RBC Bearings Incorporated (Nasdaq: ROLL), a leading
international manufacturer of highly-engineered precision bearings
and components for the industrial, defense and aerospace
industries, today reported results for the second quarter of fiscal
year 2018.
Second Quarter
Highlights
($ in millions)
Fiscal 2018
Fiscal 2017 Change GAAP
Adjusted (1) GAAP Adjusted (1) GAAP
Adjusted (1) Net sales $164.3 $164.3 $153.9
$153.9 6.7% 6.7% Gross margin $61.8 $61.8
$56.7 $56.7 9.0% 9.0% Gross margin % 37.6% 37.6% 36.9% 36.9%
Operating income $25.3 $31.8 $29.6 $29.8 -14.5% 6.7% Operating
income % 15.4% 19.3% 19.2% 19.3% Net income $14.8 $20.3 $18.2 $18.4
-18.7% 10.0% Diluted EPS $0.61 $0.83 $0.77 $0.78 -20.8% 6.4%
(1) Results exclude items in
reconciliation below.
Six Month Highlights
($ in millions)
Fiscal 2018
Fiscal 2017 Change GAAP
Adjusted (1) GAAP Adjusted (1) GAAP
Adjusted (1) Net sales $328.2 $328.2 $308.5
$308.5 6.4% 6.4% Gross margin $123.7 $123.7
$114.0 $114.4 8.5% 8.2% Gross margin % 37.7% 37.7% 36.9% 37.1%
Operating income $57.1 $63.6 $58.8 $59.4 -2.9% 7.1% Operating
income % 17.4% 19.4% 19.1% 19.2% Net income $36.6 $42.2 $36.3 $36.5
1.0% 15.7% Diluted EPS $1.51 $1.74 $1.53 $1.54 -1.3% 13.0%
(1) Results exclude items in
reconciliation below.
“Our solid second quarter operating performance was driven by
strong industrial sales growth, combined with continued gross
margin improvements across the organization,” said Dr. Michael J.
Hartnett, Chairman and Chief Executive Officer. “We are able to
maintain our improved margin profile as a result of our cost
initiatives, manufacturing process improvements, and consolidation
programs. Moving forward, our backlog remains strong and we are
confident in our ability to maintain the strong momentum throughout
the second half of the year.”
Second Quarter ResultsNet
sales for the second quarter of fiscal 2018 were $164.3 million, an
increase of 6.7% from $153.9 million in the second quarter of
fiscal 2017. Net sales for the aerospace markets decreased 1.2% and
the industrial markets increased by 22.9%. Gross margin for the
second quarter of fiscal 2018 was $61.8 million compared to $56.7
million for the same period last year. Gross margin as a percentage
of net sales was 37.6% in the second quarter of fiscal 2018
compared to 36.9% for the same period last year.
SG&A for the second quarter of fiscal 2018 was $27.6
million, an increase of $2.4 million from $25.2 million for the
same period last year. As a percentage of net sales, SG&A was
16.8% for the second quarter of fiscal 2018 compared to 16.4% for
the same period last year.
Other operating expenses for the second quarter of fiscal 2018
totaled $8.9 million compared to $2.0 million for the same period
last year. For the second quarter of fiscal 2018, other operating
expenses were comprised mainly of $6.5 million related to
restructuring of our Canadian operation and $2.4 million of
amortization of intangible assets. Other operating expenses last
year consisted primarily of $2.4 million in amortization of
intangibles offset by $0.4 million of other income.
Operating income for the second quarter of fiscal 2018 was $25.3
million compared to operating income of $29.6 million for the same
period last year. Excluding costs associated with restructuring of
our Canadian operation, operating income would have been $31.8
million for the second quarter of fiscal 2018 compared to an
adjusted $29.8 million for the same period last year. Excluding
these adjustments, operating income as a percentage of net sales
would have been 19.3% compared to 19.3% for the same period last
year.
Interest expense, net was $1.9 million for the second quarter of
fiscal 2018 compared to $2.3 million for the same period last
year.
Income tax expense for the second quarter of fiscal 2018 was
$8.5 million compared to $8.9 million for the same period last
year. Our effective income tax rate for the second quarter of
fiscal 2018 was 36.4% compared to 32.9% for the same period last
year. The effective income tax rate was impacted by discrete tax
benefit of $0.9 million associated with the restructuring of our
Canadian operation and other state discrete tax benefits of $0.1
million.
Net income for the second quarter of fiscal 2018 was $14.8
million compared to $18.2 million for the same period last year. On
an adjusted basis, net income would have been $20.3 million for the
second quarter of fiscal 2018, compared to an adjusted net income
of $18.4 million for the same period last year.
Diluted EPS for the second quarter of fiscal 2018 was 61 cents
per share compared to 77 cents per share for the same period last
year. On an adjusted basis, diluted EPS for the second quarter of
fiscal 2018 would have been 83 cents per share compared to an
adjusted diluted EPS of 78 cents per share for the same period last
year, an increase of 6.4%.
