is Equiserve (Fleet National Bank
c/o Equiserve, P.O. Box 43010, Providence, Rhode Island 02940-3010; Investor
Relations Telephone Number 781-575-3400).

Common Share Purchase Rights

We have entered into a rights agreement pursuant to which each
outstanding share of our common stock, including those shares being sold by us
pursuant to this prospectus, has attached a right to purchase one-half of one
share of our common stock. Each share of our common stock subsequently issued by
us prior to the expiration of the rights agreement will likewise have attached a
right. Under circumstances described below, the rights will entitle the holder
of the rights to purchase additional shares of our common stock. In this
prospectus unless the context requires otherwise, all references to our common
stock include the accompanying rights.

Currently, the rights are not exercisable and trade with our common
stock. If the rights become exercisable, then each full right, unless held by a
person or group that beneficially owns more than 15% of our outstanding common
stock, will initially entitle the holder to purchase one-half of one share of
our common stock at a purchase price of $60 per full share, or $30 per half
share, subject to adjustment. The rights will become exercisable only if a
person or group has acquired, or announced an intention to acquire, 15% or more
of our outstanding common stock. Under some circumstances, including the
existence of a 15% acquiring party, each holder of a right, other than the
acquiring party, will be entitled to purchase at the right's then-current
exercise price, shares of our common stock having a market value of two times
the exercise price. If another corporation

acquires us after a party acquires 15% or more of our common stock, then each
holder of a right will be entitled to receive the acquiring corporation's common
shares having a market value of two times the exercise price. The rights may be
redeemed at a price of $0.001 until a party acquires 15% or more of our common
stock and, after that time, may be exchanged for one share of our common stock
per right until a party acquires 50% or more of our common stock. The rights
expire on January 28, 2010, subject to extension. Under the rights agreement,
our board of directors may reduce the thresholds applicable to the rights from
15% to not less than 10%. The rights do not have voting or dividend rights and,
until they become exercisable, have no dilutive effect on our earnings.

Certain Anti-Takeover Provisions

Under our articles of incorporation, our board of directors is divided
into three classes of directors serving staggered terms of three years each.
Each class is to be as nearly equal in number as possible, with one class being
elected each year. Our articles of incorporation also provide that:

o directors may be removed from office only for cause and only with
the affirmative vote of a majority of the votes entitled to be
cast at an election of directors;

o any vacancy on the board of directors or any newly created
directorship may be filled by the remaining directors then in
office, though less than a quorum; and

o our shareholders have no cumulative voting rights, which means
that the holders of shares of our common stock are entitled to
exercise more than 50% of the voting power are able to elect all
of the directors to be elected.

Statutory Provisions

Section 180.1150 of the Wisconsin Business Corporation Law provides that
the voting power of shares of public Wisconsin corporations such as us held by
any person or persons acting as a group in excess of 20% of our voting power is
limited to 10% of the full voting power of those shares, unless full voting
power of those shares has been restored pursuant to a vote of shareholders.
Sections 180.1140 to 180.1144 of the Wisconsin Business Corporation Law contain
some limitations and special voting provisions applicable to specified business
combinations involving Wisconsin corporations such as us and a 10% shareholder,
unless the board of directors of the corporation approves the business
combination or the shareholder's acquisition of shares before these shares are
acquired. Similarly, Sections 180.1130 to 180.1133 of the Wisconsin Business
Corporation Law contain special voting provisions applicable to some business
combinations involving public Wisconsin corporations, unless specified minimum
price and procedural requirements are met. Following commencement of a takeover
offer, Section 180.1134 of the Wisconsin Business Corporation Law imposes
special voting requirements on share repurchases effected at a premium to the
market and on asset sales by the corporation, unless, as it relates to the
potential sale of assets, the corporation has at least three independent
directors and a majority of the independent directors vote not to have the
provision apply to the corporation.

UNDERWRITING

Under an underwriting agreement dated March , 2002, we have agreed
to sell to the underwriters named below the indicated numbers of shares of our
common stock:
Number
Underwriter of Shares

Robert W. Baird & Co. Incorporated............................
ABN AMRO Rothschild LLC.......................................
CIBC World Markets Corp.......................................
---------
Total............................................... 3,000,000
=========

The underwriting agreement provides that the underwriters are obligated
to purchase all the shares of our common stock in the offering if any are
purchased, other than those shares covered by the over-allotment option we
describe below. The underwriting agreement also provides that if an underwriter
defaults, the purchase commitments of non-defaulting underwriters may be
increased or this offering of our common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a
pro-rata basis up to 450,000 additional shares from us at the public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of our common stock.

The underwriters propose to offer the shares of our common stock
initially at the public offering price on the cover page of this prospectus and
to selling group members at that price less a selling concession of up to $ per
share. The underwriters and selling group members may allow a discount of $ per
share on sales to other broker/dealers. After the offering, the representatives
may change the public offering price and concession and discount to
broker/dealers. As used in this section:

o Underwriters are securities broker/dealers that are parties to the
underwriting agreement and will have a contractual commitment to
purchase shares of our common stock from us, and the
representatives are the three firms acting on behalf of the
underwriters.

o Selling group members are securities broker/dealers to whom the
underwriters may sell shares of our common stock at the public
offering price less the selling concession above, but who do not
have a contractual commitment to purchase shares from us.

o Broker/dealers are firms registered under applicable securities
laws to sell securities to the public.

o The syndicate consists of the underwriters and the selling group
members.

The following table summarizes the compensation and estimated expenses we
will pay. The compensation we will pay to the underwriters will consist solely
of the underwriting discount, which is equal to the public offering price per
share of common stock less the amount the underwriters pay to us per share of
common stock. The underwriters have not received and will not receive from us
any other item of compensation or expense in connection with this offering
considered by the National Association of Securities Dealers, Inc. to be
underwriting compensation under its rules of fair practice.

Per share Total
Without With Without With
over-allotment over-allotment over-allotment over-allotment

Underwriting discounts and
commissions paid by us................ $ $ $ $
Expenses payable by us................... $ $ $ $

We have agreed to pay all of the expenses in connection with this
offering. The principal components of the offering expenses payable by us will
include the fees and expenses of our accountants and attorneys, the fees of our
registrar and transfer agent, the cost of printing this prospectus, the American
Stock Exchange listing fees and filing fees paid to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc.

