ROLL - Earnings call transcript Q2 2018 | RBC Bearings Incorporated

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Operator

Good day, ladies and gentlemen, and welcome to RBC Bearings Second Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to Chris Donovan, Alpha Investor Relations.

You may begin.

Chris Donovan

Good morning, and thank you for joining us for RBC Bearings fiscal 2018 second quarter earnings conference call. call Dr. the on me today are With Michael J. Officer; Chairman, A. and Executive President Chief and Daniel Hartnett, President, Financial Vice Bergeron, Chief Operating Officer. Officer and Chief

beginning results will due of me the Before Securities or Litigation made let implied that of Private materially call, of XXXX. factors. from Act some projected Actual under remind the variety statements differ forward-looking We to be you today a Reform and for Bearings' company's detail recent are may detailed filings are made and refer a today's you on SEC that the more in in of the impact financial to and release future the risks the greater RBC press also described factors discussion website. with company's results the condition. could those These operating

between information In of on GAAP as part is financial release website. the company's and included non-GAAP the is and available addition, reconciliation

the turn I'll Hartnett. Dr. Now over call to

Michael Hartnett

our for the explain Hey. welcome million for good morning, quarter X.X% $XXX.X and Net and some to and specific went same were quarter overview the last a here conference over period the the XXXX million turn input. $XXX.X then Thank to call of second for for it versus Dan I'll Bearings. of increase. you, sales year, RBC fiscal how

was million a a for was increase. increase. income For represented XX.X% margin Gross last for of sales same or Adjusted XX% This million fiscal with the sales. products year, products second quarter at $XX.X XX%. to X.X% the XXXX quarter the of of million or of sales, net X% industrial year, versus $XX.X of XXXX, fiscal aerospace our $XX.X net the second million compares period last $XX.X XX.X% operating

continue to consolidated new that, costs when will and last further mentioned facilities. This production accrue mature, experience margins. run start-up with is programs we associated benefits primarily As to call, in several low we

date. continue $XX.X as $XX.X made in and Industrial debt progress XX.X% We benefit rate, XX.X% was in and flow for products. on has strong XX.X% another oil see we of to was these aftermarket for OEM semiconductor the and expect overall corresponding quarter beginning EBITDA up reduced to of came and basis. Industrial year-over-year up quarter distribution demand per a a was and showed industrial by XX.X%, Adjusted growth for gas Mining, machinery share. machine the distribution. in was was gas, the the year-over-year were MRO products the million, work semiconductor standout and and our quarter diluted was which cash of third key good at marine, $XX.X and revenues. semiconductor $X.XX Strength tool, most machinery, to see million, markets, oil EPS and here. rail general demonstrated million. include mining, been industrial this Free markets

about lumpy was this will nicely the off was products and quarter but On period, the defense later for were Defense year. aerospace another the often slow of XXX program for dependable, Boeing build we during accelerate Reduction in rates expect the headwind. revenues, X.X%. but

which ahead dynamic XXX impact are on are positively. We the expected to MAX, introduction in that year, next and which this dialed increases XXXX are and the contract under planned in substantially

jeopardy, our customers Storm in us third of cost couple dollars it region. our This million the in impacted of in most expect to a our operations few not some sales was disrupted, recover of of but our over Finally, to were many million still and revenues recovered September Irma during diligently in plants of be a there quarter. period. left we only over, as dollars the but four the that that pretty operations, worked We the

Regarding our third quarter.

looking performance. and between Dan the detail $XXX very XX%. last solid year, somewhere financial million $XXX year us period of an more over sales million, compared expecting to XX% I'll to are is on call now increase $XXX.X the turn the over be to with for between and million The today. We total

Daniel Bergeron

second Thanks, cost mainly same to the $X.X The incentive items. of XXXX last $X.X Michael. of compared increase to SG&A million period personnel $XX.X due stock for and fiscal year. $X.X higher of million million, of quarter was was million, compensation million for additional the $XX.X other

XXXX As expense a compared of for Other was quarter sales, for of million, for compared to $X.X SG&A of the period fiscal expense net the year. year. $X percentage same million second of second XXXX, last last the operating of the XX.X% XX.X% period quarter was to fiscal for same expense

in compared of period income related XXXX. were million basis, for million operating comprised For expenses operating operating million quarter been restructuring $XX.X would quarter in fiscal second Other to adjusted fiscal same sales same period million for last XXXX, amortization the of period would same second a of Adjusted been of an of for operation the for and of the million XXXX, for assets. assets, percentage $XX.X expense year. $X.X in Operating the mainly $X.X period compared the income $X.X of of fiscal to amortization to $XX.X last have operating offset On have XX.X% income XXXX, other million intangible net million XX.X% of fiscal the to year last $X.X by for quarter other year. intangible same operating as compared fiscal of Canadian the income second million $XX.X for consisted the quarter XXXX, the our of income. mainly second was

compared an XXXX fiscal year. the XXXX, per net million, for second for million XXXX, the per same income EPS adjusted quarter $XX.X $XX.X was was of $XX.X adjusted period same share last share to net of fiscal compared of reported For per for period the share share, period same of of diluted XXXX, share compared second adjusted Diluted last $X.XX an company $X.XX of of the period quarter year. earnings per an $X.XX the the would second the million per for for million basis, second $XX.X year. the $X.XX diluted fiscal net quarter for income earnings been the last income to net per for same income On year. of share compared basis, quarter to have to fiscal last On

