RBC Bearings Incorporated (Nasdaq: ROLL, ROLLP), 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 first quarter
of fiscal 2023.
Key Highlights
- First quarter net sales of $354.1 million increased 126.7% over
last year; organic net sales up 13.1%.
- First quarter gross margin of $141.2 million, 39.9%.
- First quarter EBITDA of 27.4%; adjusted EBITDA of 28.4% vs last
year adjusted EBITDA of 29.0%.
- Second quarter outlook shows net sales of $355 million to $365
million, a growth rate of 121% to 127%.
- First quarter GAAP diluted EPS $1.09, adjusted diluted EPS
$1.19, and new adjusted diluted EPS $1.79.
First Quarter Financial
Highlights
($ in millions)
Fiscal 2023
Fiscal 2022
Change
GAAP
Adjusted (1)
GAAP
Adjusted (1)
GAAP
Adjusted (1)
Net sales
$
354.1
$
156.2
126.7
%
Gross margin
$
141.2
$
63.8
121.3
%
Gross margin %
39.9
%
40.8
%
Operating income
$
64.5
$
68.3
$
29.3
$
29.9
119.9
%
128.5
%
Operating income %
18.2
%
19.3
%
18.8
%
19.1
%
Net income
$
37.4
$
40.2
$
24.0
$
24.3
55.7
%
65.6
%
Net income available to common
stockholders
$
31.7
$
34.5
$
24.0
$
24.3
31.8
%
41.9
%
Diluted EPS
$
1.09
$
1.19
$
0.95
$
0.96
14.7
%
24.0
%
New Diluted EPS
$
1.79
$
1.22
46.7
%
(1) Results exclude items in
reconciliation below.
“We are pleased to report, revenues were strong across the
majority of our end markets in both the industrial and aerospace
sectors,” said Dr. Michael J. Hartnett, Chairman and Chief
Executive Officer. “Matching this strength in demand was excellent
execution at the plant level and exceptional margin performance.
Our outlook for the balance of the fiscal year remains on this
positive track.”
First Quarter Results
Net sales for the first quarter of fiscal 2023 were $354.1
million, an increase of 126.7% from $156.2 million in the first
quarter of fiscal 2022. Net sales for our Industrial segment
increased 286.8%, including sales of approximately $177.5 million
from Dodge, while our Aerospace/Defense segment increased 10.0%.
Gross margin for the first quarter of fiscal 2023 was $141.2
million compared to $63.8 million for the same period last
year.
SG&A for the first quarter of fiscal 2023 was $55.8 million,
an increase of $24.6 million from $31.2 million for the same period
last year. As a percentage of net sales, SG&A was 15.8% for the
first quarter of fiscal 2023 compared to 20.0% for the same period
last year.
Other operating expenses for the first quarter of fiscal 2023
totaled $20.9 million compared to $3.2 million for the same period
last year. For the first quarter of fiscal 2023, other operating
expenses included $17.3 million of amortization of intangible
assets and $3.8 million of costs associated with the Dodge
acquisition, partially offset by $0.2 million of other income. For
the first quarter of fiscal 2022, other operating expenses
consisted primarily of $2.6 million of amortization of intangible
assets and $0.6 million of restructuring costs and other items.
Operating income for the first quarter of fiscal 2023 was $64.5
million compared to $29.3 million for the same period last year.
Excluding approximately $3.8 million of acquisition related costs,
adjusted operating income for the first quarter of fiscal 2023 was
$68.3 million. Excluding restructuring costs and other items of
$0.6 million, adjusted operating income for the first quarter of
fiscal 2022 was $29.9 million. Adjusted operating income as a
percentage of net sales was 19.3% for the first quarter of fiscal
2023 compared to 19.1% for the same period last year.
Interest expense, net, was $15.8 million for the first quarter
of fiscal 2023 compared to $0.3 million for the same period last
year. The increase in interest cost during the period is a result
of the quarterly impact of the permanent financing associated with
the Dodge acquisition.