We and our directors and key officers have agreed not to offer, sell,
transfer, pledge, contract to sell, transfer or pledge, or file with the
Securities and Exchange Commission a registration statement under the Securities
Act of 1933, as amended, relating to any additional shares of our common stock
or securities convertible into or exchangeable or exercisable for any of shares
of our common stock without the prior written consent of Robert W. Baird & Co.
Incorporated for a period of 90 days after the date of this prospectus, except
that these restrictions will not apply to our ability to grant employee or
director stock options under the terms of stock option plans in effect on the
date of this prospectus or to issue our common stock upon any exercise of these
options. The restrictions will also not apply to transfers by our directors and
key officers by gift, will or intestacy so long as the transferee agrees not to
make further transfers of the shares during the 90-day period.

We have agreed to indemnify the underwriters against liabilities under
the Securities Act of 1933, as amended, or to contribute to payments that the
underwriters may be required to make in that respect.

The shares of our common stock are traded on the American Stock Exchange
under the symbol "RBC."

Some of the underwriters and their affiliates have provided, and may
provide in the future, advisory and investment banking services to us, for which
they have received and would receive customary compensation.

G. Frederick Kasten, Jr., the Chairman and a director of Robert W. Baird
& Co. Incorporated (an underwriter of this offering), is one of our directors.

The representatives on behalf of the underwriters may engage in
over-allotment transactions, stabilizing transactions and syndicate covering
transactions in accordance with Regulation M under the Securities Exchange Act
of 1934, as amended.

o Over-allotment involves sales by the underwriters of shares in
excess of the number of shares the underwriters are obligated to
purchase, which creates a syndicate short position.

o Stabilizing transactions permit bids to purchase shares of our
common stock so long as the stabilizing bids do not exceed a
specified maximum.

o Syndicate covering transactions involve purchases of our common
stock in the open market after the distribution has been completed
to cover syndicate short positions.

o The representatives may, at their discretion, reclaim a selling
concession from any syndicate member that appears to have
permitted its customers to purchase shares in the public offering
and then promptly resell all or a portion of such shares to that
syndicate member. However, the underwriters do not have any
agreements with any potential purchasers of shares of common stock
in this offering that would restrict their transfer of such shares
following this offering.

These stabilizing transactions and syndicate covering transactions may
cause the price of our common stock to be higher than the price that might
otherwise exist in the open market. These transactions may be effected on the
American Stock Exchange or otherwise and, if commenced, may be discontinued at
any time.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other
information with the SEC. We have also filed a registration statement on Form
S-3, including exhibits, under the Securities Act of 1933 with respect to the
common stock offered by this prospectus. This prospectus is a part of the
registration statement, but does not contain all of the information included in
the registration statement or the exhibits. You may read and copy the
registration statement and any other document that we file at the SEC's public
reference rooms at 450 Fifth Street, N.W., Washington D.C., and at regional SEC
offices in Chicago, Illinois. You can call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. You can also find
our public filings with the SEC on the Internet at a web site maintained by the
SEC located at http://www.sec.gov.

We are "incorporating by reference" specified documents that we file with
the SEC, which means:

o incorporated documents are considered part of this prospectus

o we are disclosing important information to you by referring you to
those documents

o information we file with the SEC will automatically update and
supersede information contained in this prospectus

INCORPORATION OF INFORMATION BY REFERENCE

We incorporate by reference the documents we list below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus and before the
end of the offering of our common stock:

o our Annual Report on Form 10-K for the year ended December 31,
2000

o our Quarterly Reports on Form 10-Q for the quarters ended March
31, 2001, June 30, 2001, and September 30, 2001

o our Current Reports on Form 8-K dated January 29, 2002,
February 1, 2002 and February 11, 2002

o the description of our common stock contained in our Registration
Statement on Form 8-B, dated June 10, 1994, and filed with the SEC
on June 16, 1994, including any amendment or report filed for the
purpose of updating such description

o the description of our common share purchase rights contained in
our Registration Statement on Form 8-A, dated January 28, 2000,
including any amendment or report filed for the purpose of
updating such description

You may request a copy of any of these filings, at no cost, by writing to
Kenneth F. Kaplan, Vice President, Chief Financial Officer and Secretary,
Regal-Beloit Corporation, 200 State Street, Beloit, Wisconsin 53511-6254, or by
calling Mr. Kaplan at (608) 364-8800.

LEGAL MATTERS

The validity of the shares of our common stock offered by this prospectus
will be passed upon for us by Foley & Lardner, Milwaukee, Wisconsin. Some legal
matters will be passed upon for the underwriters by Quarles & Brady LLP,
Milwaukee, Wisconsin.

EXPERTS

The audited financial statements and schedules incorporated by reference
and included in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public

accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.

INDEX TO HISTORICAL CONSOLIDATED
FINANCIAL STATEMENTS

Consolidated Financial Statements
Report of Independent Public Accountants................................ F-2
Consolidated Statements of Income for the Years Ended
December 31, 1999, 2000 and 2001..................................... F-3
Consolidated Balance Sheets as of December 31, 2000 and 2001............ F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 2000 and 2001..................................... F-5
Consolidated Statements of Shareholders' Investment for
the Years Ended December 31, 1999, 2000 and 2001..................... F-6
Notes to Consolidated Financial Statements.............................. F-7

F-1

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, 2001 and 2000, and the related consolidated statements of income,
shareholders' investment and cash flows for each of the three years in the
period ended December 31, 2001. 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 auditing standards generally
accepted in the United States. 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, 2001 and 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.

ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin
January 29, 2002

F-2

REGAL-BELOIT CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars, Except Shares Outstanding and Per Share Data)

For the Year Ended December 31,
-------------------------------
1999 2000 2001
---- ---- ----

Net Sales ........................................ $ 550,661 $ 598,203 $ 663,571
Cost of Sales .................................... 406,493 440,774 497,694
----------- ----------- -----------
Gross Profit ............................... 144,168 157,429 165,877
Operating Expenses ............................... 71,728 85,821 109,817
----------- ----------- -----------
Income From Operations ..................... 72,440 71,608 56,060
Interest Expense ................................. 9,406 15,332 22,239
Interest Income .................................. 220 274 221
----------- ----------- -----------
Income Before Income Taxes ................. 63,254 56,550 34,042
Provision for Income Taxes ....................... 25,187 22,779 14,452
----------- ----------- -----------
Net Income ................................. $ 38,067 $ 33,771 $ 19,590
=========== =========== ===========

Earnings Per Share ............................... $ 1.82 $ 1.61 $ .94
=========== =========== ===========

Earnings Per Share - Assuming Dilution ........... $ 1.80 $ 1.61 $ .93
=========== =========== ===========

Average Number of Shares Outstanding ............. 20,959,182 20,984,423 20,868,896
=========== =========== ===========

Average Number of Shares - Assuming Dilution ..... 21,169,580 20,996,189 21,124,204
=========== =========== ===========

See accompanying Notes to Consolidated Financial Statements.

F-3

REGAL-BELOIT CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Information)

ASSETS

December 31,
Current Assets: 2000 2001
---- ----

Cash and cash equivalents .............................. $ 2,612 $ 6,629
Receivables, less allowance for doubtful accounts
of $2,233 in 2001 and $2,031 in 2000 .............. 97,032 80,595
Income tax receivable .................................. 4,069 182
Future income tax benefits ............................. 9,475 8,420
Inventories ............................................ 148,741 132,272
Prepaid expenses ....................................... 3,709 3,401
--------- ---------
Total Current Assets .............................. 265,638 231,499
Property, Plant and Equipment:
Land and improvements .................................. 11,898 11,867
Buildings and improvements ............................. 84,171 85,170
Machinery and equipment ................................ 225,617 240,444
--------- ---------
Property, Plant and Equipment, at cost ............ 321,686 337,481
Less-accumulated depreciation .......................... (132,608) (152,608)
--------- ---------
Net Property, Plant and Equipment ................. 189,078 184,873
Goodwill ..................................................... 316,295 312,735
Other noncurrent assets ...................................... 21,396 17,492
--------- ---------
Total Assets ...................................... $ 792,407 $ 746,599
========= =========

LIABILITIES AND SHAREHOLDERS' INVESTMENT

Current Liabilities:
Accounts payable ....................................... $ 32,298 $ 28,429
Dividends payable ...................................... 2,509 2,505
Accrued compensation and employee benefits ............. 21,941 20,250
Other accrued expenses ................................. 22,849 17,303
Federal and state income taxes ......................... 154 1,848
Current maturities of long-term debt ................... 106 120
--------- ---------
Total Current Liabilities ......................... 79,857 70,455

Long-term debt ............................................... 393,510 345,667
Deferred income taxes ........................................ 41,063 43,022
Other noncurrent liabilities ................................. 4,088 5,304
Minority interest in consolidated subsidiary ................. -- 2,001
Shareholders' Investment:
Commonstock, $.01 par value, 50,000,000
shares authorized, 20,877,249 issued
and outstanding in 2001 and 20,912,192 issued
and outstanding in 2000 ........................ 210 210
Additional paid-in capital ............................. 41,779 41,967
Less-treasury stock, at cost, 159,900 shares in 2001
and 99,200 shares in 2000 ...................... (1,685) (2,727)
Retained Earnings ...................................... 234,992 244,564
Accumulated other comprehensive loss ................... (1,407) (3,864)
--------- ---------
Total Shareholders' Investment .................... 273,889 280,150
--------- ---------
Total Liabilities and Shareholders' Investment .... $ 792,407 $ 746,599
========= =========

See accompanying Notes to Consolidated Financial Statements.

F-4

REGAL-BELOIT CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars Except Share Information)
For the Year Ended December 31,
-------------------------------
1999 2000 2001
---- ---- ----

Cash Flows From Operating Activities:
Net Income ................................................... $ 38,067 $ 33,771 $ 19,590
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization .......................... 23,052 25,549 31,798
Provision for deferred income taxes .................... 1,652 7,678 3,014
Change in assets and liabilities, net of acquisitions:
Receivables ....................................... 1,093 8,321 16,673
Inventories ....................................... 7,066 (5,686) 17,014
Income tax receivable ............................. -- (4,069) 3,887
Current liabilities and other, net ................ (673) (13,475) (10,207)
--------- --------- ---------

Net cash provided from operating activities ....... 70,257 52,089 81,769

Cash Flows From Investing Activities:
Additions to property, plant and equipment ............. (11,422) (16,994) (15,426)
Business acquisitions .................................. (32,083) (269,232) (3,629)
Sale of property, plant and equipment .................. 49 2,725 650
Other, net ............................................. (1,216) (1,519) 159
--------- --------- ---------

Net cash (used in) investing activities ................ (44,672) (285,020) (18,246)

Cash Flows From Financing Activities:
Additions to long-term debt ............................ 1,000 270,000 2,000
Repayment of long-term debt ............................ (19,047) (24,598) (50,598)
Repurchase of common stock ............................. -- (1,685) (1,042)
Stock issued under option plans ........................ 726 194 188
Dividends paid to shareholders ......................... (10,057) (10,075) (10,022)
--------- --------- ---------
Net cash (used in) provided from financing activities... (27,378) 233,836 (59,474)

EFFECT OF EXCHANGE RATE ON CASH .............................. (26) (22) (32)
--------- --------- ---------

Net increase (decrease) in cash and cash
equivalents ............................................ (1,819) 883 4,017
Cash and cash equivalents at beginning of year ......... 3,548 1,729 2,612
--------- --------- ---------
Cash and cash equivalents at end of year ............... $ 1,729 $ 2,612 $ 6,629
========= ========= =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest .......................................... $ 9,520 $ 14,924 $ 22,607
Income Taxes ...................................... $ 24,886 $ 18,348 $ 7,265

See accompanying Notes to Consolidated Financial Statements.

