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 second quarter of fiscal 2024.

Second Quarter Financial Highlights

• Second quarter net sales of $385.6 million increased 4.4% over last year, Aerospace/Defense up 22.9 % and Industrial down 2.8 %.

• Gross margin of 43.1% in the second quarter of fiscal 2024 compared to 40.9 % for the same quarter last year.

• Second quarter net income as a percentage of net sales of 13.4% vs 11.9% last year; Adjusted EBITDA as a percentage of net sales of 31.7 % vs 29.5 % last year.

($ in millions)

Fiscal 2024

 

 

Fiscal 2023

 

 

Change

GAAP

   

Adjusted (1)

 

GAAP

   

Adjusted (1)

 

GAAP

   

Adjusted (1)

Net sales

$

385.6

   

 

 

$

369.2

   

 

 

4.4%

   

 

Gross margin

$

166.3

   

$

166.6

 

$

151.1

   

$

151.1

 

10.0%

   

10.2%

Gross margin %

 

43.1%

   

 

43.2%

 

 

40.9%

   

 

40.9%

 

 

   

 

Operating income

$

87.8

   

$

88.4

 

$

72.0

   

$

76.0

 

21.8%

   

16.3%

Operating income %

 

22.8%

   

 

22.9%

 

 

19.5%

   

 

20.6%

 

 

   

 

Net income

$

51.7

   

$

68.9

 

$

43.8

   

$

61.9

 

17.9%

   

11.3%

Net income attributable to common stockholders

$

45.9

   

$

63.2

 

$

38.1

   

$

56.2

 

20.8%

   

12.5%

Diluted EPS

$

1.58

   

$

2.17

 

$

1.31

   

$

1.93

 

20.6%

   

12.4%

(1) Results exclude items in reconciliation below.

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

   

 

Six Month Financial Highlights

($ in millions)

Fiscal 2024

 

 

Fiscal 2023

 

 

Change

GAAP

   

Adjusted (1)

 

GAAP

   

Adjusted (1)

 

GAAP

   

Adjusted (1)

Net sales

$

772.7

   

 

 

$

723.3

   

 

 

6.8%

   

 

Gross margin

$

334.2

   

$

334.5

 

$

292.3

   

$

292.3

 

14.3%

   

14.4%

Gross margin %

 

43.2%

   

 

43.3%

 

 

40.4%

   

 

40.4%

 

 

   

 

Operating income

$

172.8

   

$

173.7

 

$

136.5

   

$

144.3

 

26.6%

   

20.4%

Operating income %

 

22.4%

   

 

22.5%

 

 

18.9%

   

 

19.9%

 

 

   

 

Net income

$

101.7

   

$

136.6

 

$

81.2

   

$

119.5

 

25.2%

   

14.3%

Net income attributable to common stockholders

$

90.2

   

$

125.1

 

$

69.8

   

$

108.0

 

29.4%

   

15.9%

Diluted EPS

$

3.10

   

$

4.30

 

$

2.40

   

$

3.72

 

29.2%

   

15.6%

(1) Results exclude items in reconciliation below.

 

   

 

 

 

 

   

 

 

 

 

   

 

“We are pleased with our second quarter results, which were in line with our expectations for the period,” said Dr. Michael J. Hartnett, Chairman and Chief Executive Officer. “Our aerospace and defense segment experienced another strong quarter as we continue to benefit from strong OEM demand for our products and an improving supply chain. As we look toward the second half of fiscal 2024, we remain confident that we are on track to deliver record performance.”

Second Quarter Results

Net sales for the second quarter of fiscal 2024 were $385.6 million, an increase of 4.4% from $369.2 million in the second quarter of fiscal 2023. Net sales for our Industrial segment decreased 2.8%, while net sales for our Aerospace/Defense segment increased 22.9%. Gross margin for the second quarter of fiscal 2024 was $166.3 million compared to $151.1 million for the same period last year.

SG&A for the second quarter of fiscal 2024 was $60.5 million, an increase of $3.0 million from $57.5 million for the same period last year. As a percentage of net sales, SG&A was 15.7% for the second quarter of fiscal 2024 compared to 15.6% for the same period last year.

