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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ___

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES X NO ___

Indicate the number of shares outstanding of each of the issuers’ classes of common stock as of the latest practicable date.

25,031,006 Shares, Common Stock, $.01 Par Value

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CAUTIONARY STATEMENT

The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: With the exception of historical facts, the statements contained in Item 2. of this Form 10-Q may be forward looking statements. Actual results may differ materially from those contemplated. Forward looking statements involve risks and uncertainties, including but not limited to, the following risks: 1) cyclical downturns affecting the markets for capital goods, 2) substantial increases in interest rates that impact the cost of our outstanding debt, 3) our success in increasing sales and maintaining or improving the operating margins of our businesses, 4) the availability of or material increases in the costs of select raw materials or parts, 5) actions taken by competitors, and 6) our ability to satisfy various covenant requirements under our credit facility. Investors are directed to other documents, such as our Annual Report on Form 10-K and other Form 10-Q's filed with the Securities and Exchange Commission.

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PART I

FINANCIAL INFORMATION

REGAL-BELOIT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands of Dollars)

See accompanying notes.

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REGAL-BELOIT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands of Dollars, Except Per Share Data)

See accompanying notes.

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REGAL-BELOIT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of Dollars)

See accompanying notes.

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REGAL-BELOIT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2003

1. BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of REGAL-BELOIT Corporation and its wholly owned subsidiaries and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. All adjustments which management believes are necessary for a fair statement of the results for the interim periods presented have been reflected and are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested these statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K.

2. INVENTORIES

Cost for approximately 85% of the Company’s inventory is determined using the last-in, first-out (LIFO) inventory valuation method. The approximate percentage distribution between major classes of inventories is as follows:

	March 31, 2003	December 31, 2002
Raw Material	11%	11%
Work-in Process	19%	19%
Finished Goods	70%	70%

3. COMPREHENSIVE INCOME

The Company's comprehensive income is impacted by the amount of the cumulative translation adjustment recorded to shareholders' equity. For the quarter ended March 31, 2003, the impact was $657,000 of comprehensive income resulting in comprehensive income of $6,725,000 for the quarter. The impact in the first quarter of 2002 was $277,000 of comprehensive expense resulting in comprehensive income of $5,511,000.

4. WARRANTY COSTS

The Company recognizes the cost associated with its standard warranty on its products at the time of sale. The amount recognized is based on historical experience. The following is a reconciliation of the changes in accrued warranty costs for the first quarter of 2003:

		(In Thousands of Dollars)
Beginning balance January 1, 2003			$3,431
Deduct: Payments			(1,402	)
Add: Provision			1,146
Ending balance March 31, 2003			$3,175

5. BUSINESS SEGMENTS

The Company operates two strategic businesses that are reportable segments: the Mechanical Group and the Electrical Group.

As consistent with December 31, 2002, acquired intangibles with definite lives were not material.

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6. STOCK-BASED COMPENSATION COST

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 would have been reduced to the following pro-forma amounts:

The fair value of each option grant is estimated using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in the first quarter of 2003 and 2002, respectively: risk-free interest rates of 3.3% and 5.0%; expected dividend yield of 2.5% and expected option lives of 7.0 years for both years; and expected volatility of 33% and 32%.

Item 2. Management's Discussion and Analysis of Financial

Condition and Results of Operations

Unless the context requires otherwise, references in this Item 2 to “we”, “us”, “our” or “the Company” refer collectively to REGAL-BELOIT CORPORATION and its subsidiaries.

OVERVIEW

We expected and achieved sequential earnings improvement in the first quarter of 2003 from the fourth quarter of 2002. Also as expected, significant recovery in our markets did not begin during the quarter. However, net sales did increase to $153.3 million in the first quarter, a 5% sequential improvement from $146.0 million in 2002’s fourth quarter and a 2% gain over the first quarter of 2002. The combination of the sales increase and improved operating margin from the fourth quarter of 2002 resulted in first quarter earnings of $.24 following $.18 per share in the fourth quarter last year.