F-5

REGAL-BELOIT CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(In Thousands of Dollars, Except Per Share Data)

Accumulated
Common Additional Other
Comprehensive Stock $.01 Paid-In Treasury Retained Comprehensive
Income Par Value Capital Stock Earnings Income (Loss) Total
------ --------- ------- ----- -------- ------------- -----

Balance, December 31, 1998........ $209 $40,860 -- $183,285 $143 $224,497

Net Income........................ $38,067 -- -- -- 38,067 -- 38,067

Dividends Declared ($.48 per
share)........................... -- -- -- (10,065) -- (10,065)

Translation Adjustments........... (599) -- -- -- -- (599) (599)
-------

Comprehensive Income.............. $37,468
=======

Stock Options Exercised........... 1 725 -- -- -- 726
----- ------ ------ -------- ------- --------

Balance, December 31, 1999........ 210 41,585 -- 211,287 (456) 252,626

Net Income........................ $33,771 -- -- -- 33,771 -- 33,771

Dividends Declared ($.48 per share) -- -- -- (10,066) -- (10,066)

Translation Adjustments........... (951) -- -- -- -- (951) (951)
-------

Comprehensive Income.............. $32,820
=======

Common Stock Repurchased ......... -- -- (1,685) -- -- (1,685)

Stock Options Exercised........... -- 194 -- -- -- 194
----- ------ ------ -------- ------- --------

Balance, December 31, 2000........ 210 41,779 (1,685) 234,992 (1,407) 273,889

Net Income........................ $19,590 -- -- -- 19,590 -- 19,590

Dividends Declared ($.48 per share) -- -- -- (10,018) -- (10,018)

Translation Adjustments........... (928) -- -- -- -- (928) (928)

Additional Pension Liability...... (1,529) -- -- -- -- (1,529) (1,529)
-------

Comprehensive Income.............. $17,133 -- -- -- -- -- --
=======

Common Stock Repurchased ......... -- -- (1,042) -- -- (1,042)

Stock Options Exercised........... -- 188 -- -- -- 188
----- ------- ------- -------- ------- --------

Balance, December 31, 2001........ $210 $41,967 $(2,727) $244,564 $(3,864) $280,150
===== ======= ======== ======== ======== ========

See accompanying Notes to Consolidated Financial Statements.

F-6

REGAL-BELOIT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For The Three Years Ended December 31, 2001

(1) Nature of Operations

REGAL-BELOIT CORPORATION (the Company) is a United States-based
multinational corporation. The Company is organized into two operating groups,
the Mechanical Group with its principal line of business in mechanical products
which control motion and torque, and the Electrical Group, with its principal
line of business in electric motors and power generation products. The principal
markets for the Company's products and technologies are within the United
States.
--------------------------------------------------------------------------------
(2) Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the
Company and its wholly owned and majority owned subsidiaries. The minority
interest in the earnings of the majority owned consolidated subsidiary is not
material.

Revenue Recognition

Sales and related cost of sales for all products are recognized upon
shipment of the products, as shipments are FOB shipping point.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the U.S. ("GAAP") 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,
2001.

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.

Life Insurance Policies

The Company maintains life insurance policies on certain officers and
management which name the Company as beneficiary. The total face value of these
policies was $7,963,000 at both December 31, 2001 and 2000. The cash surrender
value, net of policy loans, is $251,000 and $3,209,000 at December 31, 2001 and
2000, respectively, and is included as a component of Other Noncurrent Assets.

Intangible Assets

The cost of goodwill and other intangible assets is amortized on a
straight-line basis over the estimated periods benefited ranging from 5 to 40
years. Goodwill amortization was $8,401,000, $4,994,000 and $3,845,000 in 2001,
2000 and 1999, respectively. Accumulated goodwill amortization was $23,965,000
at December 31, 2001 and $15,564,000 at December 31, 2000.

F-7

Effective January 1, 2002, goodwill will no longer be amortized, in
accordance with SFAS No. 142, "Goodwill and Other Intangible Assets". Intangible
assets with definitive lives will continue to be amortized. Goodwill and
intangible assets will be evaluated in 2002 for impairment of their carrying
values and at least annually thereafter. Earnings will be charged if the
carrying value of goodwill or an intangible asset exceeds its fair market value.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of these assets may
not be recoverable. The Company assesses these assets for impairment based on
estimated future cash flows from these assets.

Inventories

The approximate percentage distribution between major classes of
inventory is as follows:
December 31,
----------------------
2001 2000
--------- ---------
Raw Material.................... 11% 11%
Work In Process................. 19% 21%
Finished Goods and
Purchased Parts.............. 70% 68%

Inventories are stated at cost, which is not in excess of market. Cost for
approximately 87% of the Company's inventory at December 31, 2001 and 89% in
2000, 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 $4,417,000 and $3,233,000 as of December 31, 2001 and 2000,
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, plant and equipment retired or otherwise disposed
of is removed from the 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 15 years

Shipping and Handling Revenues and Costs

Shipping and handling costs are recorded as costs of sales and the
related billings are recorded as sales.

Reclassifications

Certain reclassifications were made to the 2000 and 1999 financial
statements to conform to the 2001 presentation.

Earnings per Share

The difference between basic and diluted earnings per share is
attributable to the incremental shares to be issued under the Company's stock
option plans which totaled 255,308, 11,766 and 210,398 at December 31, 2001,
2000 and 1999, respectively.

F-8

--------------------------------------------------------------------------------
(3) Leases and Rental Commitments

Rental expenses charged to operations amounted to $7,314,000 in 2001,
$4,934,000 in 2000 and $4,189,000 in 1999. The Company has future minimum rental
commitments under operating leases as shown in the following table:

Year (In Thousands of Dollars)
------------------ -----------------------------------
2002 $4,164
2003 3,081
2004 2,926
2005 2,227
2006 1,847
Thereafter 2,037
--------------------------------------------------------------------------------
(4) Acquisitions

On January 16, 2001, the Company acquired, for cash, selected assets of
Philadelphia Gear Company, which now comprises the Company's spiral bevel gear
product line. The purchased assets included inventory and selected machinery,
equipment and tooling. The operating results and assets purchased are not
material to the performance or financial position of the Company.