Other operating expenses for the second quarter of fiscal 2024 totaled $18.0 million compared to $21.6 million for the same period last year. For the second quarter of fiscal 2024, other operating expenses included $17.6 million of amortization of intangible assets, $0.3 million of restructuring costs, and $0.1 million of other items. For the second quarter of fiscal 2023, other operating expenses included $16.8 million of amortization of intangible assets, $4.0 million of costs associated with the Dodge acquisition, and $0.8 million of other items.

Operating income for the second quarter of fiscal 2024 was $87.8 million compared to $72.0 million for the same period last year. Excluding approximately $0.6 million of restructuring costs, adjusted operating income for the second quarter of fiscal 2024 was $88.4 million; excluding approximately $4.0 million of acquisition-related costs, adjusted operating income for the second quarter of fiscal 2023 was $76.0 million. Adjusted operating income as a percentage of net sales was 22.9% for the second quarter of fiscal 2024 compared to 20.6% for the same period last year.

Interest expense, net, was $20.1 million for the second quarter of fiscal 2024 compared to $18.3 million for the same period last year.

Income tax expense for the second quarter of fiscal 2024 was $15.2 million compared to $9.7 million for the same period last year. The effective income tax rate for the second quarter of fiscal 2024 was 22.7% compared to 18.1% for the same period last year.

Net income for the second quarter of fiscal 2024 was $51.7 million compared to $43.8 million for the same period last year. On an adjusted basis, net income was $68.9 million for the second quarter of fiscal 2024 compared to $61.9 million for the same period last year. Refer to the tables below for details on the adjustments made to net income to arrive at adjusted net income. Net income attributable to common stockholders for the second quarter of fiscal 2024 was $45.9 million compared to $38.1 million for the same period last year. On an adjusted basis, net income attributable to common stockholders for the second quarter of fiscal 2024 was $63.2 million compared to $56.2 million for the same period last year.

Diluted EPS attributable to common stockholders for the second quarter of fiscal 2024 was $1.58 compared to $1.31 for the same period last year. On an adjusted basis, diluted EPS attributable to common stockholders was $2.17 for the second quarter of fiscal 2024 compared to $1.93 for the same period last year.

We are now entering the last year for the mandatorily convertible preferred stock. October 15, 2024 is the mandatory conversion date and is the last time we will have to pay a 5% dividend ($5.7 million per quarter), which reduces our net income attributable to common stockholders. This will lead to $23.0 million of annual cash savings in future periods.

If the preferred stock conversion were to have taken place during the second quarter of fiscal 2024, it would have resulted in an additional 2,029,980 shares of outstanding common stock. If we were to add these 2,029,980 shares and exclude the preferred stock quarterly dividend of $5.7 million, diluted EPS for this quarter would have been $1.66 rather than the reported $1.58, and adjusted diluted EPS would have been $2.21 rather than the reported $2.17.

Backlog as of September 30, 2023 was $641.3 million compared to $641.1 million as of July 1, 2023 and $653.2 million as of October 1, 2022. The $641.3 million backlog amount excluded $121.1 million of orders that we expected to fulfill beyond 12 months from September 30, 2023; the $641.1 million backlog amount excluded $124.1 million of orders that we expected to fulfill beyond 12 months from July 1, 2023; the $653.2 million backlog amount excluded $67.3 million of orders that we expected to fulfill beyond 12 months from October 1, 2022.

Specline Acquisition

On August 18, 2023, RBC acquired the business assets of Specline, Inc. (“Specline”) for $18.7 million. Specline, which is based in Carson City, Nevada, is a manufacturer of precision bearings for the commercial and defense aerospace markets. Specline is included in our Aerospace/Defense segment.

Outlook for the Third Quarter Fiscal 2024

The Company expects net sales to be approximately $370.0 million to $380.0 million in the third quarter of fiscal 2024, compared to $351.6 million last year, a growth rate of 5.2% to 8.1%. 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 $1.55 to $1.60 billion.

