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RBC Bearings Incorporated Announces Fiscal 2019 First Quarter Results

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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 2019.

First Quarter Financial Highlights

($ in millions)       Fiscal 2019     Fiscal 2018     Change
GAAP     Adjusted (1) GAAP     Adjusted (1) GAAP     Adjusted (1)
Net sales $176.0     $176.0 $163.9     $163.9 7.4%     7.4%
Gross margin $67.7 $67.7 $62.0 $62.0 9.2% 9.2%
Gross margin % 38.5% 38.5% 37.8% 37.8%
Operating income $36.0 $36.0 $32.0 $32.0 12.6% 12.6%
Operating income % 20.5% 20.5% 19.5% 19.5%
Net income $27.5 $28.1 $21.8 $22.0 25.9% 27.9%
Diluted EPS $1.12 $1.15 $0.90 $0.91 24.4% 26.4%
(1) Results exclude items in reconciliation below.
 

"Our results for the first quarter of fiscal 2019 were in line with our
expectations as organic net sales grew 9.4% during the period.
Industrial sales led the way with a positive impact from the aerospace
sector as well," said Dr. Michael J. Hartnett, Chairman and Chief
Executive Officer. "The quarter's strong operating performance, earnings
growth, and healthy backlog have us well positioned for the remainder of
fiscal 2019."

First Quarter Results
Net sales
for the first quarter of fiscal 2019 were $176.0 million, an increase of
7.4% from $163.9 million in the first quarter of fiscal 2018. Organic
net sales increased 9.4% for the first quarter of 2019. Organically, net
sales in the aerospace and industrial markets increased by 3.9% and
18.7%, respectively. Gross margin for the first quarter of fiscal 2019
was $67.7 million compared to $62.0 million for the same period last
year. Gross margin as a percentage of net sales was 38.5% in the first
quarter of fiscal 2019 compared to 37.8% for the same period last year.

SG&A for the first quarter of fiscal 2019 was $29.6 million, an increase
of $1.8 million from $27.8 million for the same period last year. The
increase was primarily due to higher personnel related expenses of $1.2
million, $0.5 million of additional incentive stock compensation and
other items of $0.1 million. As a percentage of net sales, SG&A was
16.8% for the first quarter of fiscal 2019 compared to 16.9% for the
same period last year.

Other operating expenses for the first quarter of fiscal 2019 totaled
$2.2 million compared to $2.3 million for the same period last year. For
the first quarter of fiscal 2019, other operating expenses were
comprised primarily of $2.4 million of amortization of intangible assets
offset by $0.2 million of other items. Other operating expenses last
year consisted of $2.4 million in amortization of intangible assets
offset by $0.1 million of other items.

Operating income for the first quarter of fiscal 2019 was $36.0 million
compared to operating income of $32.0 million for the same period last
year. As a percentage of net sales, operating income was 20.5% for the
first quarter of fiscal 2019 compared to 19.5% for the same period last
year.

Interest expense, net was $1.7 million for the first quarter of fiscal
2019 compared to $2.0 million for the same period last year.

Other non-operating expenses were $1.0 million for the first quarter
fiscal 2019 compared to $0.5 million for the same period last year. For
the first quarter of fiscal 2019, other non-operating expenses were
comprised primarily of $1.0 million in loss on early extinguishment of
debt. Other non-operating expenses for the same period last year
consisted of $0.3 million of foreign exchange translation loss and $0.2
million of other items.

Income tax expense for the first quarter of fiscal 2019 was $5.8 million
compared to $7.6 million for the same period last year. Our effective
income tax rate for the first quarter of fiscal 2019 was 17.4% compared
to 25.8% for the same period last year. The income tax expense includes
approximately $1.3 million of benefit from incentive stock compensation
compared to $2.3 million for the same period last year.

Net income for the first quarter of fiscal 2019 was $27.5 million
compared to $21.8 million for the same period last year. On an adjusted
basis, net income would have been $28.1 million for the first quarter of
fiscal 2019, compared to an adjusted net income of $22.0 million for the
same period last year.

Diluted EPS for the first quarter of fiscal 2019 was $1.12 per share
compared to $0.90 per share for the same period last year. On an
adjusted basis, diluted EPS for the first quarter of fiscal 2019 would
have been $1.15 per share compared to an adjusted diluted EPS of $0.91
per share for the same period last year, an increase of 26.4%.