On September 29, 2000, the Company acquired 100% of the stock of Leeson
Electric Corporation, a private company, for approximately $260,000,000 in cash.
During 2001, the purchase price allocation was finalized and resulted in an
increase to goodwill of approximately $4,000,000. This resulted in approximately
$86,000,000 of the purchase price being allocated to the net assets acquired,
and the remaining $174,000,000 being recorded as goodwill. Leeson is a leading
North American manufacturer and marketer of electric motors and related
products. On June 29, 2000, the Company acquired the assets and liabilities of
Thomson Technology, Inc. ("TTI") for approximately $10,000,000. TTI is a
Vancouver, BC, Canada based manufacturer of power systems controls for the
worldwide power generation market.

On May 28, 1999, the Company purchased the Lincoln Motors business of
Lincoln Electric Holdings, Inc., for a cash purchase price of approximately
$32,100,000. Lincoln Motors manufactures and markets a line of AC electric
motors from 1 horsepower to 800 horsepower.
--------------------------------------------------------------------------------
(5) Long-Term Debt and Bank Credit Facilities

(In Thousands of Dollars)
December 31,
------------------------------------------
Long-term debt consists of the following: 2001 2000
-------------------- ------------------

Revolving Credit Facility............................... $342,000 $392,500
Other................................................... 3,787 1,116
-------------------- ------------------
345,787 393,616
Less-Current maturities................................. 120 106
-------------------- ------------------
Noncurrent portion...................................... $345,667 $393,510
==================== ==================

The Company maintains a $375,000,000 revolving credit facility which
expires December 31, 2005 (the "Facility"). The Facility permits the Company to
borrow at interest rates based upon a margin above LIBOR, which margin varies
with the ratio of debt to earnings before interest, taxes, depreciation and
amortization ("EBITDA"). These interest rates also vary with LIBOR. The
Facility, as amended during 2001, restricts the payment of dividends to the
current $.12 per quarter and also limits acquisitions for cash to $15 million
for an individual acquisition and to $30 million in the aggregate. The Company
has pledged in the amended facility the stock of its major subsidiaries as
security for this agreement. The stock pledge and the dividend and acquisition
restrictions are subject to release if the Company's ratio of funded debt to
EBITDA meets certain requirements. The Facility also includes various financial
covenants regarding minimum net worth, permitted debt levels and minimum
interest coverage. The most restrictive financial covenant included in the
Facility is the ratio of funded debt to EBITDA. This covenant ratio was 4.15 at
December 31, 2001, but declines in future quarters throughout 2002 to 3.25 at
December 31, 2002. The Company was in compliance with all financial covenants as
of December 31, 2001.
F-9

The average balance outstanding under the Facility in 2001 was
$372,512,000. The average interest rate paid under the Facility in 2001 was 5.9%
and was 4.2% at December 31, 2001. The Company had $30,200,000 of available
borrowing capacity, after deducting approximately $2,800,000 for standby letters
of credit, under the Facility at December 31, 2001. (See Management's Discussion
and Analysis of Financial Statements, "Liquidity and Capital Resources").

The Company also has other loans with a total balance outstanding of
$3,787,000 at December 31, 2001. The largest is a $2,000,000 industrial
development bond issue completed on September 6, 2001.

Based on the borrowing rates currently available to the Company for
bank loans with similar terms and average maturities, the fair market value of
long-term debt is not materially different from the carrying value.

Maturities of long-term debt are as follows:

Year (In Thousands of Dollars)
-------------------- ---------------------------------
2002 $120
2003 107
2004 232
2005 342,222
2006 678
Thereafter 2,428
--------
Total $345,787
========
--------------------------------------------------------------------------------
(6) Contingencies

The Company is, from time to time, party to lawsuits arising from its
normal business operations. It is believed that the outcome of these lawsuits
will have no material effect on the Company's financial position or its results
of operations.
--------------------------------------------------------------------------------
(7) Retirement Plans

The Company has a number of retirement plans that cover most of its
employees. The plans include defined contribution plans and defined benefit
plans. The defined contribution plans provide for company contributions based,
depending on the plan, upon one or more of participant contributions, service
and profits. Company contributions to defined contribution plans totaled
$3,329,000, $4,628,000 and $4,820,000 in 2001, 2000 and 1999, respectively.
Benefits provided under defined benefit plans are based, depending on the plan,
on employees' average earnings and years of credited service, or a benefit
multiplier times years of service. Funding of these qualified defined benefit
plans is in accordance with federal laws and regulations.

Net periodic pension benefit costs for the defined benefit plans were
as follows:
(In Thousands of Dollars)
--------------------------------------
2001 2000 1999
----------- --------- ----------
Service cost...... $1,330 $1,253 $1,375
Interest cost..... 3,078 2,993 2,809
Expected return
on plan assets. (5,410) (4,858) (4,158)
Net amortization
and deferral... (355) (125) 58
----------- --------- ----------
Net periodic
(income)
expense........ $(1,357) $(737) $84
=========== ========= ==========

F-10

The following table presents a reconciliation of the funded status of
the defined benefit plans using an assumed discount rate of 7.5% in 2001 and
2000, annual compensation increases of 3.75% in 2001 and 4.5% in 2000, and an
assumed long-term rate of return on plan assets of 9.0% in 2001 and 2000.