Live Webcast

RBC Bearings Incorporated will host a webcast on Thursday, November 9th, 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 # 13741820. An audio replay of the call will be available from 2:00 p.m. ET November 9th, 2023, until 2:00 p.m. ET November 23rd, 2023. The replay can be accessed by dialing 877-660-6853 (international callers dial +1 201-612-7415) and providing conference ID # 13741820. 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 Gross Margin and Adjusted Operating Income

Adjusted gross margin excludes the impact of restructuring costs associated with the closing of a plant. 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, Adjusted EBITDA aids our 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 some investors 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 on Form 10-K filed with the SEC. 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,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

$

385,572

 

$

369,167

 

$

772,694

 

$

723,247

 

Cost of sales

 

219,247

 

 

218,020

 

 

438,518

 

 

430,948

 

Gross margin

 

166,325

 

 

151,147

 

 

334,176

 

 

292,299

 

  Operating expenses: Selling, general and administrative

 

60,560

 

 

57,519

 

 

125,233

 

 

113,347

 

Other, net

 

18,032

 

 

21,611

 

 

36,196

 

 

42,465

 

Total operating expenses

 

78,592

 

 

79,130

 

 

161,429

 

 

155,812

 

  Operating income

 

87,733

 

 

72,017

 

 

172,747

 

 

136,487

 

  Interest expense, net

 

20,134

 

 

18,332

 

 

40,608

 

 

34,131

 

Other non-operating expense

 

775

 

 

184

 

 

1,302

 

 

951

 

Income before income taxes

 

66,824

 

 

53,501

 

 

130,837

 

 

101,405

 

Provision for income taxes

 

15,171

 

 

9,699

 

 

29,157

 

 

20,165

 

Net income

 

51,653

 

 

43,802

 

 

101,680

 

 

81,240

 

Preferred stock dividends

 

5,686

 

 

5,750

 

 

11,436

 

 

11,500

 

Net income attributable to common stockholders

$

45,967

 

$

38,052

 

$

90,244

 

$

69,740

 

  Net income per common share attributable to common stockholders: Basic

$

1.59

 

$

1.32

 

$

3.13

 

$

2.43

 

Diluted

$

1.58

 

$

1.31

 

$

3.10

 

$

2.40

 

  Weighted average common shares: Basic

 

28,885,411

 

 

28,758,403

 

 

28,866,142

 

 

28,714,445

 

Diluted

 

29,138,596

 

 

29,093,791

 

 

29,126,670

 

 

29,020,403

 

  Three Months Ended Six Months Ended Reconciliation of Reported Gross Margin to September 30, October 1, September 30, October 1, Adjusted Gross Margin:

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Reported gross margin

$

166,325

 

$

151,147

 

$

334,176

 

$

292,299

 

Restructuring and consolidation

 

289

 

 

-

 

 

289

 

 

-

 

Adjusted gross margin

$

166,614

 

$

151,147

 

$

334,465

 

$

292,299

 

  Three Months Ended Six Months Ended Reconciliation of Reported Operating Income to September 30, October 1, September 30, October 1, Adjusted Operating Income:

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Reported operating income

$

87,733

 

$

72,017

 

$

172,747

 

$

136,487

 

Transaction and related costs

 

25

 

 

(15

)

 

25

 

 

67

 

Transition services

 

-

 

 

3,999

 

 

-

 

 

7,704

 

Restructuring and consolidation

 

631

 

 

17

 

 

921

 

 

17

 

Adjusted operating income

$

88,389

 

$

76,018

 

$

173,693

 

$

144,275

 

  Three Months Ended Six Months Ended Reconciliation of Reported Net Income to Adjusted Net September 30, October 1, September 30, October 1, Income Attributable to Common Stockholders:

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Reported net income

$

51,653

 

$

43,802

 

$

101,680

 

$

81,240

 

Transaction and related costs

 

25

 

 

(15

)

 

25

 

 

67

 

Transition services

 

-

 

 

3,999

 

 

-

 

 

7,704

 

Restructuring and consolidation

 

631

 

 

17

 

 

