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RBC Bearings Incorporated Announces Fiscal 2020 Fourth Quarter Results

OXFORD, Conn.--(BUSINESS WIRE)--May 20, 2020-- 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 fourth quarter of fiscal year 2020.

Key Highlights

- Fourth quarter adjusted gross margin as a percentage of sales of 41.3% represents an increase of 120 basis points over the same period last year
- Fourth quarter adjusted operating income as a percentage of sales of 23.1% increased 50 basis points over the prior year period
- Fourth quarter cash flow from operations less capital expenditures was $34.7 million and $118.3 million for the full fiscal year

Fourth Quarter Financial Highlights

($ in millions)

Fiscal 2020

 

Fiscal 2019

 

Change

GAAP

Adjusted (1)

GAAP

Adjusted (1)

GAAP

Adjusted (1)

Net sales

$185.8

 

$182.2

 

2.0%

 

Gross margin

$76.6

$76.7

$73.0

$73.0

5.0%

5.1%

Gross margin %

41.2%

41.3%

40.1%

40.1%

 

 

Operating income

$43.5

$43.0

$40.3

$41.2

7.9%

4.2%

Operating income %

23.4%

23.1%

22.1%

22.6%

 

 

Net income

$33.8

$33.1

$31.4

$32.9

7.4%

0.8%

Diluted EPS

$1.35

$1.33

$1.27

$1.33

6.3%

0.0%

(1) Results exclude items in reconciliation below.

Twelve Month Financial Highlights

($ in millions)

Fiscal 2020

 

Fiscal 2019

 

Change

GAAP

Adjusted (1)

GAAP

Adjusted (1)

GAAP

Adjusted (1)

Net sales

$727.5

 

$702.5

 

3.6%

 

Gross margin

$289.1

$289.5

$276.7

$276.7

4.5%

4.6%

Gross margin %

39.7%

39.8%

39.4%

39.4%

 

 

Operating income

$156.8

$157.7

$132.0

$149.8

18.7%

5.3%

Operating income %

21.6%

21.7%

18.8%

21.3%

 

 

Net income

$126.0

$126.4

$105.2

$119.7

19.8%

5.6%

Diluted EPS

$5.06

$5.07

$4.26

$4.84

18.8%

4.8%

(1) Results exclude items in reconciliation below.

“The Company ended fiscal 2020 with solid execution and performance in the fourth quarter under highly unusual circumstances,” said Dr. Michael J. Hartnett, Chairman and Chief Executive Officer. “We enter fiscal 2021 from a position of strength, with a healthy backlog, ample liquidity and a strong balance sheet. While we continue to evaluate the impacts of COVID-19 across our end markets, our strong balance sheet and other liquidity options provide us many tools to effectively navigate this environment and achieve our operational goals.”

Fourth Quarter Results

Net sales for the fourth quarter of fiscal 2020 were $185.8 million, an increase of 2.0% from $182.2 million in the fourth quarter of fiscal 2019, and organic net sales increased 0.6% year over year. Net sales for the aerospace markets increased 4.3% while industrial market net sales declined 1.9%, 5.6% on an organic basis. Gross margin for the fourth quarter of fiscal 2020 was $76.6 million compared to $73.0 million for the same period last year. Excluding $0.1 million of inventory purchase accounting adjustments related to the acquisition of Swiss Tool, adjusted gross margin as a percentage of net sales was 41.3% in the fourth quarter of fiscal 2020 compared to 40.1% for the same period last year.

SG&A for the fourth quarter of fiscal 2020 was $31.0 million, an increase of $1.5 million from $29.5 million for the same period last year. The increase was primarily due to $0.8 million of additional share-based stock compensation costs and additional personnel-related costs of $0.8 million offset by $0.1 million of other items. As a percentage of net sales, SG&A was 16.7% for the fourth quarter of fiscal 2020 compared to 16.2% for the same period last year.

Other operating expenses for the fourth quarter of fiscal 2020 totaled $2.1 million compared to $3.2 million for the same period last year. For the fourth quarter of fiscal 2020, other operating expenses consisted primarily of $2.6 million of amortization of intangible assets, $0.8 million of restructuring costs and $0.1 million of other items offset by a $1.4 million gain on the sale of a surplus building. For the fourth quarter of fiscal 2019, other operating expenses were comprised mainly of $2.3 million in amortization of intangible assets and $0.9 million of restructuring expense.