RESULTS OF OPERATIONS

Our net sales in the first quarter of 2003 were $153.3 million, 1.9% higher than net sales of $150.4 million in the first quarter of 2002. Our sales were impacted by weak product demand across most of our markets as a result of continued weakness in the industrial manufacturing sector of the economy. (See Note 5 to the accompanying financial statements for our business segment data.)

Gross profit of $36.2 million in the first quarter was virtually unchanged from comparable 2002. However, as a percentage of sales, gross profit decreased to 23.6% from 24.2% a year previously. The gross profit margin decrease was due primarily to reduced overhead absorption resulting from lower production levels and to higher utilities, unemployment insurance and trucking diesel fuel costs this year versus a year ago.

Operating expenses of $25.0 million in the first quarter were 5.0% higher than the $23.8 million in 2002’s first quarter. The increase was due primarily to a combination of higher costs for insurances and personnel. Our income from operations was $11.2 million in the first quarter, 11.1% below $12.6 million in comparable 2002. As a percentage of sales, income from operations decreased to 7.3% from 8.4% in the first quarter last year. The impact of the lower gross profit margin and higher operating expenses resulted in the lower income from operations.

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Interest expense of $1.6 million was 54.3% lower than $3.5 million in 2002’s first quarter. A combination of: 1) reduced debt resulting from proceeds of the Company’s $90 million March 13, 2002 stock offering and our 2002 operating cash flow and 2) reduced interest rates paid by the Company accounted for the significantly reduced interest expense. Our effective tax rate in the first quarter of 2003 was 37.5% as compared to 36.5% in comparable 2002.

Our net income was $6.1 million in 2003’s first quarter, a 5.2% increase from $5.8 million in the first quarter of 2002. Earnings per share of $.24 in 2003 compares to $.27 per share in comparable 2002. The decrease in EPS despite increased net income was due to the impact of our March 2002 stock offering.

LIQUIDITY AND CAPITAL RESOURCES

Our working capital was $165.3 million at March 31, 2003, an increase of $7.9 million from December 31, 2002. Our Current Ratio was 3.0:1 at quarter’s end, below 3.2:1 at year-end 2002. Increased accounts receivable were responsible for the working capital increase.

Cash flow from operations in the first quarter of 2003 was $6.4 million, below operating cash flow of $10.0 million in comparable 2002. The lower cash flow was due to an increase in inventories in 2003 versus a decline in inventories in the first quarter of 2002. Capital spending in the first quarter was $4.2 million, double the $2.1 million spent a year ago. Outstanding commitments for future capital expenditures at March 31, 2003 were $2.0 million.

Our primary financing source is our $275 million long-term unsecured revolving credit facility (the “Facility”) that expires December 31, 2005. On March 4, 2003 we amended the facility to change a financial covenant for the balance of 2003 and to reduce the facility by $25 million to $275 million. The Facility requires us to maintain specified financial ratios and to satisfy certain financial condition tests, with which we were in compliance as of March 31, 2003.

At March 31, 2003, we had $218.2 million of debt outstanding under the Facility and $223.1 million of debt from all sources. Our available borrowing capacity was approximately $17 million at March 31, 2003. We believe we will be able to satisfy the financial ratios and tests specified in the Facility for the foreseeable future. We also believe that the combination of borrowing availability under the Facility and our operating cash flow will provide sufficient cash availability to finance our existing operations for the foreseeable future.

CRITICAL ACCOUNTING POLICIES

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of our financial statements and the amounts of our revenues and expenses during the periods reported. Actual results may differ from these estimates under different assumptions or conditions. We believe the following are our critical accounting policies which could have the most significant effect on our reported results or require management’s most difficult, subjective or complex judgments.

Revenue Recognition

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

Allowance for Doubtful Accounts

We record allowances for doubtful accounts after customer-specific analysis and general analysis of past due balances, economic conditions and historical experience. Allowance levels change as customer-specific circumstances and the general analysis areas above change.