921

 

 

17

 

Foreign exchange translation loss/(gain)

 

-

 

 

(254

)

 

-

 

 

(417

)

M&A related amortization

 

16,347

 

 

16,145

 

 

32,605

 

 

32,556

 

Stock compensation expense

 

3,733

 

 

4,354

 

 

9,137

 

 

8,173

 

Amortization of deferred finance fees

 

791

 

 

2,040

 

 

1,647

 

 

4,338

 

Tax impact of adjustments and other tax matters

 

(4,292

)

 

(8,183

)

 

(9,432

)

 

(14,221

)

Adjusted net income

$

68,888

 

$

61,905

 

$

136,583

 

$

119,457

 

  Preferred stock dividends

 

5,686

 

 

5,750

 

 

11,436

 

 

11,500

 

  Adjusted net income attributable to common stockholders

$

63,202

 

$

56,155

 

$

125,147

 

$

107,957

 

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

$

2.19

 

$

1.95

 

$

4.34

 

$

3.76

 

Diluted

$

2.17

 

$

1.93

 

$

4.30

 

$

3.72

 

  Weighted average common shares: Basic

 

28,885,411

 

 

28,758,403

 

 

28,866,142

 

 

28,714,445

 

Diluted

 

29,138,596

 

 

29,093,791

 

 

29,126,670

 

 

29,020,403

 

  Three Months Ended Six Months Ended Reconciliation of Reported Net Income to September 30, October 1, September 30, October 1, Adjusted EBITDA:

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Reported net income

$

51,653

 

$

43,802

 

$

101,680

 

$

81,240

 

Interest expense, net

 

20,134

 

 

18,332

 

 

40,608

 

 

34,131

 

Provision for income taxes

 

15,171

 

 

9,699

 

 

29,157

 

 

20,165

 

Stock compensation expense

 

3,733

 

 

4,354

 

 

9,137

 

 

8,173

 

Depreciation and amortization

 

30,002

 

 

28,426

 

 

59,676

 

 

57,068

 

Other non-operating expense

 

775

 

 

184

 

 

1,302

 

 

951

 

Transaction and related costs

 

25

 

 

(15

)

 

25

 

 

67

 

Transition services

 

-

 

 

3,999

 

 

-

 

 

7,704

 

Restructuring and consolidation

 

631

 

 

17

 

 

921

 

 

17

 

Adjusted EBITDA

$

122,124

 

$

108,798

 

$

242,506

 

$

209,516

 

  Three Months Ended Six Months Ended September 30, October 1, September 30, October 1, Selected Financial Data:

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Cash provided by operating activities

$

53,022

 

$

29,345

 

$

114,820

 

$

88,380

 

  Capital expenditures

$

7,483

 

$

15,219

 

$

14,185

 

$

23,076

 

  Total debt

$

1,323,448

 

$

1,522,114

 

  Cash and cash equivalents

$

56,627

 

$

88,495

 

  Total debt minus cash and cash equivalents

$

1,266,821

 

$

1,433,619

 

  Repurchase of common stock

$

7,037

 

$

5,999

 

  Backlog

$

641,282

 

$

653,238

 

    Three Months Ended Six Months Ended September 30, October 1, September 30, October 1, Segment Data, Net External Sales:

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Aerospace and defense segment

$

127,271

 

$

103,548

 

$

247,743

 

$

202,947

 

Industrial segment

 

258,301

 

 

265,619

 

 

524,951

 

 

520,300

 

Total net external sales

$

385,572

 

$

369,167

 

$

772,694

 

$

723,247

 

  FY2024 Q3 Outlook - Modeling Items: Net sales $370,000-$380,000 Gross margin (as a percentage of net sales) 42.25% - 42.75% SG&A (as a percentage of net sales) 17.00%-17.50% Interest expense, net $19,500-$20,000 Preferred stock dividends

$

5,750

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231109316647/en/

RBC Bearings Robert Sullivan 203-267-5014 Rsullivan@rbcbearings.com

Alpha IR Group Michael Cummings 617-461-1101 investors@rbcbearings.com