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 third quarter of fiscal year 2017.
Third Quarter Highlights | ||||||||||||||||||||
($ in millions) | Fiscal 2017 | Fiscal 2016 | Change | |||||||||||||||||
GAAP | Adjusted (1) | GAAP | Adjusted (1) | GAAP | Adjusted (1) | |||||||||||||||
Net sales | $146.7 | $146.7 | $144.2 | $144.2 | 1.7% | 1.7% | ||||||||||||||
Gross margin | $52.4 | $55.6 | $53.5 | $54.1 | -2.1% | 2.8% | ||||||||||||||
Gross margin % | 35.7% | 37.9% | 37.1% | 37.5% | ||||||||||||||||
Operating income | $20.5 | $27.6 | $27.1 | $27.6 | -24.1% | -0.2% | ||||||||||||||
Operating income % | 14.0% | 18.8% | 18.8% | 19.2% | ||||||||||||||||
Net income | $12.8 | $17.4 | $17.0 | $17.3 | -25.1% | 0.6% | ||||||||||||||
Diluted EPS | $0.54 | $0.73 | $0.73 | $0.73 | -26.0% | 0.0% |
(1) Results exclude items in reconciliation below.
Nine Month Highlights | ||||||||||||||||||||
($ in millions) | Fiscal 2017 | Fiscal 2016 | Change | |||||||||||||||||
GAAP | Adjusted (1) | GAAP | Adjusted (1) | GAAP | Adjusted (1) | |||||||||||||||
Net sales | $455.2 | $455.2 | $435.2 | $435.2 | 4.6% | 4.6% | ||||||||||||||
Gross margin | $166.4 | $170.0 | $158.4 | $165.6 | 5.0% | 2.6% | ||||||||||||||
Gross margin % | 36.5% | 37.3% | 36.4% | 38.0% | ||||||||||||||||
Operating income | $79.3 | $87.0 | $73.0 | $86.3 | 8.6% | 0.8% | ||||||||||||||
Operating income % | 17.4% | 19.1% | 16.8% | 19.8% | ||||||||||||||||
Net income | $49.0 | $53.8 | $45.0 | $53.6 | 9.0% | 0.5% | ||||||||||||||
Diluted EPS | $2.07 | $2.27 | $1.91 | $2.28 | 8.4% | -0.4% |
(1) Results exclude items in reconciliation below.
“We were able to drive solid financial performance in what is traditionally our slowest seasonal fiscal quarter,” said Dr. Michael J. Hartnett, Chairman and Chief Executive Officer. “Our restructuring activities are driven by a strategy to achieve better alignment and rationalization of our manufacturing resources to more efficiently support a period of increasing industrial demand.”
Third Quarter Results
Net sales
for the third quarter of fiscal 2017 were $146.7 million, an increase of
1.7% from $144.2 million in the third quarter of fiscal 2016. Net sales
for the aerospace markets increased 1.2% and the industrial markets
increased 2.7%. Gross margin for the third quarter of fiscal 2017 was
$52.4 million compared to $53.5 million for the same period last year.
Excluding the impact of integration and restructuring and an inventory
purchase accounting adjustment last year, gross margin would have been
$55.6 million compared to $54.1 million for the same period last year.
Adjusted gross margin as a percentage of net sales would have been 37.9%
in the third quarter of fiscal 2017 compared to 37.5% for the same
adjusted period last year.
SG&A for the third quarter of fiscal 2017 was $25.7 million, an increase of $1.8 million from $23.9 million for the same period last year. The increase of $1.8 million was mainly due to $0.9 million in personnel related costs, $0.4 million incentive stock compensation, $0.2 million in professional fees, and $0.3 million of other items. As a percentage of net sales, SG&A was 17.5% for the third quarter of fiscal 2017 compared to 16.5% for the same period last year.
Other operating expenses for the third quarter of fiscal 2017 totaled $6.1 million, an increase of $3.5 million, compared to $2.6 million for the same period last year. For the third quarter of fiscal 2017, other operating expenses were comprised mainly of $3.8 million of integration and restructuring costs and $2.3 million of amortization of intangible assets. Other operating expenses last year consisted primarily of $2.5 million in amortization of intangibles and $0.1 million of other items.
Operating income for the third quarter of fiscal 2017 was $20.5 million compared to operating income of $27.1 million for the same period last year. Excluding costs associated with integration and restructuring, operating income would have been $27.6 million for the third quarter of fiscal 2017 compared to an adjusted $27.6 million for the same period last year. Excluding these adjustments, operating income as a percentage of net sales would have been 18.8% compared to 19.2% for the same period last year.
Interest expense, net was $2.1 million for the third quarter of fiscal 2017 compared to $2.2 million for the same period last year.
Income tax expense for the third quarter of fiscal 2017 was $5.9 million compared to $7.8 million for the same period last year. Our effective income tax rate for the third quarter of fiscal 2017 was 31.5% compared to 31.5% for the same period last year. The effective income tax rate without discrete tax benefit items would have been 31.8% and 32.1%, respectively.