Turning cash down the company to session. second from Q&A million to turn to compared to back the of quarter like In the million the same with the $XX.X in period quarter million were last to in XXXX, second for XXXX, in company would The $XX.X million $XX.X compared activities the in quarter Capital the and period the same XXXX, ended now operating cash fiscal debt paid $X.X to the for last call $XX.X $X flow. fiscal million million quarter of generated fiscal year. expenditures I of cash. begin the operator year. second

Operator

line Skibitski of of Our first Drexel Instructions] from question Hamilton. [Operator the Pete comes

Your now is open. line

Pete Skibitski

good Hi guys. morning

Michael Hartnett

Pete. morning, Good

Pete Skibitski

is, Maybe, notes Mike, restructure this to say to Canada. that build-to-print decision a and Montréal. for - think, talk a Sargent can maybe you facility us us My of maybe facility the is on give color I Pratt some kind

that confirm add So, some they were it got there, you maybe maybe bit. that biz some margins can of and exposure jet struggling you color? and looks But a some I'm guessing on like maybe

Michael Hartnett

attractive the challenged. did Sargent was acquisition, and was was acquisition, a diligence Sure. part least certainly it the this of of during Well, very the we period identified the unit business as sort when business that

contract consolidation, some and the that we after had. of there did concerned the to many was barriers so, obligations barriers acquisition those And business

So, core capital worked brings capital and we where today. strategies investment, and management terms And of put us amount the barriers disproportionate we'd synergy. business our through unit. are from offered that for of kind or into return little and business really of we us effort a and required the those in of the It saw view, to really have we little amount

efforts conclusion capital so to elsewhere, spent we the better are and liquidate the our and our So, operation. reached

Pete Skibitski

Okay, okay.

completely? exiting you're just not site? those another So, to product lines moving them You're

Michael Hartnett

That's correct.

Pete Skibitski

recollection mentioned you million. cash in fiscal it's $X.X the And of kind was my an Okay. benefit I XXXX annualized think release, that number? Is your that

Daniel Bergeron

the of the we'll down, shutting of closure its balance and what of operation it the sheet, of through minus obviously. December point That's Yes. from generate end cost the basically at the liquidation then

Pete Skibitski

Right.

guys okay. But over of comps X up, [ph] And didn't you're just the GDP. think growth XX% half ask at growth. industrial half. I into in going I now about mean, the Okay, the kind are think, talk think now to X.Xx the And of tough to kind first typically on industrial I I second you particularly want I of year. the

pretty double-digit there's kind the strong wondering know could of what that just but in you be I'm accelerating. even are numbers I So, ISM is general, type that this may the - cycle be this driving sense a think growth. of

share? much comps? something But that Or of guess. sense is if you've where GDP, why faster just you've particular gets taken I maybe growing market wondering really so your the I'm have to OEM than it you're is easy question So, what it areas got

Michael Hartnett

a is down of Well, I by quarter. we storms number think, doing of the itself, growing shutting good a though GDP at for X% first country had even during parts the job of all, - the all

core would our in like well businesses. GDP that and that, it's maybe it's have as Who X%. that base growth when been So But healthy, knows? our really extremely businesses healthy do

the barrel, it how on back was think oil all a make lot has industry. be of a they And to and part and to everybody good for are and a the mining a a Basically, barrel few all production, and So cannibalized went baseline. gas the knows of $XXX into back barrel. last that, the over years add extraordinarily a equipment I of the between money from $XX sort oil were lights And when And you brought now years. of and the number to you depressed off lights shut that's $XX $XXX at know both on. $XX to

have move begins well. the and you as well is of right GDP equipment the very in trucks. the And So, and and sector kind follows the suit. again, that And I disproportionate the mining mean Caterpillar doing other demand everything Hitachi of now. people and mining that's United for selling strong States, Liebherr well. to does when a start same amount

Pete Skibitski

semiconductor just pop see semi since new iPhone I around with thought And having launches, iPhone ask - the you tend an okay. Apple launch? Okay, a do to business and the I'd your exposure guys it's in

Michael Hartnett

for, part industry that so very train, much. mean, And whole tooling that us into and that favors we'll that iPhone went the the new is - I we're technology of yes. Yes. there's

Pete Skibitski

Okay, okay.

