RBC RBC Bearings Incorporated

RBC Bearings Incorporated (NYSE: RBC, RBCP), a leading international manufacturer of highly engineered precision bearings, components and essential systems for the industrial, defense and aerospace industries, today reported results for the first quarter of fiscal 2024.

First Quarter Financial Highlights

• First quarter net sales of $387.1 million increased 9.3% over last year, Aerospace/Defense up 21.2% and Industrial up 4.7%.
• Gross margin of 43.4% in the first quarter of fiscal 2024 compared to 39.9% for the same quarter last year. Up 400bps from adjusted gross margin for fiscal year 2022.
• First quarter net income as a percentage of net sales of 12.9% vs 10.6% last year; Adjusted EBITDA as a percentage of net sales of 31.1% vs 28.4% last year.
• Free cash flow of $55.1 million, net debt to TTM adjusted EBITDA reduced to 2.84.
• GAAP diluted EPS of $1.52 and adjusted diluted EPS of $2.13.

($ in millions)

Fiscal 2024

 

Fiscal 2023

 

 

% Change

GAAP

 

Adjusted (1)

GAAP

 

Adjusted (1)

 

GAAP

 

Adjusted (1)

Net sales

$387.1

 

 

$354.1

 

 

 

9.3%

 

 

Gross margin

$167.9

 

$141.2

 

 

 

18.9%

 

Gross margin %

43.4%

 

39.9%

 

 

 

 

 

Operating income

$85.0

 

$85.3

$64.5

 

$68.3

 

31.9%

 

25.0%

Operating income %

22.0%

 

22.0%

18.2%

 

19.3%

 

 

 

 

Net income

$50.0

 

$67.7

$37.4

 

$57.5

 

33.6%

 

17.6%

Net income attributable to common stockholders

$44.3

 

$61.9

$31.7

 

$51.8

 

39.7%

 

19.6%

Diluted EPS attributable to common stockholders

 $1.52

 

$2.13

$1.09

 

$1.79

 

39.4%

 

19.0%

(1) Results exclude items in reconciliation below.

 

 

 

 

 

 

 

 

 

 

 

 

“We are pleased with our first quarter results, as net sales increased 9.3% during the period,” said Dr. Michael J. Hartnett, Chairman and Chief Executive Officer. “As anticipated, we see strong demand for products from the aerospace and defense marine sectors. Our aircraft customers’ pursuit of even greater plane build rates has pushed RBC sales growth well into the double digits; and our industrial sector experiences continuing benefit from healthy order rates for bearings servicing high-growth markets.”

First Quarter Results

Net sales for the first quarter of fiscal 2024 were $387.1 million, an increase of 9.3% from $354.1 million in the first quarter of fiscal 2023. Net sales for our Industrial segment increased 4.7%, while net sales for our Aerospace/Defense segment increased 21.2%. Gross margin for the first quarter of fiscal 2024 was $167.9 million compared to $141.2 million for the same period last year.

SG&A for the first quarter of fiscal 2024 was $64.7 million, an increase of $8.9 million from $55.8 million for the same period last year. As a percentage of net sales, SG&A was 16.7% for the first quarter of fiscal 2024 compared to 15.8% for the same period last year.

Other operating expenses for the first quarter of fiscal 2024 totaled $18.2 million compared to $20.9 million for the same period last year. For the first quarter of fiscal 2024, other operating expenses included $17.5 million of amortization of intangible assets, $0.3 million of restructuring costs, and $0.4 million of other items. For the first quarter of fiscal 2023, other operating expenses included $17.3 million of amortization of intangible assets and $3.8 million of costs associated with the Dodge acquisition, partially offset by $0.2 million of other income.

Operating income for the first quarter of fiscal 2024 was $85.0 million compared to $64.5 million for the same period last year. Excluding approximately $0.3 million of restructuring costs associated with the closing of a plant located in California, adjusted operating income for the first quarter of fiscal 2024 was $85.3 million; excluding approximately $3.8 million of acquisition costs associated with the Dodge acquisition, adjusted operating income for the first quarter of fiscal 2023 was $68.3 million. Adjusted operating income as a percentage of net sales was 22.0% for the first quarter of fiscal 2024 compared to 19.3% for the same period last year.