Income tax expense for the first quarter of fiscal 2023 was
$10.5 million compared to $5.4 million for the same period last
year. The effective income tax rate for the first quarter of fiscal
2023 was 21.8% compared to 18.4% for the same period last year. The
fiscal 2023 first quarter income tax expense included $0.6 million
of tax benefits from share-based stock compensation. Income tax
expense for the first quarter of fiscal 2022 included $2.1 million
of benefit from share-based stock compensation along with $0.2
million of tax benefit associated with the statute of limitations
expiration with respect to certain items.
Net income for the first quarter of fiscal 2023 was $37.4
million compared to net income of $24.0 million for the same period
last year. On an adjusted basis, net income was $40.2 million for
the first quarter of fiscal 2023 compared to $24.3 million for the
same period last year. Net income available to common stockholders
for the first quarter of fiscal 2023 was $31.7 million compared to
$24.0 million for the same period last year. On an adjusted basis,
net income available to common stockholders for the first quarter
of fiscal 2023 was $34.5 million compared to $24.3 million for the
same period last year.
Diluted EPS for the first quarter of fiscal 2023 was $1.09
compared to $0.95 for the same period last year. On an adjusted
basis, diluted EPS was $1.19 for the first quarter of fiscal 2023
compared to $0.96 for the same period last year. On an adjusted
basis, new diluted EPS was $1.79 for the first quarter of fiscal
2023 compared to $1.22 for the same period last year.
Backlog as of July 2, 2022 was $635.7 million compared to $420.2
million as of July 3, 2021 and $603.1 million as of April 2,
2022.
Outlook for the Second Quarter Fiscal
2023
The Company expects net sales to be approximately $355 million
to $365 million in the second quarter of fiscal 2023, compared to
$160.9 million last year, a growth rate of 121% to 127%.
Restatement of Previously Issued
Consolidated Financial Statements
On August 2, 2022, the Audit Committee of the Board of Directors
of the Company, in consultation with the Company’s management,
concluded that the previously issued consolidated financial
statements as of and for the years ended April 2, 2022, April 3,
2021, and March 28, 2020 and the consolidated financial statements
for the quarters therein (the “Affected Periods”) included in the
Company’s Annual Report on Form 10-K filed with the Securities and
Exchange Commission on May 26, 2022 contained an error related to
the accounting of non-cash stock-based compensation granted to the
Company’s CEO and COO. As a result of this error, the Audit
Committee determined that the Company’s consolidated financial
statements for the Affected Periods included in the 2022 Annual
Report on Form 10-K should not be relied upon and should be
restated by adjusting selling, general and administrative expenses
to reflect non-cash stock-based compensation that should have been
recognized in each of the Affected Periods. Any previously issued
or filed reports, press releases, earnings releases and investor
presentations or other communications describing the Company’s
previously issued consolidated financial statements and other
related financial information covering the Affected Periods should
no longer be relied upon.
The need for the restatement arose out of the Company’s
reexamination of the timing of the Company’s recognition of
stock-based compensation, a non-cash item, for awards granted to
the CEO and COO in light of their employment agreements as then in
effect, which historically included provisions that (i) would
accelerate the vesting of all the CEO’s then-unvested shares of
restricted stock and stock options in the event that he voluntarily
resigns from employment or provides the Company with notice that
his employment agreement will not renew, and (ii) would accelerate
the vesting of all the COO’s then-unvested shares of restricted
stock and stock options in the event that he provides the Company
with notice that his employment agreement will not renew.
Historically, the Company recognized stock-based compensation for
restricted stock awards granted to the CEO and COO over the
three-year vesting period and option awards over the five-year
vesting period stated in the agreements underlying these awards,
but U.S. GAAP requires stock-based compensation for awards to be
recognized over the shorter service period effectively provided by
the above-referenced provisions in the CEO and COO’s respective
employment agreements.
The CEO and COO’s employment agreements have been amended to
remove the provisions referred to above (which the Company, the CEO
and COO consider to be a technical mistake causing the employment
agreements to not reflect the parties’ mutual agreement) so the
Company will recognize stock-based compensation for restricted
stock and option awards granted in the future to the CEO and COO
over the full three- and five-year vesting periods, respectively,
rather than over the shorter service period applicable to the prior
awards.
