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 first quarter of fiscal
year 2018.
First Quarter Highlights
Fiscal 2018 Fiscal 2017
Change
($ in millions)
GAAP Adjusted (1) GAAP Adjusted (1)
GAAP Adjusted (1) Net sales $163.9
$163.9 $154.6 $154.6 6.0% 6.0% Gross
margin $61.9 $61.9 $57.3 $57.6 8.1% 7.4% Gross margin % 37.8% 37.8%
37.0% 37.3% Operating income $31.8 $31.8 $29.2 $29.6 8.8% 7.4%
Operating income % 19.4% 19.4% 18.9% 19.2% Net income $21.8 $22.0
$18.0 $18.1 20.9% 21.5% Diluted EPS $0.90 $0.91 $0.76 $0.77 18.4%
18.2% (1) Results exclude items in reconciliation below.
“We are pleased with the solid operating performance to start
off our fiscal year,” said Dr. Michael J. Hartnett, Chairman and
Chief Executive Officer. “The company saw increased revenue from
both the Industrial and Aerospace sectors. The healthy earnings
growth and current backlog provide us confidence in our ability to
deliver strong performance over the year.”
First Quarter ResultsNet
sales for the first quarter of fiscal 2018 were $163.9 million
compared to $154.6 million in the first quarter of fiscal 2017, an
increase of 6.0%. Industrial sales increased 12.1% mainly driven by
marine, energy, mining, semi-conductor, and general industrial
activity. Aerospace sales increased 2.8% mainly driven by
commercial aircraft and defense.
Gross margin for the first quarter of fiscal 2018 was $61.9
million compared to $57.3 million for the same period last year.
Gross margin as a percentage of net sales was 37.8% in the first
quarter of fiscal 2018 compared to 37.0% for the same period last
year. Excluding acquisition related costs of $0.4 million in fiscal
2017, gross margin as a percentage of net sales would have been
37.8% in the first quarter of fiscal 2018 compared to 37.3% in
fiscal 2017.
SG&A for the first quarter of fiscal 2018 was $27.8 million
compared to $25.8 million for the same period last year. As a
percentage of net sales, SG&A was 16.9% for the first quarter
of fiscal 2018 compared to 16.7% for the same period last year. The
increase was primarily due to higher personnel related expenses of
$1.3 million, $0.5 million of additional incentive stock
compensation, and other items of $0.2 million.
Other operating expenses for the first quarter of fiscal 2018
totaled $2.3 million compared to $2.2 million for the same period
last year. For the first quarter of fiscal 2018 other operating
expenses were comprised mainly of $2.4 million of amortization of
intangibles offset by $0.1 million of other operating income. For
the first quarter of fiscal 2017 other operating expenses were
comprised mainly of $2.2 million of amortization of
intangibles.
Operating income for the first quarter of fiscal 2018 was $31.8
million compared to operating income of $29.2 million for the same
period last year. Operating income as a percentage of net sales was
19.4% compared to 18.9% for the same period last year. Excluding
acquisition related costs in fiscal 2017, operating income as a
percentage of net sales was 19.4% for the first quarter of fiscal
2018 compared to 19.2% for the same adjusted period last year.
Interest expense, net was $2.0 million for the first quarter of
fiscal 2018 compared to $2.3 million for the same period last year.
For the first quarter of fiscal 2018 interest expense, net
consisted of interest expense of $1.7 million and deferred debt
fees of $0.3 million.
Other non-operating expense for the first quarter of fiscal 2018
was $0.4 million. In the first quarter of fiscal 2018, other
non-operating expenses were mainly comprised of $0.3 million of
foreign exchange translation loss and $0.1 million of other
items.
Income tax expense for the first quarter of fiscal 2018 was $7.6
million compared to $8.8 million for the same period last year. The
effective income tax rate for the first quarter of fiscal 2018 was
25.8% compared to 32.7% for the same period last year. On April 2,
2017, the Company adopted a new accounting standard ASU No.
2016-09, “Improvements to Employee Share-Based Payment Accounting.”
As a result of the adoption, the Company began recording the tax
effects associated with stock-based compensation through the income
statement on a prospective basis which resulted in a tax benefit of
$2.3 million for the first three months of fiscal 2018. Prior to
adoption, these amounts would have been recorded as an increase to
additional paid-in capital. The adoption of this standard also
resulted in a cumulative effect change to opening retained earnings
of $1.1 million for previously unrecognized excess tax
benefits.
Net income for the first quarter of fiscal 2018 was $21.8
million compared to $18.0 million for the same period last year. On
an adjusted basis, net income for the first quarter of fiscal 2018
would have been $22.0 million compared to $18.1 million for the
same period last year.
Diluted EPS for the first quarter of fiscal 2018 was 90 cents
per share compared to 76 cents per share for the same period last
year. On an adjusted basis diluted EPS for the first quarter of
fiscal 2018 would have been 91 cents per share compared to diluted
EPS of 77 cents per share for the same period last year. The
adoption of ASU No. 2016-09 added approximately 9 cents to diluted
and adjusted diluted EPS in the first quarter fiscal 2018.
Impact of New Accounting
StandardIn March 2016, the FASB issued ASU No. 2016-09,
"Improvements to Employee Share-Based Payment Accounting" which
amends ASC Topic 718, Compensation - Stock Compensation. This ASU
includes provisions intended to simplify various aspects related to
how share-based payments are accounted for and presented in the
financial statements. The Company adopted this standard on April 2,
2017. As a result of the adoption, the Company began recording the
tax effects associated with stock-based compensation through the
income statement on a prospective basis which resulted in a tax
benefit of $2.3 million for the first three months of fiscal 2018.