Interest expense, net, was $20.5 million for the first quarter of fiscal 2024 compared to $15.8 million for the same period last year.

Income tax expense for the first quarter of fiscal 2024 was $14.0 million compared to $10.5 million for the same period last year. The effective income tax rate for the first quarter of fiscal 2024 was 21.9% compared to 21.8% for the same period last year.

Net income for the first quarter of fiscal 2024 was $50.0 million compared to $37.4 million for the same period last year. On an adjusted basis, net income was $67.7 million for the first quarter of fiscal 2024 compared to $57.5 million for the same period last year. Net income attributable to common stockholders for the first quarter of fiscal 2024 was $44.3 million compared to $31.7 million for the same period last year. On an adjusted basis, net income attributable to common stockholders for the first quarter of fiscal 2024 was $61.9 million compared to $51.8 million for the same period last year.

Diluted EPS attributable to common stockholders for the first quarter of fiscal 2024 was $1.52 compared to $1.09 for the same period last year. On an adjusted basis, diluted EPS attributable to common stockholders was $2.13 for the first quarter of fiscal 2024 compared to $1.79 for the same period last year.

Backlog as of July 1, 2023 was $641.1 million compared to $635.7 million as of July 2, 2022 and $663.8 million as of April 1, 2023. The $641.1 million backlog amount excludes $124.1 million of orders that we expect to fulfill beyond 12 months from July 1, 2023. The $635.7 million backlog amount excluded $67.0 million of orders that we expected to fulfill beyond 12 months from July 2, 2022. The $663.8 million backlog amount excludes $95.6 million of orders that we expect to fulfill beyond 12 months from April 1, 2023.

Outlook for the Second Quarter Fiscal 2024

The Company expects net sales to be approximately $380.0 million to $390.0 million in the second quarter of fiscal 2024, compared to $369.2 million last year, a growth rate of 2.9% to 5.6%. Keep in mind our first and fourth quarters are historically our strongest as second and third quarter holidays reduce production days. We are on track to reach full year fiscal 2024 net sales of approximately $1.6 billion.

Live Webcast

RBC Bearings Incorporated will host a webcast on Friday, August 4th, 2023 at 11:00 a.m. ET 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 877-407-4019 (international callers dial +1 201-689-8337) and provide conference ID # 13740255. An audio replay of the call will be available from 2:00 p.m. ET August 4th, 2023, until 2:00 p.m. ET August 18th, 2023. The replay can be accessed by dialing 877-660-6853 (international callers dial +1 201-612-7415) and providing conference ID # 13740255. Investors are advised to dial into the call at least ten minutes prior to the call to register.

Non-GAAP Financial Measures

In 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, as well as other non-cash items including but not limited to depreciation, amortization, and equity-based incentive compensation. 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 this press release with the most comparable GAAP measures are included in the financial table attached to this press release.

Adjusted Operating Income Adjusted operating income excludes acquisition expenses (including the impact of acquisition-related fair value adjustments in connection with purchase), restructuring and other similar charges, gains or losses on extinguishment of debt, and other non-operational, non-cash or non-recurring losses. We believe that adjusted operating income is useful in assessing our financial performance by excluding items that are not indicative of our core operating performance or that may obscure trends useful in evaluating our continuing results of operations.

Adjusted Net Income Attributable to Common Stockholders and Adjusted Earnings Per Share Attributable to Common Stockholders Adjusted net income attributable to common stockholders and adjusted earnings per share attributable to common stockholders (calculated on a diluted basis) exclude non-cash expenses for amortization related to acquired intangible assets, stock-based compensation, amortization of deferred finance fees, acquisition expenses (including the impact of acquisition-related fair value adjustments in connection with purchase), restructuring and other similar charges, gains or losses on divestitures, discontinued operations, gains or losses on extinguishment of debt, and other non-operational, non-cash or non-recurring losses, net of their income tax impact. We believe that adjusted net income and adjusted earnings per share are useful in assessing our financial performance by excluding items that are not indicative of our core operating performance or that may obscure trends useful in evaluating our continuing results of operations.