Backlog, as of September 30, 2017, was $390.2 million compared
to $341.8 million as of October 1, 2016.
Restructuring of Canadian
OperationIn the second quarter of fiscal 2018, the
Company reached a decision to restructure its manufacturing
operation in Montreal, Canada. After completing its obligations,
the Company expects to close its Montreal location and consolidate
certain residual assets into other locations by the end of this
fiscal year. As a result, the Company recorded an after-tax charge
of $5.6 million associated with the restructuring in the second
quarter of fiscal 2018 attributable to the Engineered Products
segment. The $5.6 million charge includes $1.3 million impairment
of fixed assets and $5.2 million impairment of intangible assets
offset by $0.9 million tax benefit. The total expected impact of
this restructuring will be between $7.0 million and $7.5 million in
after-tax charges. The Company expects a positive cash flow result
of approximately $4.4 million from this action.
Outlook for the Third Quarter Fiscal
2018The Company expects net sales to be approximately
$162.0 million to $163.0 million in the third quarter fiscal 2018.
This would result in a growth rate of approximately 10.5% to 11.1%
on a year over year basis.
Live WebcastRBC Bearings
Incorporated will host a webcast at 11:00 a.m. ET today to discuss
the quarterly results. To access the webcast, go to the investor
relations portion of the Company’s website, www.rbcbearings.com,
and click on the webcast icon. If you do not have access to the
Internet and wish to listen to the call, dial 844-419-1755
(international callers dial 216-562-0468) and provide conference ID
# 9098489. An audio replay of the call will be available from 2:00
p.m. ET November 3rd, 2017 until 1:00 p.m. ET November 10th, 2017.
The replay can be accessed by dialing 855-859-2056 (international
callers dial 404-537-3406) and providing conference call ID #
9098489. Investors are advised to dial into the call at least ten
minutes prior to the call to register.
Non-GAAP Financial
MeasuresIn addition to disclosing results of operations
that are determined in accordance with U.S. generally accepted
accounting principles (“GAAP”), this press release also discloses
non-GAAP results of operations that exclude certain items. These
non-GAAP measures adjust for items that Management believes are
unusual. Management believes that the presentation of these
non-GAAP measures provides useful information to investors
regarding the Company’s results of operations, as these non-GAAP
measures allow investors to better evaluate ongoing business
performance. Investors should consider non-GAAP measures in
addition to, not as a substitute for, financial measures prepared
in accordance with U.S. GAAP. A reconciliation of the non-GAAP
measures disclosed in the press release with the most comparable
U.S. GAAP measures are included in the financial table attached to
this press release.
About RBC BearingsRBC
Bearings Incorporated is an international manufacturer and marketer
of highly engineered precision bearings and components. Founded in
1919, the Company is primarily focused on producing highly
technical or regulated bearing products and components requiring
sophisticated design, testing and manufacturing capabilities for
the diversified industrial, aerospace and defense markets. The
Company is headquartered in Oxford, Connecticut.
Safe Harbor for Forward Looking
StatementsCertain statements in this press release
contain “forward-looking statements.” All statements other than
statements of historical fact are “forward-looking statements” for
purposes of federal and state securities laws, including the
section of this press release entitled “Outlook”; any projections
of earnings, revenue or other financial items relating to the
Company, any statement of the plans, strategies and objectives of
management for future operations; any statements concerning
proposed future growth rates in the markets we serve; any
statements of belief; any characterization of and the Company’s
ability to control contingent liabilities; anticipated trends in
the Company’s businesses; and any statements of assumptions
underlying any of the foregoing. Forward-looking statements may
include the words “may,” “estimate,” “intend,” “continue,”
“believe,” “expect,” “anticipate,” and other similar words.
Although the Company believes that the expectations reflected in
any forward-looking statements are reasonable, actual results could
differ materially from those projected or assumed in any of our
forward-looking statements. Our future financial condition and
results of operations, as well as any forward-looking statements,
are subject to change and to inherent risks and uncertainties
beyond the control of the Company. These risks and uncertainties
include, but are not limited to, risks and uncertainties relating
to general economic conditions, geopolitical factors, future levels
of general industrial manufacturing activity, future financial
performance, market acceptance of new or enhanced versions of the
Company’s products, the pricing of raw materials, changes in the
competitive environments in which the Company’s businesses operate,
the outcome of pending or future litigation and governmental
proceedings and approvals, estimated legal costs, increases in
interest rates, tax legislation and changes, the Company’s ability
to meet its debt obligations, the Company’s ability to acquire and
integrate complementary businesses, and risks and uncertainties
listed or disclosed in the Company’s reports filed with the
Securities and Exchange Commission, including, without limitation,
the risks identified under the heading “Risk Factors” set forth in
the Company’s most recent Annual Report filed on Form 10-K. The
Company does not intend, and undertakes no obligation, to update or
alter any forward-looking statements.