Operating income for the fourth quarter of fiscal 2020 was $43.5 million compared to $40.3 million for the same period last year. Excluding $0.1 million of inventory purchase accounting adjustments related to the acquisition of Swiss Tool, other restructuring charges of $0.8 million, and a $1.4 million gain on sale of a surplus building, adjusted operating income for the fourth quarter of fiscal 2020 was $43.0 million. Excluding costs associated with restructuring in the fourth quarter of fiscal 2019, adjusted operating income was $41.2 million. Adjusted operating income as a percentage of net sales was 23.1% for the fourth quarter of fiscal 2020 compared to 22.6% for the same period last year. On a full year basis, fiscal 2020 year-to-date adjusted operating income as a percentage of net sales was 21.7% compared to 21.3% for the same period last year.

Interest expense, net was $0.4 million for the fourth quarter of fiscal 2020 compared to $0.8 million for the same period last year.

Income tax expense for the fourth quarter of fiscal 2020 was $9.2 million compared to $8.3 million for the same period last year. The effective income tax rate for the fourth quarter of fiscal 2020 was 21.4% compared to 20.8% for the same period last year. The current quarter income tax expense included approximately $0.4 million of benefit from share-based stock compensation and $0.4 million of net benefit associated with discrete and other tax items. Income tax expense for the same period last year was impacted by $0.6 million of benefit associated with share-based stock compensation offset by $0.8 million of discrete and other tax reserves.

Net income for the fourth quarter of fiscal 2020 was $33.8 million compared to $31.4 million for the same period last year. On an adjusted basis, net income was $33.1 million for the fourth quarter of fiscal 2020 compared to $32.9 million for the same period last year.

Diluted EPS for the fourth quarter of fiscal 2020 was $1.35 per share compared to $1.27 per share for the same period last year. On an adjusted basis, diluted EPS was $1.33 for both the fourth quarter of fiscal 2020 and the same period last year.

Backlog as of March 28, 2020 was $478.6 million compared to $445.1 million as of March 30, 2019.

Sale of Houston Building

In the fourth quarter of fiscal 2020, the Company sold its manufacturing building located in Houston, TX that was associated with a previously closed facility. The Company sold the building for approximately $8.0 million and recorded a book gain of $1.4 million in the fourth quarter of fiscal 2020.

COVID-19

The COVID-19 health crisis, which was declared a pandemic in March 2020, has led to governments around the world implementing measures to reduce the spread. These measures include quarantines, “shelter in place” orders, travel restrictions, and other measures and have resulted in a slowdown of worldwide economic activity.

Our business is operating as an essential business, and as such, our facilities have remained open, with the exception of a few temporary closures at some of our international locations. The COVID-19 pandemic impacted our commercial aerospace and industrial sales in March of our fourth quarter of fiscal 2020. During this period, our commercial aerospace sales also faced headwinds associated with build rate changes on the Boeing 737 MAX.

In the fourth quarter of fiscal 2020, we did not experience significant disruptions in our supply chain or with our customers as a result of COVID-19. We anticipate that our production and sales in fiscal 2021 will be negatively affected by the economic implications of the pandemic. Commercial aerospace OEM and aftermarket, which make up approximately half of our sales annually, will be impacted by the decline in air travel and changes in production rates. Our sales to defense markets, which represent approximately one quarter of total sales, will grow over the next year. Our sales to industrial markets will be adversely affected in the first two quarters of fiscal 2021 due to the slowdown of economic activity. We expect to see demand increasing as “shelter in place” directives are eliminated. Management is continuously evaluating the status of our orders and operations, and restructuring efforts are being implemented where necessary to align our cost structure to the new demand levels we experience in the marketplace.

Liquidity

The Company ended fiscal 2020 with a strong cash balance and liquidity position. Cash at March 28, 2020 was $103.3 million and the Company had approximately $259.1 million of undrawn revolving credit on its two bank facilities. The Company ended the year with total debt of $23.0 million and is in full compliance with all covenants under its credit agreements.

Outlook for the First Quarter Fiscal 2021

The Company expects net sales to be approximately $150.0 million to $155.0 million in the first quarter of fiscal 2021, compared to $182.7 million last year.