Adjusted EBITDA We use the term “Adjusted EBITDA” to describe net income adjusted for the items summarized in the “Reconciliation of GAAP to Non-GAAP Financial Measures” table below. Adjusted EBITDA is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors, excluding non-operational, non-cash or non-recurring losses or gains. In view of our debt level, it is also provided to aid investors in understanding our compliance with our debt covenants. Management and various investors use the ratio of total debt less cash to Adjusted EBITDA, or "net debt leverage," as a measure of our financial strength and ability to incur incremental indebtedness when making investment decisions and evaluating us against peers. Lastly, management and various investors use the ratio of the change in Adjusted EBITDA divided by the change in net sales (referred to as “incremental margin” in the case of an increase in net sales or “decremental margin” in the case of a decrease in net sales) as an additional measure of our financial performance and utilize it when making investment decisions and evaluating us against peers.

Adjusted EBITDA is not a presentation made in accordance with GAAP, and our definition of Adjusted EBITDA may vary from the definition used by others in our industry. Adjusted EBITDA should not be considered as an alternative to net income, income from operations, or any other performance measures derived in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted EBITDA does not reflect: (a) our capital expenditures, future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements for, our working capital needs; (c) the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt; (d) tax payments that represent a reduction in cash available to us; (e) any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; or (f) the impact of earnings or charges resulting from matters that we and the lenders under our credit agreement may not consider indicative of our ongoing operations. In particular, our definition of Adjusted EBITDA adds back certain non-cash, non-operating or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur or vary greatly, are difficult to predict, and can represent the effect of long-term strategies as opposed to short-term results. In addition, certain of these expenses can represent the reduction of cash that could be used for other corporate purposes. Further, although not included in the calculation of Adjusted EBITDA below, the measure may at times (i) include estimated cost savings and operating synergies related to operational changes ranging from acquisitions to dispositions to restructurings and/or (ii) exclude one-time transition expenditures that we anticipate we will need to incur to realize cost savings before such savings have occurred.

About RBC Bearings

RBC Bearings Incorporated is an international manufacturer and marketer of highly engineered precision bearings, components and essential systems. 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 Statements

Certain 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 following: 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,” “would,” “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 aerospace/defense and industrial market activity, future financial performance, our debt level, the integration of the Dodge acquisition, 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, our ability to meet our debt obligations, the Company’s ability to acquire and integrate complementary businesses, and risks and uncertainties listed or disclosed in our 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,

 

2023

 

 

2022

 

Net sales

 $

387,122

 

 $

354,080

 

Cost of sales

 

219,271

 

 

212,928

 

Gross margin

 

167,851

 

 

141,152

 

  Operating expenses: Selling, general and administrative

 

64,673

 

 

55,828

 

Other, net

 

18,164

 

 

20,854

 

Total operating expenses

 

82,837

 

 

76,682

 

  Operating income

 

85,014

 

 

64,470

 

  Interest expense, net

 

20,474

 

 

15,799

 

Other non-operating expense

 

527

 

 

767

 

Income before income taxes

 

64,013

 

 

47,904

 

Provision for income taxes

 

13,986

 

 

10,466

 

Net income

 

50,027

 

 

37,438

 

Preferred stock dividends

 

5,750

 

 

5,750

 

Net income attributable to common stockholders

 $

44,277

 

 $

31,688

 

  Net income per common share attributable to common stockholders: Basic

 $

1.53

 

 $

1.11

 

Diluted

 $

1.52

 

 $

1.09

 

  Weighted average common shares: Basic

 

28,846,874

 

 

28,670,488

 