Net income for the third quarter of fiscal 2017 was $12.8 million compared to $17.0 million for the same period last year. On an adjusted basis, net income would have been $17.4 million for the third quarter of fiscal 2017, compared to an adjusted net income of $17.3 million for the same period last year.
Diluted EPS for the third quarter of fiscal 2017 was 54 cents per share compared to 73 cents per share for the same period last year. On an adjusted basis, diluted EPS for the third quarter of fiscal 2017 would have been 73 cents per share compared to an adjusted diluted EPS of 73 cents per share for the same period last year.
Backlog, as of December 31, 2016, was $349.1 million compared to $351.3 million as of December 26, 2015.
Integration and Restructuring of Industrial
Operations
In the third quarter of fiscal 2017, the
Company reached a decision to integrate and restructure its industrial
manufacturing operation in South Carolina. The Company will exit a few
smaller product offerings and consolidate two manufacturing facilities
into one. These restructuring efforts will better align our
manufacturing capacity and market focus. As a result the Company
recorded a charge of $7.1 million associated with the integration and
restructuring activity attributable to the Roller Bearings segment. The
$7.1 million charge includes $3.2 million of inventory rationalization
costs, $2.4 million loss on fixed asset disposals, $1.2 million exit
obligation associated with a building operating lease, and $0.3 million
impairment of intangible assets. The inventory rationalization costs
were recorded in “Cost of Sales” and all other costs were recorded in
“Other, net” in the income statement.
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 # 58476776. An audio replay
of the call will be available from 2:00 p.m. ET February 8th, 2017 until
11:59 p.m. ET February 15th, 2017. The replay can be accessed by dialing
855-859-2056 (international callers dial 404-537-3406) and providing
conference call ID # 58476776. Investors are advised to dial into the
call at least ten minutes prior to the call to register.
Non-GAAP Financial Measures
The
Company prepares and publicly releases quarterly unaudited financial
statements prepared in accordance with U.S. GAAP. In accordance with the
Securities and Exchange Commission (the “SEC”) guidance on Compliance
and Disclosure Interpretations, the Company also discloses and discusses
certain non-GAAP financial measures in our public releases which are
identified as “adjusted” that exclude certain items. Management uses
these non-GAAP financial measures to provide additional information
which is useful to gain an understanding of the factors and trends
affecting our business. Management believes these disclosures assist in
understanding the trends of our operating performance when comparing
periods both historically and prospectively. As a result, the Company
also believes disclosure of these non-GAAP measures helps investors
evaluate the business in the same manner as Management. The non-GAAP
measures disclosed within this press release exclude certain items that
arise outside the ordinary course of the Company’s continuing
operations, including, but not limited to, integration and restructuring
charges, acquisition costs, gains and losses on foreign exchange, and
non-discrete tax benefits and expenses. 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 tables
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, 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, 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 | Nine Months Ended | |||||||||||||||||||||||
December 31, | December 26, | December 31, | December 26, | |||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
Net sales | $ | 146,656 | $ | 144,216 | $ | 455,178 | $ | 435,220 | ||||||||||||||||
Cost of sales | 94,271 | 90,695 | 288,811 | 276,817 | ||||||||||||||||||||
Gross margin | 52,385 | 53,521 | 166,367 | 158,403 | ||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Selling, general and administrative | 25,712 | 23,850 | 76,696 | 72,519 | ||||||||||||||||||||
Other, net | 6,144 | 2,619 | 10,367 | 12,872 | ||||||||||||||||||||
Total operating expenses | 31,856 | 26,469 | 87,063 | 85,391 | ||||||||||||||||||||
Operating income | 20,529 | 27,052 | 79,304 | 73,012 | ||||||||||||||||||||
Interest expense, net | 2,111 | 2,238 | 6,659 | 6,222 | ||||||||||||||||||||
Other non-operating (income) expense | (216 | ) | (54 | ) | 51 | (44 | ) | |||||||||||||||||
Income before income taxes | 18,634 | 24,868 | 72,594 | 66,834 | ||||||||||||||||||||
Provision for income taxes | 5,864 | 7,821 | 23,556 | 21,864 | ||||||||||||||||||||
Net income | $ | 12,770 | $ | 17,047 | $ | 49,038 | $ | 44,970 | ||||||||||||||||
Net income per common share: | ||||||||||||||||||||||||
Basic | $ | 0.54 | $ | 0.73 | $ | 2.09 | $ | 1.94 | ||||||||||||||||
Diluted | $ | 0.54 | $ | 0.73 | $ | 2.07 | $ | 1.91 | ||||||||||||||||