Backlog, as of June 30, 2018, was $419.2 million compared to $380.5
million as of July 1, 2017.

Term Loan Debt Extinguishment
On
May 31, 2018, the Company paid down the remaining term loan balance of
$159.3 million, resulting in a loss on extinguishment of debt of $1.0
million. The loss was recorded in other non-operating expense in the
income statement. There were no new fees or any pre-payment fees related
to the early pay-down of the term loan.

Outlook for the Second Quarter of Fiscal 2019
The
Company expects net sales to be approximately $171.0 million to $174.0
million in the second quarter of fiscal 2019. This would result in a
growth rate of approximately 4.1% to 5.9% on a year-over-year basis and
organic growth rate of approximately 6.1% to 7.9% on a year-over-year
basis.

Live Webcast
RBC 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 # 7287895. An audio replay
of the call will be available from 2:00 p.m. ET August 2nd,
2018 until 2:00 p.m. ET August 9th, 2018. The replay can be
accessed by dialing 855-859-2056 (international callers dial
404-537-3406) and providing conference call ID # 7287895. 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. 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 Bearings
RBC 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 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 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, increased import duties, 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, including the impact of the TCJA, 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
June 30, July 1,
2018 2017
 
Net sales $ 175,985 $ 163,897
Cost of sales   108,246     101,881  
Gross margin 67,739 62,016
 
Operating expenses:
Selling, general and administrative 29,575 27,778
Other, net   2,166     2,279  
Total operating expenses 31,741 30,057
 
Operating income 35,998 31,959
 
Interest expense, net 1,711 2,029
Other non-operating (income) expense   1,034     531  
Income before income taxes 33,253 29,399
Provision for income taxes   5,786     7,590  
Net income $ 27,467   $ 21,809  
 
Net income per common share:
Basic $ 1.14 $ 0.92
Diluted $ 1.12 $ 0.90
 
Weighted average common shares:
Basic 24,140,778 23,805,138
Diluted 24,543,589 24,189,375
 
 
 
Reconciliation of Reported Net Income and Net Income Three Months Ended
Per Common Share to Adjusted Net Income and June 30, July 1,
Adjusted Net Income Per Common Share: 2018 2017
 
Reported net income $ 27,467 $ 21,809
Loss on extinguishment of long term debt (1) 815 -
Foreign exchange translation loss (gain) (1) (100 ) 208
Discrete tax reserve loss (benefit)   (73 )   (48 )
Adjusted net income $ 28,109   $ 21,969  
(1) After tax impact.
 
Adjusted net income per common share:
Basic $ 1.16 $ 0.92
Diluted $ 1.15 $ 0.91
 
Weighted average common shares:
Basic 24,140,778 23,805,138
Diluted 24,543,589 24,189,375
 
 
 
Three Months Ended
June 30, July 1,
Segment Data, Net External Sales: 2018 2017
 
Plain bearings segment $ 78,525 $ 72,653
Roller bearings segment 35,870 31,413
Ball bearings segment 18,074 15,780
Engineered products segment   43,516     44,051  
$ 175,985   $ 163,897  
 
 
Three Months Ended
June 30, July 1,
Selected Financial Data: 2018 2017
 
Depreciation and amortization $ 7,313 $ 7,098
 
Incentive stock compensation expense $ 3,766 $ 3,228
 
Operating income plus depreciation/amortization    
plus incentive stock compensation expense $ 47,077 $ 42,285
 
 
Cash provided by operating activities $ 33,835 $ 39,809
 
Capital expenditures $ 6,993 $ 5,659
 
Total debt $ 144,293 $ 237,865
 
Cash and short-term investments $ 55,656 $ 45,463
 
Total debt minus cash $ 88,637 $ 192,402
 
Repurchase of common stock $ 1,491 $ 2,288
 
Backlog $ 419,249 $ 380,450
 
*The Company retrospectively adopted ASU No. 2017-07, "Compensation
– Retirement Benefits (Topic 715): Improving the Presentation of Net
Periodic Pension Cost and Net Periodic Postretirement Benefit Cost"
on April 1, 2018. The adoption of this ASU resulted in the
reclassification of $159 of net periodic benefit cost from
compensation costs ($107 included within Cost of sales and $52
within Other, net) to Other non-operating expense on the
Consolidated Statement of Operations for the three-month period
ended July 1, 2017.

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