Diluted

 

29,114,819

 

 

28,944,955

 

  Three Months Ended Reconciliation of Reported Operating Income to July 1, July 2, Adjusted Operating Income:

 

2023

 

 

2022

 

Reported operating income

 $

85,014

 

 $

64,470

 

Transaction and related costs

 

-

 

 

82

 

Transition services

 

-

 

 

3,705

 

Restructuring and consolidation

 

290

 

 

-

 

Adjusted operating income

 $

85,304

 

 $

68,257

 

  Three Months Ended Reconciliation of Reported Net Income to Adjusted Net July 1, July 2, Income Attributable to Common Stockholders:

 

2023

 

 

2022

 

Reported net income

 $

50,027

 

 $

37,438

 

Transaction and related costs

 

-

 

 

82

 

Transition services

 

-

 

 

3,705

 

Restructuring and consolidation

 

290

 

 

-

 

Foreign exchange translation loss/(gain)

 

-

 

 

(163

)

M&A related amortization

 

16,258

 

 

16,411

 

Stock compensation expense

 

5,404

 

 

3,819

 

Amortization of deferred finance fees

 

856

 

 

2,298

 

Tax impact of adjustments and other tax matters

 

(5,140

)

 

(6,038

)

Adjusted net income

 $

67,695

 

 $

57,552

 

  Preferred stock dividends

 

5,750

 

 

5,750

 

  Adjusted net income attributable to common stockholders

 $

61,945

 

 $

51,802

 

    Adjusted net income per common share attributable to common stockholders: Basic

 $

2.15

 

 $

1.81

 

Diluted

 $

2.13

 

 $

1.79

 

  Weighted average common shares: Basic

 

28,846,874

 

 

28,670,488

 

Diluted

 

29,114,819

 

 

28,944,955

 

  Three Months Ended Reconciliation of Reported Net Income to July 1, July 2, Adjusted EBITDA:

 

2023

 

 

2022

 

Reported net income

 $

50,027

 

 $

37,438

 

Interest expense, net

 

20,474

 

 

15,799

 

Provision for income taxes

 

13,986

 

 

10,466

 

Stock compensation expense

 

5,404

 

 

3,819

 

Depreciation and amortization

 

29,674

 

 

28,642

 

Other non-operating expense

 

527

 

 

767

 

Transaction and related costs

 

-

 

 

82

 

Transition services

 

-

 

 

3,705

 

Restructuring and consolidation

 

290

 

 

-

 

Adjusted EBITDA

 $

120,382

 

 $

100,718

 

  Three Months Ended   July 1, July 2, Selected Financial Data:

 

2023

 

 

2022

 

Cash provided by operating activities

 $

61,798

 

 $

59,035

 

  Capital expenditures

 $

6,702

 

 $

7,857

 

  Total debt

 $

1,344,885

 

 $

1,565,330

 

  Cash and cash equivalents

 $

56,744

 

 $

119,587

 

  Total debt minus cash and cash equivalents

 $

1,288,141

 

 $

1,445,743

 

  Repurchase of common stock

 $

6,782

 

 $

5,984

 

  Backlog

 $

641,124

 

 $

635,741

 

    Three Months Ended July 1, July 2, Segment Data, Net External Sales:

 

2023

 

 

2022

 

Aerospace and defense segment

 $

120,472

 

 $

99,399

 

Industrial segment

 

266,650

 

 

254,681

 

Total net external sales

 $

387,122

 

 $

354,080

 

  FY2024 Q2 Outlook - Modeling Items: Net sales $380,000-$390,000 Gross margin (as a percentage of net sales) 42.00% - 42.50% SG&A (as a percentage of net sales) 16.25%-16.75% Interest expense, net  $19,500-$20,000 Preferred stock dividends

$5,750

 

 

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RBC Bearings Robert Sullivan 203-267-5014 Rsullivan@rbcbearings.com Alpha IR Group Michael Cummings 617-461-1101 investors@rbcbearings.com