The change in the recognition of stock-based compensation is a
non-cash item that affects the timing of recognition but not the
total amount of the corresponding compensation expense for each
award. The following table shows the Company’s SG&A and
operating income for the Affected Periods as previously reported
and as restated:
(in thousands)
As Previously Reported
Restatement Impacts
As Restated
Fiscal Year Ended April 2,
2022
Selling, general and administrative
expenses
$
158,634
$
8,969
$
167,603
Operating income
$
130,063
$
(8,969
)
$
121,094
Fiscal Year Ended April 3,
2021
Selling, general and administrative
expenses
$
106,000
$
(3,217
)
$
102,783
Operating income
$
111,458
$
3,217
$
114,675
Fiscal Year Ended March 28,
2020
Selling, general and administrative
expenses
$
122,565
$
7,418
$
129,983
Operating income
$
156,785
$
(7,418
)
$
149,367
The change in the recognition of stock-based compensation
described above does not impact the Company’s (i) liquidity or cash
flows from operating activities, investing activities and financing
activities during the Affected Periods, (ii) Adjusted EBITDA
non-GAAP financial measure, or (iii) compliance with its
obligations under any material agreement, including the financial
covenants contained in the agreements governing its outstanding
indebtedness.
The Company plans to restate the financial statements as of and
for the Affected Periods in an amendment to the 2022 Annual Report
on Form 10-K to be filed with the SEC.
In addition, the Company’s management has concluded that there
was a material weakness in internal control over financial
reporting during the Affected Periods relating to the error
described above. The Company’s remediation plan with respect to
such material weakness will be described in the amendment to the
2022 Annual Report on Form 10-K to be filed with the SEC.
Live Webcast
RBC Bearings Incorporated will host a webcast on Thursday,
August 4th at 12:00 p.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 # 13731919. An audio replay
of the call will be available from 3:00 p.m. ET August 4th, 2022,
until 3:00 p.m. ET August 18th, 2022. The replay can be accessed by
dialing 877-660-6853 (international callers dial +1 201-612-7415)
and providing conference ID # 13731919. 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.
Adjusted Operating Income
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 and Adjusted Earnings Per Share
Adjusted net income and adjusted earnings per share (calculated
on a diluted basis) exclude 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.
New Adjusted Net Income and New Adjusted Earnings Per Share
New adjusted net income and new adjusted earnings per share
excludes non-cash expenses for amortization related to acquired
intangible assets, stock compensation and amortization of deferred
finance fees, net of their income tax impact. We believe that new
adjusted net income and new 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.
EBITDA
EBITDA represents earnings from continuing operations before
interest and other debt related activities, taxes, depreciation and
amortization and stock compensation expense. EBITDA is presented
because it is an important supplemental measure of performance and
it is frequently used by analysts, investors and other interested
parties in the evaluation of companies in our industry. EBITDA is
also presented and compared by analysts and investors in evaluating
our ability to meet debt service obligations. Other companies in
our industry may calculate EBITDA differently. EBITDA is not a
measurement of financial performance under GAAP and should not be
considered as an alternative to cash flow from operating activities
or as a measure of liquidity or an alternative to net income as
indicators of operating performance or any other measures of
performance derived in accordance with GAAP. Because EBITDA is
calculated before recurring cash charges, including interest
expense and taxes, and is not adjusted for capital expenditures or
other recurring cash requirements of the business, it should not be
considered as a measure of discretionary cash available to invest
in the growth of the business.
Adjusted EBITDA
Adjusted EBITDA is the term we use to describe EBITDA 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, it is also provided to aid investors in
understanding our compliance with our debt covenants. Adjusted
EBITDA is not a presentation made in accordance with GAAP, and our
use of the term Adjusted EBITDA varies from 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 allows us to add 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, vary greatly and 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 allow us to add estimated cost savings and operating
synergies related to operational changes ranging from acquisitions
to dispositions to restructurings and/or exclude one-time
transition expenditures that we anticipate we will need to incur to
realize cost savings before such savings have occurred. Further,
management and various investors use the ratio of total debt less
cash to Adjusted EBITDA (which includes a full pro-forma
last-twelve-month impact of acquisitions), or "net debt leverage",
as a measure of our financial strength and ability to incur
incremental indebtedness when making key 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 is utilized when making key investment
decisions and evaluating us against peers.