(In Thousands of Dollars)
-----------------------------
2001 2000
------------- ------------
Change in projected benefit obligation:
Obligation at beginning of period......... $41,042 $39,909
Service cost.............................. 1,330 1,253
Interest cost............................. 3,078 2,993
Change in assumptions..................... (882) (1,293)
Plan amendments........................... 403 131
Benefits paid............................. (1,863) (1,951)
------------- ------------
Obligation at end of period............... 43,108 41,042
------------- ------------
Change in fair value
of plan assets:
Fair value of plan assets at beginning
of period.............................. 60,844 60,601
Actual (loss) return on plan assets....... (11,582) 1,827
Employer contributions.................... 282 367
Benefits paid............................. (1,863) (1,951)
------------- ------------
Fair value of plan assets at end of 47,681 60,844
period.................................
------------- ------------

Funded status............................. 4,573 19,802

Unrecognized net actuarial loss
(gain).................................. 3,251 (13,289)
Unrecognized prior service costs........... 1,252 924
------------- ------------
Net amount recognized...................... $9,076 $7,437
============= ============

Amounts recognized in balance sheets:
Prepaid benefit cost.................. $11,077 $10,728
Accrued benefit liability............. (3,906) (3,291)
Intangible asset...................... 376 --
Accumulated other comprehensive
loss............................... 1,529 --
------------- ------------
Net amount recognized................. $9,076 $7,437
============= ============

The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for the defined benefit plans with accumulated benefit
obligations in excess of plan assets were $7,740,000, $7,699,000 and $4,094,000,
respectively, as of December 31, 2001, and $3,105,000, $3,054,000 and $0,
respectively, as of December 31, 2000.
--------------------------------------------------------------------------------
(8) Shareholders' Investment

The Company has one stock option plan available for new grants to officers,
directors and key employees, the 1998 Stock Option Plan. Additionally, the
Company's 1987 Stock Option Plan and 1991 Flexible Stock Incentive Plan, which
have expired as to new grants, have shares previously granted remaining
outstanding. Options under all the plans were granted at prices that equalled
the market value on the date of the grant and with a maximum term of 10 years
from the date of grant. Options vest over various periods up to 10 years. A
summary of the Company's three stock option plans follows:

F-11

At December 31, 2001
-----------------------------------------------------------------
1987 Plan 1991 Plan 1998 Plan
------------------- -------------------- ------------------

Total Plan shares........................ 450,000 1,000,000 1,000,000
Options granted.......................... 449,850 762,882 705,400
Options outstanding...................... 38,700 731,324 690,100
Options available for grant.............. -- -- 294,600

A summary of the status of the Company's three stock option plans as of
December 31, 2001, 2000 and 1999, and changes during the years then ended is
presented below:

2001 2000 1999
--------------------------- -------------------------- --------------------------
Shares Weighted Shares Weighted Shares Weighted
Average Average Average
Exercise Exercise Exercise
Price Price Price
----------- ----------- ----------- ----------- ----------- -----------

Outstanding at beginning
of year................. 1,477,718 $18.01 1,430,682 $18.47 839,018 $14.18
Granted.................... 41,850 18.71 134,750 18.14 705,700 22.65
Exercised.................. (26,194) 7.52 (26,018) 6.97 (78,336) 9.33
Forfeited.................. (33,250) 21.28 (61,696) 22.61 (35,700) 23.43
----------- ----------- ----------- ----------- ----------- -----------
Outstanding at end of year. 1,460,124 $18.49 1,477,718 $18.01 1,430,682 $18.47

Options exercisable at
year-end................ 889,824 865,968 656,265

The following table provides information on the three Plans at various
exercise price ranges:

Range of Exercise Prices
-----------------------------------------------------------------------------------
$7.18-$10.78 $10.79-$16.18 $16.19-$24.27 $24.28-$32.44 Total
-------------- ------------- ------------- ------------ -------------

Options outstanding
at 12/31/01 355,510 34,464 963,300 106,850 1,460,124

Options exercisable
at 12/31/01 355,510 29,464 401,000 103,850 889,824

The Company accounts for its stock option plans under APB Opinion No.
25. Accordingly, no compensation cost has been recognized in the statements of
income. Had compensation cost for these plans been determined consistent with
FASB Statement No. 123 "Accounting for Stock-Based Compensation", the Company's
net income and earnings per share ("EPS") would have been reduced to the
following pro-forma amounts:

(In Thousands, Except Per Share Data)
--------------------------------------------------------------
2001 2000 1999
--------------------- ------------------ ---------------

Net income:
As Reported................................ $19,590 $33,771 $38,067
Pro Forma.................................. $18,886 $33,018 $36,532
Earnings Per Share
As Reported................................ $.94 $1.61 $1.82
Pro Forma.................................. $.91 $1.57 $1.74
Earnings Per Share - Assuming Dilution
As Reported................................ $.93 $1.61 $1.80
Pro Forma.................................. $.89 $1.57 $1.73

F-12

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 2001, 2000 and 1999, respectively: risk-free
interest rates of 5.1%, 6.3% and 5.4%; expected dividend yield of 2.5% for all
years; expected option lives of 7.0 for all years; expected volatility of 33% in
both 2001 and 2000, and 32% in 1999.

On January 28, 2000, the Board of Directors approved a Shareholder
Rights Plan (the "Plan"). Pursuant to this Plan, one common share purchase right
is included with each outstanding share of common stock. In the event the rights
become exercisable, each right will initially entitle its holder to buy one-half
of one share of the Company's common stock at a price of $60 per share
(equivalent to $30 per one-half share), subject to adjustment. The rights will
become exercisable if a person or group acquires, or announces an offer for, 15%
or more of the Company's common stock. In this event, each right will thereafter
entitle the holder to purchase, at the right's then-current exercise price,
common stock of the Company or, depending on the circumstances, common stock of
the acquiring corporation having a market value of twice the full share exercise
price. The rights may be redeemed by the Company at a price of one-tenth of one
cent per right at any time prior to the time a person or group acquires 15% or
more of the Company's common stock. The rights expire on January 28, 2010,
unless otherwise extended.

The Board of Directors approved in 2000 a repurchase program of up to
2,000,000 common shares of Company stock. Management was authorized to effect
purchases from time to time in the open market or through privately negotiated
transactions. Through December 31, 2001, the Company repurchased 159,900 shares
at an average purchase price of $17.06 per share. Management ceased repurchases
in January 2001.