So, I and of on stay logic, say? Is that year, next then some - that Or... next the you'd a into at would get strong point suppose reasonable you maybe you be for at comp expect least tougher a couple quarters to semis.

Michael Hartnett

to in that's and access, terms all that. Yes, accruing I internally think, help I to even a and of done mean market few positively demand we've us. beyond ourselves things market

us. stock you watch Materials and conference their think calls, that's Applied to I listen and

Pete Skibitski

guys. Thanks queue. in back get I’ll great. That’s Okay.

Operator

Thank you.

comes Our the question Liwag America Lynch. Merrill Bank of Kristine next of from line of

open. Your line is

Kristine Liwag

Hi, guys. good morning

Michael Hartnett

morning Good Kristine.

Kristine Liwag

I what gains guess to the sort aerospace MAX market destocking in ramp increase do see going wanted expect commercial the on AXXX? At I you of of now when Is share and the benefits industry? to and in the point do on understand rate to the XXX And expect there better. little bit the neo? see a your significant some right you

Michael Hartnett

look all that it's you all our million we - were a revenues, out the if worth by Kristine, those stranger four even the No, lost storm that revenues all, dollars. first aerospace actually was were was so plants few of quarter, than of What - that that. at affected

aerospace it major we've our had call interesting Vanguard started we that Beyond with an that, OEMs of the program program. one

we So, based new documentation. - been project, one supplier by which the the our a lead enhanced which in major their is as on of production initiative OEMs chosen have

to no sort be the being new just this program that meant in definition Mar-a-Lago the what the were really do to lead of But did right? our and conform in manufacturing of created new headwinds a some out we So the documentation thing, thrilled to we bit should it one of plants, supplier So, feel quarter program, that for worked can't the be side Wolf order say you Blitzer lead each little some dinner. chosen in definition. to to production the for like although what and as delayed invited major sides - to both

through we a of Those throughput few that while so being we missed will as dollars plant, a was not was revenue revenues and catch So, being done, it. product along production. quarter because right Cadillac-ing have been back result enough and and now the million of the third now the to need sort lost in definitions upon, sort back up trying where agreed we're be, all recover to of the of

AXXX we're not And planes. production the quarter. airplanes to of build element was the group sort the our Airbus of taking of was of they've second at seeing in element that rate the So the - series third published that product

engines, finished they're they're and trouble think getting up think that plane having they're I their assemblies, their We So, and I track builds. backing down.

has And sure way by the pressure the help to that Pratt the up a is catch - so, end will of catching by them of end year. Airbus the great year. up that of under I'm

So over sort itself that should of time. correct

So impacted the factors that those are three quarter. really the aerospace

Kristine Liwag

on That's helpful. program. up following Vanguard this maybe And

a is nonrecurring So, event? like you for this get did single And something this? paid

Michael Hartnett

Did Wolf - provide dinner. to service pay the that I it's have think of we don't the we just I for part mean, customer. -

Kristine Liwag

catch-up It in on helps work following aerospace. That maybe lot. see. you'll I have like gross margins. up a XQ, And then seems for

me react in you engines to like environment? You've see should got industrials. growth How well. firing, so in mean in margins sounds we significant as should all to accelerating margins are it that I gross growth expect

Michael Hartnett

saying Dan. I this what is ahead, Dan, Go to Dan that and says. keep

Daniel Bergeron

I target get to on our trying Kristine, XXX year. think XX target the to still end of - of we're by internal the to bps

The bit of of that programs special Mike we wanted was on put the kind of little except for first that some about drag was to could year-to-date these a where be talking margin. quarter

we that to shooting a XX.X%, at we're by win the year. end So, to XX.X% closer the basis. run still of ended [ph] rate bps so the on And run-rate be least hoping of we're at year in last at XXX

Kristine Liwag

for means Dan, right it price a should closer the your XX% percent stock be you. we expect could That's a like stock where compensation which helpful. rather And to and more, question is to SG&A sales cost XX% maybe, follow-up as With from than before? of

Daniel Bergeron

No.

end about year, pretty year the we be of lined I at should XX.X%. up the where were by we think much last

on organic the benefit first of are growth, of kind strategic on half impacting investments the the year. line seeing top should so that's capital those making numbers But human we for this some investments. We in from and our start

Kristine Liwag

Great. guys. Thank very you much

Michael Hartnett

Thank Kristine. you,

Operator

Our Instructions] Capital. the of comes KeyBanc [Operator Steve next question line from Barger of

open. now is line Your

Steve Barger

guys. Good morning,

Michael Hartnett

Good morning, Steve.