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 # 1387663. An audio replay of the call will be available from 1:45 p.m. ETMay 20, 2020 until 1:45 p.m. ETMay 27, 2020. The replay can be accessed by dialing 855-859-2056 (international callers dial 404-537-3406) and providing conference call ID # 1387663. 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 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, COVID-19 pandemic, 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, 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

 

Twelve Months Ended

March 28,

 

March 30,

 

March 28,

 

March 30,

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Net sales

$

185,843

 

$

182,162

 

$

727,461

 

$

702,516

 

Cost of sales

 

109,259

 

 

109,194

 

 

438,358

 

 

425,863

 

Gross margin

 

76,584

 

 

72,968

 

 

289,103

 

 

276,653

 

 
Operating expenses:
Selling, general and administrative

 

30,985

 

 

29,461

 

 

122,565

 

 

117,504

 

Other, net

 

2,079

 

 

3,192

 

 

9,753

 

 

27,114

 

Total operating expenses

 

33,064

 

 

32,653

 

 

132,318

 

 

144,618

 

 
Operating income

 

43,520

 

 

40,315

 

 

156,785

 

 

132,035

 

 
Interest expense, net

 

399

 

 

819

 

 

1,885

 

 

5,173

 

Other non-operating expense (income)

 

180

 

 

(212

)

 

761

 

 

772

 

Income before income taxes

 

42,941

 

 

39,708

 

 

154,139

 

 

126,090

 

Provision for income taxes

 

9,189

 

 

8,271

 

 

28,103

 

 

20,897

 

Net income

$

33,752

 

$

31,437

 

$

126,036

 

$

105,193

 

 
Net income per common share:
Basic

$

1.36

 

$

1.28

 

$

5.12

 

$

4.32

 

Diluted

$

1.35

 

$

1.27

 

$

5.06

 

$

4.26

 

 
Weighted average common shares:
Basic

 

24,745,009

 

 

24,506,648

 

 

24,632,637

 

 

24,357,684

 

Diluted

 

24,994,189

 

 

24,786,898

 

 

24,922,631

 

 

24,716,213

 

 

Three Months Ended

 

Twelve Months Ended

Reconciliation of Reported Gross Margin to

March 28,

 

March 30,

 

March 28,

 

March 30,

Adjusted Gross Margin:

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Reported gross margin

$

76,584

 

$

72,968

 

$

289,103

 

$

276,653

 

Inventory purchase accounting adjustment

 

97

 

 

-

 

 

368

 

 

-

 

Adjusted gross margin

$

76,681

 

$

72,968

 

$

289,471

 

$

276,653

 

 

Three Months Ended

 

Twelve Months Ended

Reconciliation of Reported Operating Income to

March 28,

 

March 30,

 

March 28,

 

March 30,

Adjusted Operating Income:

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Reported operating income

$

43,520

 

$

40,315

 

$

156,785

 

$

132,035

 

Net loss on sale of Miami division

 

-

 

 

(258

)

 

-

 

 

16,544

 

Net gain on sale of Houston building

 

(1,440

)

 

-

 

 

(1,440

)

 

-

 

Inventory purchase accounting adjustment

 

97

 

 

-

 

 

368

 

 

-

 

Acquisition costs

 

-

 

 

-

 

 

901

 

 

-

 

Integration and restructuring

 

805

 

 

1,180

 

 

1,036

 

 

1,180

 

Adjusted operating income

$

42,982

 

$

41,237

 

$

157,650

 

$

149,759

 

 
Reconciliation of Reported Net Income and Net Income

Three Months Ended

 

Twelve Months Ended

Per Common Share to Adjusted Net Income and

March 28,

 

March 30,

 

March 28,

 

March 30,

Adjusted Net Income Per Common Share:

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Reported net income

$

33,752

 

$

31,437

 

$

126,036

 

$

105,193

 

Net loss on sale of Miami division (1)

 

-

 

 

(258

)

 

-

 

 

12,496

 

Net gain on sale of Houston building (1)

 

(1,132

)

 

-

 

 

(1,132

)

 

-

 

Loss on extinguishment of long-term debt (1)

 

-

 

 

-

 

 

-

 

 

815

 

Withholding tax associated with repatriation of cash

 

-

 

 

-

 

 

-

 

 

943

 

Inventory purchase accounting adjustment (1)

 

76

 

 

-

 

 

303

 

 

-

 

Acquisition costs (1)

 

-

 

 

-

 

 

769

 

 

-

 

Integration and restructuring (1)

 

633

 

 

1,012

 

 

827

 

 

1,012

 

Foreign exchange translation loss (gain) (1)

 

229

 

 

(63

)

 

738

 

 

(111

)

Discrete and other tax items (benefit) loss

 

(425

)

 

753

 

 

(1,143

)

 

(667

)

Adjusted net income

$

33,133

 

$

32,881

 

$

126,398

 

$

119,681

 

(1) After tax impact.
 