Prior to adoption, these amounts would have been recorded as an
increase to additional paid-in capital. This change may create
volatility in the Company's effective tax rate going forward. The
adoption of this standard resulted in a cumulative effect change to
opening retained earnings of $1.1 million for previously
unrecognized excess tax benefits.
Additionally, the Company will prospectively classify all
tax-related cash flows resulting from share-based payments,
including the excess tax benefits related to the settlement of
stock-based awards, as cash flows from operating activities in the
statement of cash flows. Prior to the adoption of this standard,
these were shown as cash inflows from financing activities and cash
outflows from operating activities.
The adoption of ASU No. 2016-09 also resulted in the Company
removing the excess tax benefits from the assumed proceeds
available to repurchase shares when calculating diluted earnings
per share on a prospective basis. The revised calculation increased
the diluted weighted average common shares outstanding by
approximately 0.1 million shares. The Company made an accounting
policy election to continue to estimate forfeitures as it did prior
to adoption.
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
# 60348702. An audio replay of the call will be available from 2:00
p.m. ET August 8th, 2017 until 2:00 p.m. ET August 15th, 2017. The
replay can be accessed by dialing 855-859-2056 (international
callers dial 404-537-3406) and providing conference call ID #
60348702. 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 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 GAAP. A reconciliation of the non-GAAP measures
disclosed in the press release with the most comparable 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 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, aerospace and defense manufacturing
activity, customer relationships, future financial performance,
market acceptance of new or enhanced versions of the Company’s
products, the pricing of raw materials, currency fluctuations,
changes in the competitive and regulatory environments in which the
Company’s businesses operate, the outcome of pending or future
litigation and governmental proceedings and approvals, the ability
to achieve satisfactory operating results in the integration of
acquired companies, loss of key personnel, estimated legal costs,
increases in interest rates, the Company’s ability to meet its debt
obligations, 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 July 1, July 2, 2017
2016 Net sales $ 163,897 $ 154,579 Cost of sales
101,988 97,328 Gross margin 61,909
57,251 Operating expenses: Selling, general and
administrative 27,778 25,796 Other, net 2,331
2,234 Total operating expenses 30,109 28,030
Operating income 31,800 29,221 Interest expense, net 2,029
2,293 Other non-operating (income) expense 372
118 Income before income taxes 29,399 26,810 Provision for
income taxes 7,590 8,770 Net income $
21,809 $ 18,040 Net income per common share:
Basic $ 0.92 $ 0.77 Diluted $ 0.90 $ 0.76 Weighted average
common shares: Basic 23,805,138 23,320,579 Diluted 24,189,375
23,626,751
Three Months Ended
Reconciliation of Reported Gross Margin to July 1,
July 2, Adjusted Gross Margin: 2017
2016 Reported gross margin $ 61,909
$ 57,251 Inventory purchase accounting adjustment -
382 Adjusted gross margin $ 61,909 $ 57,633
Three Months Ended
Reconciliation of Reported Operating Income to July
1, July 2, Adjusted Operating Income: 2017
2016 Reported operating income $ 31,800
$ 29,221 Inventory purchase accounting adjustment -
382 Adjusted operating income $ 31,800 $
29,603
Reconciliation
of Reported Net Income and Net Income Three Months Ended
Per Common Share to Adjusted Net Income and July 1,
July 2, Adjusted Net Income Per Common Share:
2017 2016 Reported net income $ 21,809
$ 18,040 Inventory purchase accounting adjustment (1) - 257 Foreign
exchange translation loss (1) 208 - Discrete tax benefit (48
) (215 ) Adjusted net income $ 21,969 $ 18,082
(1) After tax impact. Adjusted net income per common share:
Basic $ 0.92 $ 0.78 Diluted $ 0.91 $ 0.77 Weighted average
common shares: Basic 23,805,138 23,320,579 Diluted 24,189,375
23,626,751
Three Months Ended July
1, July 2, Segment Data, Net External Sales:
2017 2016 Plain bearings segment $ 72,653 $
70,450 Roller bearings segment 31,413 27,834 Ball bearings segment
15,780 13,710 Engineered products segment 44,051
42,585 $ 163,897 $ 154,579
Three Months Ended July 1,
July 2, Selected Financial Data: 2017
2016 Depreciation and amortization $ 7,098 $ 6,740
Incentive stock compensation expense $ 3,228 $ 2,774
Adjusted operating income plus depreciation/amortization
plus incentive stock compensation expense $ 42,126 $ 39,117
Cash provided by operating activities $ 39,809 $
19,212 Capital expenditures $ 5,659 $ 5,166 Total
debt $ 237,865 $ 343,808 Cash $ 45,463 $ 37,261 Total
debt minus cash $ 192,402 $ 306,547 Repurchase of common
stock $ 2,288 $ 3,426 Backlog $ 380,450 $ 352,556
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version on businesswire.com: http://www.businesswire.com/news/home/20170808005251/en/
RBC BearingsDaniel A. Bergeron,
203-267-5028dbergeron@rbcbearings.comorAlpha IR GroupMichael
Cummings, 617-982-0475investors@rbcbearings.com
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