ROLL - Earnings call transcript Q1 2019 | RBC Bearings Incorporated

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Operator

Good morning, ladies and gentlemen, and welcome to the Q1 2019 RBC Bearings Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time.

As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host Mr. IR, ahead. Alpha with Donovan please go Chris

Chris Donovan

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

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

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

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

Dr. Michael J. Hartnett

good fiscal Thank period versus morning, sales Chris, first a Net X.XX% quarter year, last and you, million for our XXXX for million $XXX same were everyone. $XXX.X the increase.

XXXX. was Excluding the fiscal Sargent We consider X.X%. growth quarter a Canada year, that good the last sales on from for very start organic

or products of XX.X% net XXXX, million the same Operating year excellent versus was income XX%. net rate we products. oil $XX we this it momentum year, X.X% an year-over-year year-over-year This follows XX.X% up of for fiscal to XX.X% a was sales increase million Gross develop a semiconductor For all tool our at quarter for million sales to an equipment $XX a a represented last over overall last Industrial an a in $XX gas, up continue sales. distribution machinery, and a see Mining, Clearly, period with and continue Industrial is quarter and year, growth remarkable the EBITDA products year. basis. the million, nice XX.X% XX.X% increase. of $XX.X strong was the $XX.X million OEM and or continue for these showed for markets. XX.X% last company of increase. quarter compared industrial a aerospace first on and major to and the general strength. demand of machine XX.X% show and products to with was our industrial XX% aftermarket margin

This builds short-term timing constraints, the are internal and for and add contracts support double-digits. quarters growth availability the constraints and engine we both On production XX% by the as the We up engine and bumping by our contract order external was we that We're aerospace subsequent are build rate be aircraft able driven capacity, plants, it, additional have is and by to more and defense at if plateau expansion concerns. the quarter, we for volumes in can't. sell made aerospace this the our X.X% an space, not could quarter Aero the by and least airframe side, driven next generated the XX% or to eight product staff. against well through additional year revenues in building by This we X.X% chain mainly scheduled new Supply but basis. volumes, organic driven net sales was in normalized solidly coming floor for up mainly years. and would the rates was as constraints on see OEM. equipment aerospace last some our quarters defense as of OEM In in driven first were up when Canada. external; supply reasons,

We platforms space AXXX, XXX to primarily we the Joint growth floor for machinery Boeing we Fighter the from our and for include the see XXX, demonstrated Airbus supporting our XXXX, interim expenditures where variance capacity course, MAX, some turbofan. products, add see the address and meaningful aerospace and, the the as normally of LEAP, expect to industry demands programs, geared Boeing Strike

and the expecting on between to year second of million of over million turn to X.X%. call X.X% I'll our Canada last now an period $XXX.X the $XXX detail and quarter, Regarding to for financial we're more million our sales be $XXX compared over performance. sales, net increase to Dan

Daniel A. Bergeron

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

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

the for $XX million million to Operating period in Other compared last was items. XXXX. first expenses income for non-operating $X the million by were same $X.X for consisted of first was million period of amortization other $XX.X fiscal operating amortization $X.X other the of last Other the XXXX the million intangible period to fiscal of in mainly same $X.X fiscal in mainly of XXXX, For first of the offset quarter million quarter XXXX quarter assets, items. of assets same $X.X million offset million of the year. comprised $X.X other of operating year expenses operating income expense intangible by for fiscal of for compared

[$X.X] other (sic) non-operating (XX:XX:XX) $X.X year of was For first income. a loss of quarter expenses expenses of in non-operating quarter for of primarily early fiscal of million foreign other last losses XXXX, first million and of debt the $X $X.X comprised translation consisted extinguishment other of on the exchange and million

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

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

Operator

ahead. from Pleased Your first George Godfrey is question of with line the C.L. go King.

Dr. Michael J. Hartnett

George. morning, Good

Operator

your open. ahead. Please Mr. line is Godfrey, go

of Ciarmoli is Michael from SunTrust. with go the question Please line next Your ahead.

Michael Ciarmoli

some definitely the on seeing year chain rest here. was but the terms supply elaborate been for think on regarding your bit I kind more the year and Thanks the I challenges the engine internal terms used color constraints there's progression little regarding on you for supply mean, of of rates guys. know programs morning, comments what taking some into ramping. just you're early good – of build rates. in of you Hey, most build questions sort a constraints? the of Can Maybe a little are side and of the chain bit plateauing maybe maybe the the of next there constraints? I

Dr. Michael J. Hartnett

Sure.

we we around our actually creating constraints what product from quick and And the internal get constraints constraints. the turned got external said is think subcontractors. I enough can't because external both are internal I

have product mode. its plant its manufacture to to keep place in the in We and order shuttle other in that efficiency

for subcontractors to. And of amount that, industry of these a that processes and that result and pedigree industry. the – not substantial a And many do pedigree OEM these choices not and of part, require there typically, suppliers people aerospace most processes they're can many there's special go for processes unique So, they're as very you very our is the approvals. have

now, what than processes special is more the is supply capacity. demand on there's chain right in we considerably see is these there So

of of four and So, to space to insourcing on for adding remedy machinery these floor address to to and plants working to answer and fourth that, time have XXXX, expect we've in some going processes in our beginning these of to of capacity situation be in been our phasing some are that plants we the we're Connecticut. in beginning in requirements one quarter our

there's what at augment and in-source about So, see capacity working planning least it it the is – We've a couple not on needed. we of much years do requirements for it. you is, been to can are planning that to

of but expect the it in bound are up to a it in position industry way what it good fortunately, we so, is planning execute And is, this terms pretty the we didn't and be is. to