F-13

--------------------------------------------------------------------------------
(9) Income Taxes

Earnings before income taxes consisted of the following:

(In Thousands of Dollars)
------------------------------------
2001 2000 1999
---------- --------- ---------

United States . . . . . . . . . . . . $30,213 $55,879 $62,143
Foreign . . . . . . . . . . . . . . . 3,829 671 1,111
---------- --------- ---------
Total . . . . . . . . . . . . . . . . $34,042 $56,550 $63,254
========== ========= =========

The provision for income taxes is summarized as follows:

(In Thousands of Dollars)
------------------------------------
2001 2000 1999
---------- --------- ---------

Current
Federal . . . . . . . . . . . . . $9,155 $12,858 $20,594
State . . . . . . . . . . . . . . 1,186 1,995 2,321
Foreign . . . . . . . . . . . . . 1,097 248 620
---------- --------- ---------
11,438 15,101 23,535

Deferred . . . . . . . . . . . . . . . 3,014 7,678 1,652
---------- --------- ---------
$14,452 $22,779 $25,187
========== ========= =========

A reconciliation of the statutory Federal income tax rate and the
effective tax rate reflected in the statements of income follows:

2001 2000 1999
---------- --------- ---------

Federal statutory tax rate . . . . . . 35.0% 35.0% 35.0%
State income taxes, net of federal
benefit . . . . . . . . . . . . . . . 2.3 2.5 3.0
Nondeductible goodwill amortization 4.0 2.4 2.3
Other, net . . . . . . . . . . . . . . 1.2 .4 (.5)
---------- --------- ---------
Effective tax rate . . . . . . . . . . 42.5% 40.3% 39.8%
========== ========= =========

F-14

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, 2001 of $34,602,000 is classified on the consolidated balance
sheet as a current income tax benefit of $8,420,000 and a long-term deferred
income tax liability of $43,022,000. The December 31, 2000 net deferred tax
liability was $31,588,000, consisting of a current income tax benefit of
$9,475,000 and a long-term deferred income tax liability of $41,063,000. The
components of this net deferred tax liability are as follows:

(In Thousands of Dollars)
December 31
-----------------------------
2001 2000
------------ -------------

Federal operating
loss carry forward . . . . . . . . $277 $401
Accrued employee
benefits . . . . . . . . . . . . . 1,349 1,495
Bad debt reserve . . . . . . . . . . 768 443
Warranty reserve . . . . . . . . . . 682 1,067
Other . . . . . . . . . . . . . . . . 215 2,542
------------ -------------
Deferred tax assets . . . . . . . 3,291 5,948

Property related . . . . . . . . . . (29,121) (29,643)
Inventory . . . . . . . . . . . . . . (4,935) (3,608)
Other . . . . . . . . . . . . . . . . (3,837) (4,285)
------------ -------------
Deferred tax liabilities . . . . . (37,893) (37,536)
------------ -------------
Net deferred tax liability. . . . . . $(34,602) $(31,588)
============ =============
--------------------------------------------------------------------------------
(10) Industry Segment Information

The Company's reportable segments are strategic businesses that offer
different products and services. The Company has two such reportable segments:
Mechanical Group and Electrical Group. The Mechanical Group produces mechanical
speed reducers and related products for sale to original equipment manufacturers
and distributors. The Electrical Group produces electric motors, power
generation equipment and related products for sale to original equipment
manufacturers and distributors.

The Company evaluates performance based on the segments' income from
operations. Corporate costs have been allocated to each group based primarily on
the net sales of each group. The reported net sales of each segment are solely
from external customers. No single customer accounts for 10% or more of the
Company's net sales.

The Company's products manufactured and sold outside the United States
were approximately 8%, 4% and 3% of net sales in 2001, 2000 and 1999,
respectively. Export sales from U.S. operations were approximately 6% of net
sales in 2001, 6% in 2000 and 7% in 1999.

F-15

Pertinent data for each industry segment in which the Company operated
for the three years ended December 31, 2001 is as follows:

(In Thousands of Dollars)
----------------------------------------------------------------------------------------
Depreciation
Income From Identifiable Capital and
Net Sales Operations Assets Expenditures Amortization
------------- --------------- -------------- -------------- --------------
2001

Mechanical Group . . . . . $206,615 $15,872 $125,201 $5,110 $8,824
Electrical Group . . . . . 456,956 40,188 621,398(A) 10,316 22,974
------------- --------------- -------------- -------------- --------------
Total REGAL-BELOIT . . . . $663,571 $56,060 $746,599 $15,426 $31,798
============= =============== ============== ============== ==============

2000
Mechanical Group . . . . . $244,249 $30,794 $142,145 $6,515 $9,663
Electrical Group . . . . . 353,954 40,814 650,262(A) 10,479 15,886
------------- --------------- -------------- -------------- --------------
Total REGAL-BELOIT . . . . $598,203 $71,608 $792,407 $16,994 $25,549
============= =============== ============== ============== ==============

1999
Mechanical Group . . . . . $254,967 $35,732 $145,391 $4,257 $10,910
Electrical Group . . . . . 295,694 36,708 362,774(A) 7,165 12,142
------------- --------------- -------------- -------------- --------------
Total REGAL-BELOIT . . . . $550,661 $72,440 $508,165 $11,422 $23,052
============= =============== ============== ============== ==============

(A) Includes $312,735 in 2001, $316,295 in 2000 and $143,314 in 1999 of goodwill relating to Electrical Group
acquisitions.

F-16

[INSIDE BACK COVER]

[OUTSIDE BACK COVER]

[Regal-Beloit Corporation Logo]

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

Securities and Exchange Commission filing fee.............. $ 7,059
NASD filing fee ........................................... 8,090
American Stock Exchange listing fees....................... 17,500
Transfer agent expenses and fees .......................... 4,000
Accounting fees and expenses............................... 45,000
Legal fees and expenses.................................... 165,000
Blue Sky fees and expenses................................. 10,000
Printing and engraving expenses............................ 35,000
Miscellaneous.............................................. 33,351
--------
Total expenses........................................ $ 325,000
========
All of the above fees and expenses will be paid by Regal-Beloit
Corporation (the "Registrant"). Other than the Securities and Exchange
Commission filing fee and the NASD filing fee, all fees and expenses are
estimated.

Item 15. Indemnification of Directors and Officers.