Adjusted net income per common share:
Basic

$

1.34

 

$

1.34

 

$

5.13

 

$

4.91

 

Diluted

$

1.33

 

$

1.33

 

$

5.07

 

$

4.84

 

 
Weighted average common shares:
Basic

 

24,745,009

 

 

24,506,648

 

 

24,632,637

 

 

24,357,684

 

Diluted

 

24,994,189

 

 

24,786,898

 

 

24,922,631

 

 

24,716,213

 

 

Three Months Ended

 

Twelve Months Ended

March 28,

 

March 30,

 

March 28,

 

March 30,

Segment Data, Net External Sales:

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Plain bearings segment

$

93,919

 

$

87,940

 

$

358,291

 

$

323,251

 

Roller bearings segment

 

31,369

 

 

36,121

 

 

132,642

 

 

143,832

 

Ball bearings segment

 

20,622

 

 

19,475

 

 

74,231

 

 

72,307

 

Engineered products segment

 

39,933

 

 

38,626

 

 

162,297

 

 

163,126

 

$

185,843

 

$

182,162

 

$

727,461

 

$

702,516

 

 
 

Three Months Ended

 

Twelve Months Ended

March 28,

 

March 30,

 

March 28,

 

March 30,

Selected Financial Data:

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Depreciation and amortization

$

8,145

 

$

7,396

 

$

31,420

 

$

29,658

 

 
Share-based stock compensation expense

 

5,154

 

 

4,378

 

 

20,150

 

 

16,087

 

 
Adjusted operating income plus depreciation/amortization
plus share-based stock compensation expense

$

56,281

 

$

53,011

 

$

209,220

 

$

195,504

 

 
 
Cash provided by operating activities

$

44,426

 

$

29,534

 

$

155,621

 

$

108,547

 

 
Capital expenditures

$

9,735

 

$

12,141

 

$

37,297

 

$

41,346

 

 
Total debt

$

23,012

 

$

43,646

 

 
Cash and short-term investments

$

103,255

 

$

29,884

 

 
Repurchase of common stock

$

12,209

 

$

5,232

 

 
Backlog

$

478,582

 

$

445,099

 

 
 
 
 

Three Months Ended

 

Twelve Months Ended

March 28,

 

March 30,

 

March 28,

 

March 30,

Reconciliation of Total Net Sales to Organic Sales:

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Net sales

$

185,843

 

$

182,162

 

$

727,461

 

$

702,516

 

Miami division - divestiture

 

-

 

 

-

 

 

-

 

 

(11,308

)

Swiss Tool - acquisition

 

(2,544

)

 

-

 

 

(6,357

)

 

-

 

Organic net sales

$

183,299

 

$

182,162

 

$

721,104

 

$

691,208

 

 
 

Three Months Ended

 

Twelve Months Ended

March 28,

 

March 30,

 

March 28,

 

March 30,

Reconciliation of Aerospace Net Sales to Organic Sales:

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Net sales

$

119,397

 

$

114,453

 

$

469,246

 

$

431,133

 

Miami division - divestiture

 

-

 

 

-

 

 

-

 

 

(11,308

)

Organic net sales

$

119,397

 

$

114,453

 

$

469,246

 

$

419,825

 

 
 

Three Months Ended

 

Twelve Months Ended

March 28,

 

March 30,

 

March 28,

 

March 30,

Reconciliation of Industrial Net Sales to Organic Sales:

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Net sales

$

66,446

 

$

67,709

 

$

258,215

 

$

271,383

 

Swiss Tool - acquisition

 

(2,544

)

 

-

 

 

(6,357

)

 

-

 

Organic net sales

$

63,902

 

$

67,709

 

$

251,858

 

$

271,383

 

 

 

RBC Bearings
Ernest Hawkins
203-267-5010
Ehawkins@rbcbearings.com

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

Source: RBC Bearings Incorporated