Weighted average common shares: | ||||||||||||||||||||||||
Basic | 23,581,921 | 23,220,707 | 23,457,717 | 23,197,969 | ||||||||||||||||||||
Diluted | 23,813,780 | 23,492,321 | 23,719,121 | 23,508,348 | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
Reconciliation of Reported Gross Margin to | December 31, | December 26, | December 31, | December 26, | ||||||||||||||||||||
Adjusted Gross Margin: | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||
Reported gross margin | $ | 52,385 | # | $ | 53,521 | $ | 166,367 | # | $ | 158,403 | ||||||||||||||
Inventory purchase accounting adjustment | - | 562 | 382 | 7,188 | ||||||||||||||||||||
Integration and restructuring | 3,215 | - | 3,215 | - | ||||||||||||||||||||
Adjusted gross margin | $ | 55,600 | $ | 54,083 | $ | 169,964 | $ | 165,591 | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
Reconciliation of Reported Operating Income to | December 31, | December 26, | December 31, | December 26, | ||||||||||||||||||||
Adjusted Operating Income: | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||
Reported operating income | $ | 20,529 | # | $ | 27,052 | $ | 79,304 | # | $ | 73,012 | ||||||||||||||
Inventory purchase accounting adjustment | - | 562 | 382 | 7,188 | ||||||||||||||||||||
Integration and restructuring | 7,060 | - | 7,282 | 999 | ||||||||||||||||||||
Acquisition costs | - | 25 | - | 5,097 | ||||||||||||||||||||
Adjusted operating income | $ | 27,589 | $ | 27,639 | $ | 86,968 | $ | 86,296 | ||||||||||||||||
Reconciliation of Reported Net Income and Net Income | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
Per Common Share to Adjusted Net Income and | December 31, | December 26, | December 31, | December 26, | ||||||||||||||||||||
Adjusted Net Income Per Common Share: | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||
Reported net income | $ | 12,770 | # | $ | 17,047 | $ | 49,038 | # | $ | 44,970 | ||||||||||||||
Inventory purchase accounting adjustment (1) | - | 385 | 257 | 4,789 | ||||||||||||||||||||
Integration and restructuring (1) | 4,838 | - | 4,987 | 666 | ||||||||||||||||||||
Acquisition costs (1) | - | 17 | - | 3,402 | ||||||||||||||||||||
Loss on extinguishment of debt (1) | - | - | - | 127 | ||||||||||||||||||||
Foreign exchange translation loss (gain) (1) | (199 | ) | (37 | ) | (199 | ) | (196 | ) | ||||||||||||||||
Discrete tax loss (benefit) | (56 | ) | (154 | ) | (238 | ) | (204 | ) | ||||||||||||||||
Adjusted net income | $ | 17,353 | $ | 17,258 | $ | 53,845 | $ | 53,554 | ||||||||||||||||
(1) After tax impact based on applicable effective tax rate. | ||||||||||||||||||||||||
Adjusted net income per common share: | ||||||||||||||||||||||||
Basic | $ | 0.74 | $ | 0.74 | $ | 2.30 | $ | 2.31 | ||||||||||||||||
Diluted | $ | 0.73 | $ | 0.73 | $ | 2.27 | $ | 2.28 | ||||||||||||||||
Weighted average common shares: | ||||||||||||||||||||||||
Basic | 23,581,921 | 23,220,707 | 23,457,717 | 23,197,969 | ||||||||||||||||||||
Diluted | 23,813,780 | 23,492,321 | 23,719,121 | 23,508,348 | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
December 31, | December 26, | December 31, | December 26, | |||||||||||||||||||||
Segment Data, Net External Sales: | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||
Plain bearings segment | $ | 65,822 | $ | 64,171 | $ | 205,107 | $ | 197,455 | ||||||||||||||||
Roller bearings segment | 26,157 | 26,294 | 80,786 | 84,025 | ||||||||||||||||||||
Ball bearings segment | 13,700 | 12,850 | 41,979 | 38,791 | ||||||||||||||||||||
Engineered products segment | 40,977 | 40,901 | 127,306 | 114,949 | ||||||||||||||||||||
$ | 146,656 | $ | 144,216 | $ | 455,178 | $ | 435,220 | |||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
December 31, | December 26, | December 31, | December 26, | |||||||||||||||||||||
Selected Financial Data: | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||
Depreciation and amortization | $ | 6,779 | $ | 6,698 | $ | 20,478 | $ | 19,170 | ||||||||||||||||
Incentive stock compensation expense | $ | 2,962 | $ | 2,565 | $ | 8,914 | $ | 7,193 | ||||||||||||||||
Adjusted operating income plus depreciation/amortization | ||||||||||||||||||||||||
plus incentive stock compensation expense | $ | 37,330 | $ | 36,902 | $ | 116,360 | $ | 112,659 | ||||||||||||||||
Cash provided by operating activities | $ | 36,062 | $ | 21,540 | $ | 74,575 | $ | 61,800 | ||||||||||||||||
Capital expenditures | $ | 4,794 | $ | 4,836 | $ | 14,415 | $ | 14,635 | ||||||||||||||||
Total debt | $ | 294,943 | $ | 384,974 | ||||||||||||||||||||
Cash and short-term investments | $ | 39,472 | $ | 44,403 | ||||||||||||||||||||
Repurchase of common stock | $ | 4,750 | $ | 10,470 | ||||||||||||||||||||
Backlog | $ | 349,123 | $ | 351,297 | ||||||||||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170208005232/en/
Contacts:
Daniel A. Bergeron, 203-267-5028
dbergeron@rbcbearings.com
or
Alpha
IR Group
Michael Cummings, 617-461-1101
investors@rbcbearings.com