RBC Bearings Incorporated Consolidated Statements of
Operations (dollars in thousands, except share and per share
data) (Unaudited)
Three Months Ended Six Months Ended
September 30, October 1, September 30,
October 1, 2017 2016 2017 2016
Net sales $ 164,317 $ 153,943 $ 328,214 $ 308,522 Cost of
sales 102,506 97,212 204,494
194,540 Gross margin 61,811 56,731 123,720 113,982
Operating expenses: Selling, general and administrative
27,595 25,188 55,373 50,984 Other, net 8,938
1,989 11,269 4,223 Total operating
expenses 36,533 27,177 66,642 55,207 Operating income 25,278
29,554 57,078 58,775 Interest expense, net 1,914 2,255 3,943
4,548 Other non-operating (income) expense 64
149 436 267 Income before income taxes
23,300 27,150 52,699 53,960 Provision for income taxes 8,477
8,922 16,067 17,692 Net
income $ 14,823 $ 18,228 $ 36,632 $ 36,268
Net income per common share: Basic $ 0.62 $ 0.78 $ 1.53 $
1.55 Diluted $ 0.61 $ 0.77 $ 1.51 $ 1.53 Weighted average
common shares: Basic 23,946,360 23,470,650 23,875,749 23,395,614
Diluted 24,309,593 23,712,717 24,250,740 23,670,000
Three Months Ended Six Months
Ended Reconciliation of Reported Gross Margin to
September 30, October 1, September 30,
October 1, Adjusted Gross Margin: 2017
2016 2017 2016 Reported gross margin $
61,811 # $ 56,731 $ 123,720 # $ 113,982 Inventory purchase
accounting adjustment - - -
382 Adjusted gross margin $ 61,811 $ 56,731 $
123,720 $ 114,364
Three Months Ended Six Months Ended Reconciliation
of Reported Operating Income to September 30, October
1, September 30, October 1, Adjusted Operating
Income: 2017 2016 2017 2016
Reported operating income $ 25,278 # $ 29,554 $ 57,078 # $ 58,775
Inventory purchase accounting adjustment - - - 382 Restructuring
6,494 222 6,494 222
Adjusted operating income $ 31,772 $ 29,776 $ 63,572
$ 59,379
Reconciliation of Reported Net Income and Net Income
Three Months Ended Six Months Ended Per Common
Share to Adjusted Net Income and September 30,
October 1, September 30, October 1,
Adjusted Net Income Per Common Share: 2017
2016 2017 2016 Reported net income $
14,823 # $ 18,228 $ 36,632 # $ 36,268 Inventory purchase accounting
adjustment (1) - - - 257 Restructuring (1) 5,577 149 5,577 149
Foreign exchange translation loss (gain) (1) (11 ) - 197 - Discrete
tax loss (benefit) (134 ) 33 (182 )
(182 ) Adjusted net income $ 20,255 $ 18,410 $ 42,224
$ 36,492 (1) After tax impact. Adjusted net income
per common share: Basic $ 0.85 $ 0.78 $ 1.77 $ 1.56 Diluted $ 0.83
$ 0.78 $ 1.74 $ 1.54 Weighted average common shares: Basic
23,946,360 23,470,650 23,875,749 23,395,614 Diluted 24,309,593
23,712,717 24,250,740 23,670,000
Three Months Ended Six Months Ended September
30, October 1, September 30, October 1,
Segment Data, Net External Sales: 2017 2016
2017 2016 Plain bearings segment $ 72,392 $
68,835 $ 145,045 $ 139,285 Roller bearings segment 32,317 26,795
63,730 54,629 Ball bearings segment 16,480 14,569 32,260 28,279
Engineered products segment 43,128 43,744
87,179 86,329 $ 164,317 $
153,943 $ 328,214 $ 308,522
Three Months Ended Six Months Ended
September 30, October 1, September 30,
October 1, Selected Financial Data: 2017
2016 2017 2016 Depreciation and
amortization $ 7,140 $ 6,959 $ 14,238 $ 13,699 Incentive
stock compensation expense $ 3,402 $ 3,178 $ 6,630 $ 5,952
Adjusted operating income plus depreciation/amortization
plus incentive stock compensation expense $
42,314 $ 39,913 $ 84,440 $ 79,030 Cash provided by
operating activities $ 24,153 $ 19,301 $ 63,962 $ 38,513
Capital expenditures $ 7,008 $ 4,455 $ 12,667 $ 9,621 Total
debt $ 220,228 $ 330,059 Cash and short-term investments $
42,885 $ 37,462 Repurchase of common stock $ 3,356 $ 3,530
Backlog $ 390,185 $ 341,812
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version on businesswire.com: http://www.businesswire.com/news/home/20171103005095/en/
RBC BearingsDaniel A. Bergeron,
203-267-5028dbergeron@rbcbearings.comorAlpha IR GroupMichael
Cummings, 617-461-1101investors@rbcbearings.com
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