Excess and Obsolete Inventory Reserves

Our systems track the frequency of usage of inventory by part number and reports are generated monthly. Based on these analyses of historical usage and management’s evaluation of estimated future demand, market conditions and alternative uses for possible excess or obsolete parts, reserves are recorded and changed. Excess and obsolete inventory is periodically disposed through sale to third parties, scrapping or other means, and the reserves appropriately reduced.

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Impairment of Long-Lived Assets

We review long-lived assets, which include property, plant and equipment, and other intangible assets with definitive lives such as patents and trademarks, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset in our accounting records may not be fully recoverable. Additionally, we evaluate the recoverability of goodwill and other intangible assets with indefinite lives at least annually during our fourth quarter, independent of specific events. We assess these assets for impairment based on estimated future cash flows from these assets, which estimates require us to make assumptions about future demand for the Company’s products and services, future market conditions, future growth rates and the discount rate, among others. Changes to these assumptions could result in an impairment charge in future periods.

Product Warranty Reserves

We maintain reserves for product warranty to cover the stated warranty periods for our products. We establish or change such reserves based on our evaluation of historical warranty experience and specific significant warranty matters when they become known and can reasonably be estimated.

Retirement Plans

Slightly over half of our employees are covered by defined benefit pension plans with the remaining employees covered by defined contribution plans. Our obligations under the defined benefit plans are determined with the assistance of actuarial firms. The actuaries make certain assumptions regarding such factors as withdrawal rates and mortality rates. The actuaries also provide us with information and recommendations from which management makes further assumptions on such factors as the long-term expected rate of return on plan assets, the discount rate on benefit obligations and where applicable, the rate of annual compensation increases. Based upon the assumptions made, the investments made by the plans, overall conditions and movement in financial markets, particularly the stock market, and how actual withdrawal rates, life-spans of benefit recipients and other factors differ from assumptions, annual expenses and recorded assets or liabilities of these defined benefit plans may change significantly from year to year.

Self-Insurance Liabilities

Our insurance programs include health care, workers’ compensation and product liability. We self-insure from the first dollar of loss up to various specified retention levels per occurrence. Eligible losses in excess of self-insurance retention levels and up to stated liability limits are covered by policies we purchase from insurance companies, as are eligible losses when and if we purchase aggregate stop-loss policies. We estimate the annual costs and liabilities of our self-insurance programs using our Company’s claims experience and risk exposure levels for the periods being valued. Differences in actual costs of claims from estimated costs will likely result in adjustments to expenses and liabilities.

Litigation and Claims

We record expenses and liabilities when we believe that an obligation of the Company on a specific matter is probable and we have a basis to reasonably estimate the value of the obligation. This methodology is used for environmental matters and legal claims that are filed against the Company from time to time. The uncertainty that is associated with such matters frequently requires adjustments to the liabilities previously recorded.

New Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 146 (SFAS 146), Accounting for Costs Associated with Exit or Disposal Activities. This statement addresses financial accounting and reporting for costs and recognition of liabilities associated with exit or disposal activities. This statement is effective for exit or disposal activities initiated after December 31, 2002. We initiated no exit or disposal activities during the first quarter of 2003. For an exit activity initiated under an exit plan prior to the initial application of SFAS 146, prior generally accepted accounting principles continue to apply.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Information with respect to the Company’s exposure to interest rate risk and foreign currency risk is contained on Page 15 in Item 7A. Quantitative and Qualitative Disclosures About Market Risk, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Management believes that at March 31, 2003, there has been no material change to this information.

Item 4. Controls and Procedures

Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial

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Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes were made in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART II

OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

REGAL-BELOIT CORPORATION

(Registrant)

/S/ Kenneth F. Kaplan

Kenneth F. Kaplan

Vice President - Chief Financial Officer and Secretary

(Principal Accounting and Financial Officer)

DATE: May 14 , 2003

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CERTIFICATIONS

I, James L. Packard, certify that:

1. I have reviewed this quarterly report on Form 10-Q of REGAL-BELOIT Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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I, Kenneth F. Kaplan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of REGAL-BELOIT Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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