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, the COVID-19 pandemic, geopolitical
factors, future levels of aerospace/defense and industrial market
activity, future financial performance, our debt leverage, the
integration of our recent 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, 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
July 2,
July 3,
2022
2021
Net sales
$
354,080
$
156,205
Cost of sales
212,928
92,432
Gross margin
141,152
63,773
Operating expenses: Selling, general and administrative
55,828
31,212
Other, net
20,854
3,248
Total operating expenses
76,682
34,460
Operating income
64,470
29,313
Interest expense, net
15,799
319
Other non-operating (income)/expense
767
(465
)
Income before income taxes
47,904
29,459
Provision for income taxes
10,466
5,421
Net income
37,438
24,038
Preferred stock dividends
5,750
-
Net income available to common stockholders
$
31,688
$
24,038
Net income per share available to common stockholders: Basic
$
1.11
$
0.96
Diluted
$
1.09
$
0.95
Weighted average common shares: Basic
28,670,488
25,021,063
Diluted
28,944,955
25,392,047
Three Months Ended
Reconciliation of Reported Operating Income to
July 2,
July 3,
Adjusted Operating Income:
2022
2021
Reported operating income
$
64,470
$
29,313
Transaction and related costs
82
-
Transition services
3,705
-
Restructuring and consolidation
-
557
Adjusted operating income
$
68,257
$
29,870
Reconciliation of Reported Net Income
Available to
Three Months Ended
Common Stockholders to Adjusted Net Income Available
July 2,
July 3,
to Common Stockholders:
2022
2021
Reported net income
$
37,438
$
24,038
Transaction and related costs
82
-
Transition services
3,705
-
Restructuring and consolidation
-
557
Foreign exchange translation loss/(gain)
(163
)
13
Tax impact of adjustments and other tax matters
(826
)
(309
)
Adjusted net income
$
40,236
$
24,299
Preferred stock dividends
5,750
-
Adjusted net income available to common stockholders
$
34,486
$
24,299
Adjusted net income per common share: Basic
$
1.20
$
0.97
Diluted
$
1.19
$
0.96
Weighted average common shares: Basic
28,670,488
25,021,063
Diluted
28,944,955
25,392,047
Three Months Ended
Reconciliation of Reported Operating Income to EBITDA to
July 2,
July 3,
Adjusted EBITDA:
2022
2021
Reported operating income
$
64,470
$
29,313
Depreciation and amortization
28,642
8,212
Stock compensation expense
3,819
7,182
EBITDA
$
96,931
#
$
44,707
Transaction and related costs
82
-
Transition services
3,705
-
Restructuring and consolidation
-
557
Adjusted EBITDA
$
100,718
$
45,264
Three Months Ended
Reconciliation of Adjusted Net Income Available to
July 2,
July 3,
Common Stockholders to New Adjusted Net Income
2022
2021
Available to Common Stockholders: Adjusted net income
available to common stockholders
$
34,486
$
24,299
M&A related amortization
16,411
2,081
Stock compensation expense
3,819
7,182
Amortization of deferred finance fees
2,298
106
Tax impact of adjustments
(5,212
)
(2,644
)
New adjusted net income available to common stockholders
$
51,802
$
31,024
New adjusted net income per common share: Basic
$
1.81
$
1.24
Diluted
$
1.79
$
1.22
Weighted average common shares: Basic
28,670,488
25,021,063
Diluted
28,944,955
25,392,047
Three Months Ended
July 2,
July 3,
Selected Financial Data:
2022
2021
Cash provided by operating activities
$
59,035
$
53,293
Capital expenditures
$
7,857
$
3,367
Total debt
$
1,565,330
$
10,754
Cash and marketable securities
$
119,587
$
296,091
Total debt minus cash and marketable securities
$
1,445,743
$
(285,337
)
Repurchase of common stock
$
5,984
$
6,264
Backlog
$
635,741
$
420,218
Three Months Ended
July 2,
July 3,
Segment Data, Net External Sales:
2022
2021
Industrial segment
$
254,681
$
65,840
Aerospace and defense segment
99,399
90,365
$
354,080
$
156,205
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220804005426/en/
RBC Bearings Robert Sullivan 203-267-5014
Rsullivan@rbcbearings.com
Alpha IR Group Michael Cummings 617-461-1101
investors@rbcbearings.com
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