Market Overview

RBC Bearings Incorporated Announces Fiscal 2020 Second 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 second quarter of fiscal year 2020.

Key Highlights

- Net sales of $181.9 million up 5.2% compared to the prior year quarter and 6.8% organically

- Adjusted fully diluted EPS of $1.30 up from $1.22 in the second quarter last year

- Backlog of $473.2 million up 10.1% year over year

- Completed acquisition of Swiss Tool

Second Quarter Financial Highlights

 
($ in millions) Fiscal 2020 Fiscal 2019 Change
GAAP Adjusted (1) GAAP Adjusted (1) GAAP Adjusted (1)
Net sales

$181.9

$172.9

5.2%

Gross margin

$71.1

$71.2

$67.8

$67.8

4.9%

5.0%

Gross margin %

39.1%

39.1%

39.2%

39.2%

Operating income

$37.3

$38.4

$35.9

$35.9

4.0%

7.0%

Operating income %

20.5%

21.1%

20.8%

20.8%

Net income

$31.3

$32.3

$30.1

$30.2

3.8%

7.0%

Diluted EPS

$1.26

$1.30

$1.22

$1.22

3.3%

6.6%

(1) Results exclude items in reconciliation below.

Six Month Financial Highlights

 
($ in millions) Fiscal 2020 Fiscal 2019 Change
GAAP Adjusted (1) GAAP Adjusted (1) GAAP Adjusted (1)
Net sales

$364.6

$348.9

4.5%

Gross margin

$141.8

$141.9

$135.6

$135.6

4.6%

4.7%

Gross margin %

38.9%

38.9%

38.9%

38.9%

Operating income

$75.8

$76.9

$71.9

$71.9

5.4%

6.9%

Operating income %

20.8%

21.1%

20.6%

20.6%

Net income

$61.8

$62.9

$57.6

$58.3

7.3%

7.8%

Diluted EPS

$2.49

$2.53

$2.34

$2.37

6.4%

6.8%

(1) Results exclude items in reconciliation below.

"We are pleased with our performance during the second quarter. Strong double-digit organic growth in aerospace markets more than offset the weakness in industrial markets" said Dr. Michael J. Hartnett, Chairman and Chief Executive Officer. "Our healthy backlog and continued conversion of new contracts set a welcoming stage for the next several quarters."

Second Quarter Results

Net sales for the second quarter of fiscal 2020 were $181.9 million, an increase of 5.2% from $172.9 million in the second quarter of fiscal 2019, and organic net sales increased 6.8% year over year. Net sales for the aerospace markets increased 10.2% in total and 14.4% on an organic basis. Industrial market sales declined 2.8%, 5.0% on an organic basis. Gross margin for the second quarter of fiscal 2020 was $71.1 million compared to $67.8 million for the same period last year. Gross margin as a percentage of net sales was 39.1% in the second quarter of fiscal 2020 compared to 39.2% for the same period last year.

SG&A for the second quarter of fiscal 2020 was $30.8 million, an increase of $1.5 million from $29.3 million for the same period last year. The increase was primarily due to $1.0 million of additional share-based stock compensation costs, additional personnel-related costs of $0.4 million and $0.1 million of other items. As a percentage of net sales, SG&A was 16.9% for the second quarter of fiscal 2020 compared to 17.0% for the same period last year.

Other operating expenses for the second quarter of fiscal 2020 totaled $3.0 million compared to $2.6 million for the same period last year. For the second quarter of fiscal 2020, other operating expenses consisted primarily of $2.3 million of amortization of intangible assets and $0.9 million of acquisition costs partially offset by $0.2 million of other income. For the second quarter of fiscal 2019, other operating expenses were comprised mainly of $2.6 million of amortization of intangible assets.

Operating income for the second quarter of fiscal 2020 was $37.3 million compared to operating income of $35.9 million for the same period last year. Excluding acquisition costs of $0.9 million and $0.1 million of inventory purchase accounting adjustments related to the acquisition of Swiss Tool and other restructuring charges of $0.1 million, adjusted operating income for the second quarter of fiscal 2020 was $38.4 million. Operating income as a percentage of net sales was 20.5% for the second quarter of fiscal 2020 compared to 20.8% for the same period last year.

Interest expense, net was $0.5 million for the second quarter of fiscal 2020 compared to $1.4 million for the same period last year.

Income tax expense for the second quarter of fiscal 2020 was $5.4 million compared to $4.0 million for the same period last year. The effective income tax rate for the second quarter of fiscal 2020 was 14.7% compared to 11.7% for the same period last year. The income tax expense included approximately $2.5 million of benefit from share-based stock compensation compared to $3.2 million for the same period last year.

Net income for the second quarter of fiscal 2020 was $31.3 million compared to $30.1 million for the same period last year. On an adjusted basis, net income was $32.3 million for the second quarter of fiscal 2020 compared to $30.2 million for the same period last year.

Diluted EPS for the second quarter of fiscal 2020 was $1.26 per share compared to $1.22 per share for the same period last year. On an adjusted basis, diluted EPS for the second quarter of fiscal 2020 was $1.30 per share compared to an adjusted diluted EPS of $1.22 per share for the same period last year, an increase of 6.6%.

Backlog as of September 28, 2019 was $473.2 million compared to $429.9 million as of September 29, 2018.

Acquisition

On August 15, 2019, the Company completed the acquisition of Swiss Tool Systems for $33.8 million, subject to a final working capital adjustment. With headquarters located in Bürglen, Thurgau, Switzerland, Swiss Tool is a leading world-wide supplier of modular tooling systems and high-precision boring and turning solutions for metal cutting machines. Last twelve months sales were approximately $11.3 million. Swiss Tool will be reported as part of our Engineered Products segment.

Outlook for the Third Quarter Fiscal 2020

The Company expects net sales to be approximately $177.0 million to $179.0 million in the third quarter of fiscal 2020. This would result in a growth rate of 3.2% to 4.4% on a year-over-year basis and 3.6% to 4.7% excluding $2.9 million in sales associated with our Miami division, which was sold in the third quarter of fiscal 2019, and $2.5 million of sales associated with Swiss Tool, which we acquired in the second quarter of fiscal 2020. The third quarter will be impacted by approximately four to five fewer production and shipping days due to the holiday schedule.

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 # 1382305. An audio replay of the call will be available from 1:45 p.m. ET November 1st, 2019 until 12:45 p.m. ET November 8th, 2019. The replay can be accessed by dialing 855-859-2056 (international callers dial 404-537-3406) and providing conference call ID # 1382305. 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 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.

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

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