Steve Barger

you for When a it about the typical of distribution expect to can channel? did you talk this quarter? where OEMs think do you get into sales way run inventory And are you either ahead industrial upturn, levels

Michael Hartnett

Yes.

and that converted think extent, programs. I through to - had industrial some started distribution we to some of OEM over the sales quarter, industrial OEM this big distribution programs some then direct

the bit lower it see uptick typical see I lower normally out some distribution the or credit building than back - in leading bit you have the And better So, should got number for is first, be this, this I a numbers that's but like uptick a number of numbers. with industry. little little got. then OEMs just distribution think and than the the should we Yes, normally coming think an you distributors

Steve Barger

have So, too really would this isn't what from anomalous you expected?

Michael Hartnett

No, it's not.

Steve Barger

that some is faster at back And want product inventory needed the going they that have of the low Is the to that because And channel? for to to you sense said deal - converted do with you any OEM. levels, from indicative inventory OEMs? distribution just projects didn't of and

Michael Hartnett

the first to distributor. he Well, if - can't how buys And markup to that a OEM he We all, it's wants product. of through for the the for distribution, decides be him. got there's decide obviously, buy

manufacturer when happened them into production, they're the come to And part directly that's And so, there. get programs. programs it's for not what to when in uncommon these large

based they and question. their thing have So the way that's of they're watch I very all good systems, upon looking we're buying, turns their that and to that But the closely. that. and the would inventories, sort they first think at earning really so turns And still I the distribution answer mean to your relative -

that pretty these running So, that at I weren't lean, they running rates and be I were if would would expect they're think wouldn't this - they buying lean. running

Steve Barger

cost material And Right. increases.

price are things actions picking you well, As And you fairly like look taking your that? any are see up end? they're on offset - to to are starting

Michael Hartnett

contracts Well, much materials pricing. agreed-to we're wherever with increases, major under core actions. can but And price of - obviously, not there's material seeing take our actions are long-term price our we

a the have where long-term for that That's a already And would exposure. got we've we price contract sort tremendous materials the baseline XX% So, amount spend where materials of be then some that consumed under of have we we are the certain of set. variation. might

much that We but haven't up terms seen of lately of in increases, on our way it. are antennas

Steve Barger

given do Yes. there ramp Well, And about issues? and how capacity guess input your you availability own to I are that seeing? point, you're any the feel

Michael Hartnett

Well, occasionally, that. of busy. the something we mean us. to last that of and sort more we're think digestible is to I normalized very beyond for side capacities, We But industrial demand like that's that worries pretty were business the quarter surge I the close don't our us. But having over getting busy.

Steve Barger

for how had October? off to you're alluded kind you've Did did I Well, to you continuation trends of minute, I a the seeing of in but it, a but hop about call ramp? talk you the mean were -

Michael Hartnett

the industrial Yes, in year solid sectors, aerospace. from very looks yes. yes, both Oh, - and

Steve Barger

And last question me. for

been Can always your now where either systematic via through you're you talk expansion approach to punch things to or drive list margin toward gross expansion. You've any efficiency? focused on very improve the specific that capacity in right

Michael Hartnett

we're Well, early start-up of produced major on programs, per with stage in bringing of Yes. these units really we're on where these. we're some major contracts now, the focused revenues. on right quarter number And

lot and these to getting our need these effort margins on a be engineering is margins start-ups so, the of the And going where into products.

So, pretty them you They're They're you them you ugly when don't up. - when pretty they're start actually, start up. them not start up.

curve in that to of on and manufacturing I'm these with and learning work ahead of manufacturing you've happy execution got we programs relative pretty pretty to get curve. so, curve, most on where are order strategy hard that And to and

Steve Barger

Understood. normal any business, capacity? terms Well, you of Are I are in programs in drive existing to you internal guess, capacity course investing more of for doing expansions automation?

Michael Hartnett

are of Well, a lot using we Yes. robotics.

Steve Barger

And facility that to for that's was of while, newer? I a robotics a lot don't but recall there been haven't a I before.

Michael Hartnett

more. in you would Yes, the it's months, Well, to get ought out XX I last say.

anything don't that be technical that a of and just that to it like of and barriers operational heck getting overnight. You - solved. problems It's have to effective lot a do

I we're so, making. lot we're progress absolutely spine people the work progress of I'm stuff, the thrilled I on And mean - when a that have chills at we see I down working making. and my get

Steve Barger

good Mike. time. for Well hear to the that’s Thanks

Michael Hartnett

Okay. Thank you, Steve.

Operator

I'm Thank questions I'd you. at time. for remarks. back Hartnett any hand And showing further closing Dr. this no to the call

Michael Hartnett

Well, you Okay. to for and quarter. I Thank outstanding forward thank look in everybody again the an we very participating today, and much. executing speaking to call third you

Operator

Ladies in participating today's you That program. conclude does and for gentlemen, thank conference. today's

may day. You Everyone, a have great disconnect. all

RBC Bearings (RBC) 5 Nov 172018 Q2 Earnings call transcript