Pursuant to the provisions of the Wisconsin Business Corporation Law and
the Registrant's Bylaws, directors and officers of the Registrant are entitled
to mandatory indemnification from the Registrants against certain liabilities
(which may include liabilities under the Securities Act of 1933) and expenses
(i) to the extent such officers or directors are successful in the defense of a
proceeding; and (ii) in proceedings in which the director or officer is not
successful in defense thereof, unless it is determined that the director or
officer breached or failed to perform his or her duties to the Registrant and
such breach or failure constituted: (a) a willful failure to deal fairly with
the Registrant or its shareholders in connection with a matter in which the
director or officer had a material conflict of interest; (b) a violation of
criminal law unless the director or officer had a reasonable cause to believe
his or her conduct was lawful or had no reasonable cause to believe his or her
conduct was unlawful; (c) a transaction from which the director or officer
derived an improper personal profit; or (d) willful misconduct. Additionally,
under the Wisconsin Business Corporation Law, directors of the Registrant are
not subject to personal liability to the Registrant, its shareholders or any
person asserting rights on behalf thereof, for certain breaches or failures to
perform any duty resulting solely from their status as directors, except in
circumstances paralleling those outlined in (a) through (d) above.

The indemnification provided by the Wisconsin Business Corporation Law
and the Registrant's Bylaws is not exclusive of any other rights to which a
director or officer of the Registrant may be entitled. The Registrant also
carries directors' and officers' liability insurance.

Item 16. Exhibits and Financial Statement Schedules.

The exhibits listed in the accompanying Exhibit Index are filed or
incorporated by reference as part of this Registration Statement.

Item 17. Undertakings.

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions set forth or
described in Item 15 of this Registration Statement, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is,

II-1

therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the
time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Beloit, State of Wisconsin, on March 7, 2002.

REGAL-BELOIT CORPORATION

By: /s/ James L. Packard
--------------------------------
James L. Packard
Chairman, President and Chief
Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ James L. Packard Chairman, President and March 7, 2002
----------------------------- Chief Executive Officer
James L. Packard and Director (Principal
Executive Officer)

/s/ Kenneth F. Kaplan Vice President, Chief March 7, 2002
----------------------------- Financial Officer and
Kenneth F. Kaplan Secretary (Principal
Accounting and Financial
Officer)

/s/ Henry W. Knueppel Executive Vice President and March 7, 2002
----------------------------- Director
Henry W. Knueppel

*
-----------------------------
Frank Bauchiero Director March 7, 2002

*
-----------------------------
J. Reed Coleman Director March 7, 2002

*
-----------------------------
John M. Eldred Director March 7, 2002

*
-----------------------------
Stephen Graff Director March 7, 2002

*
-----------------------------
Paul W. Jones Director March 7, 2002

*
-----------------------------
G. Frederick Kasten, Jr. Director March 7, 2002

*
-----------------------------
John A. McKay Director March 7, 2002

*By: /s/ James L. Packard
---------------------
James L. Packard
Attorney-in-fact
S-1

EXHIBIT INDEX
Exhibit
Number Document Description

(1) Form of Underwriting Agreement.

(2.1) Agreement and Plan of Merger, dated as of February 26, 1997,
among Regal-Beloit Corporation, Regal-Beloit Acquisition
Corp., Marathon Electric Manufacturing Corporation, as
amended and restated March 17, 1997 and March 26, 1997.
[Incorporated by reference to Exhibit 2.1 to Regal-Beloit
Corporation's Current Report on Form 8-K dated April 10,
1997]

(2.2) Stock Purchase Agreement, dated as of August 7, 2000, among
Regal-Beloit Corporation, LEC Acquisition Corp., Leeson
Electric Corporation and the shareholders of Leeson Electric
Corporation, as amended by First Amendment to Stock Purchase
Agreement, dated as of September 29, 2000. [Incorporated by
reference to Exhibit 2 to Regal-Beloit Corporation's Current
Report on Form 8-K dated October 13, 2000]

(4.1) Articles of Incorporation of Regal-Beloit Corporation.
[Incorporated by reference to Exhibit B to Regal-Beloit
Corporation's Definitive Proxy Statement on Schedule 14A
filed on March 15, 1994]

(4.2) Bylaws of Regal-Beloit Corporation. [Incorporated by
reference to Exhibit C to Regal-Beloit Corporation's
Corporation's Definitive Proxy Statement on Schedule 14A
filed on March 15, 1994]

(4.3) Rights Agreement, dated January 28, 2000, between
Regal-Beloit Corporation and BankBoston, N.A. [Incorporated
by reference to Exhibit 4.1 to Regal-Beloit Corporation's
Registration Statement on Form 8-A, dated January 28, 2000]

(4.4) Credit Agreement, dated as of September 29, 2000, among
Regal-Beloit Corporation, M&I Marshall & Ilsley Bank, as
Administrative Agent, and Swing Line Bank, Bank of America,
N.A., as Documentation and Syndication Agent, Banc of
America Securities LLC, as Lead Arranger and Book Manager,
and each of the Banks party to the Credit Agreement.
[Incorporated by reference to Exhibit 4 to Regal-Beloit
Corporation's Current Report on Form 8-K dated October 13,
2000]

(4.5) First Amendment to Credit Agreement, dated as of June 29,
2001, among Regal-Beloit Corporation, the financial
institutions listed on the signature pages thereof, Bank of
America, N.A., as Documentation and Syndication Agent, and
M&I Marshall & Ilsley Bank, as Administrative Agent.
[Incorporated by reference to Exhibit 1 to Regal-Beloit
Corporation's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001]

(4.6) Second Amendment and Waiver, dated as of January 31, 2002,
among Regal-Beloit Corporation, the financial institutions
listed on the signature pages thereof, Bank of America,
N.A., as Documentation and Syndication Agent, and M&I
Marshall & Ilsley Bank, as Administrative Agent.
[Incorporated by reference to Exhibit 99.4 to Regal-Beloit
Corporation's Current Report on Form 8-K dated February 1,
2002]

(5) Opinion of Foley & Lardner (including consent of counsel).**

(23.1) Consent of Arthur Andersen LLP.

(23.2) Consent of Foley & Lardner (filed as part of Exhibit (5)).**

-------------
** Previously filed.
E-1

Exhibit
Number Document Description

(24) Power of Attorney relating to subsequent amendments**

-------------
** Previously filed.

E-2