Michael Ciarmoli

online. there just then insourcing even to That's in bringing I and capacity helpful. And maybe it. Got – mean that the seguing

called called startup some in ourselves or just layered I some anything potential with might you be the think mean headwind coupling guys new through there, sort new regarding calibrating on the P&L? of flow being to out of I the mean and you some costs. expenses has of level some I you think see to I we the margin out previously what headwind variance. we should expense equipment for capacity think but changed program

Dr. Michael J. Hartnett

we're No okay I think there.

and we're because all them the expenses fleshing think sort P&L incurring these along. I of we've it's – through been

changes mean, in terms probably I that. our see any of won't you rates, to So

we should said, floor have So, coming feet space materially that square and year about next as this. I address of online XXX,XXX new

other major year. contracts also we have hand, some On online new next the coming

race. So it will be a

Michael Ciarmoli

one it. I'll here. Got And me and for just back jump last then

last comment what's broader aerospace on think didn't aftermarket happening was I in on than You some color the normal spares, – a I there or Any quarter. and know was bit aftermarket? little lower really it

Dr. Michael J. Hartnett

extent, to requirements, the For are OEMs us, to large smaller industry that a supply, subcontractors they some the in supplies MRO our general. aftermarket also but

I past, in directly if some gone don't do suppliers, coming traditional directly through to so between Airbus true or coming Boeing aftermarket. to you and coming is OEM on customers shifts us have, normally our aftermarket or know going the that people. us would could that We to see directly those call And us

was flat Dan? last what the So fairly and quarter, it's been

Daniel A. Bergeron

it year Yeah. of was In million, QX Canada. to compared last QX $XX.X $XX.X excluding million

the for quarter. year-over-year flat last So pretty it's been

Michael Ciarmoli

guys. That's lot, it. helpful. Got Thanks a

Dr. Michael J. Hartnett

Yeah.

Operator

Your next question Bank is from with Lynch. America Please Merrill ahead. go of Kristine Liwag

Kristine Tan Liwag

guys. morning, Good

Dr. Michael J. Hartnett

Good morning.

Daniel A. Bergeron

Good morning, Kristine.

Kristine Tan Liwag

up Mike, up you've following are looking plating, the oxygen on you're the there techniques. you're that fuel the treating that items are coming at? new highlighted In that adjusting question. items Are adding these today capacity and past, or you're constraints high-velocity that heat in-sourcing

Dr. Michael J. Hartnett

addressing there definitely those list? plating did listed and You they're And HVOF? Well, items. treating, heat what is you

Kristine Tan Liwag

And high-velocity technique. oxygen (XX:XX:XX) (sic) fuel and [fuel]

Dr. Michael J. Hartnett

film inspections add We'll quality we today dry pigment. and aluminum certain Yeah. outsource that also also and

bottleneck are these of sort operations, external. So all

Kristine Tan Liwag

or you And is like by to in-sourcing that capacity, XQ is you've going at you'll you're then other be Boeing already? that I OEMs, full that Have that mentioned this when guys this is approved And as engine add rate? the to then, online, qualified get gotten when when you to do you well? before this said think when they're in-house you got these the approve when

Dr. Michael J. Hartnett

procedures that's quarter. And full demonstrated quarter. first activity the show can we be we comes have Well, when OEM mean, is the won't this the in until I in start management that in appropriate floor at quality signs the off. is phase on we that to and that us we'll plant in activity and rate and

in-sourcing that's the new where plant So, we're business. this all on

those of and off. For been some HVOF of have already, signed the some existing the plating of doing the plants already some where we're

capacity capacity that adding So saying our we're substantial existing is of by to facility. establishing what a a new capacity, amount I'm

Kristine Tan Liwag

today, to the capacity you're see to some don't contracted maybe back, are maybe step taking produce of a to backlog need And a starting yet? because to that you take customers this are back your today, or to able capacity place that step before you you sort you the I Great. volume have deliver buildup adding existing that, guess capacity in your

Dr. Michael J. Hartnett

Yeah.

our definitely You there, plants some but more you of could were our I what think we have in of we use breaking need customers? was We Kristine, asked up pretty existing the do capacity. to good service capacity amount

the And demands additional calendar that coating adding, substantial facilities capacity so, beyond new to and in two of in we're in this new let's begin one manufacturing of really adding see facility are that technologies then we're the the way. support contract – a we're adding that XXXX new in plants

of two consumed incremental be the base So, won't it new the be with contract immediately RBC so business. plants will capacity and demands to

Kristine Tan Liwag

that That's mean, looks back your can when really build an it have production you at uses if look order. were last like generated have we have well. I you your this you gross helpful. to did plans margins you've as like before you in more seems capacity maybe Sargent, we at place the one of today, look the to I are absorbed are point? and do now deal for business, that squeeze appetite at also And and have point, you margins What rates this where this de-levered it already the at you one. completely cash right point, your Do because up in to at deals

Dr. Michael J. Hartnett

some those Yeah. customer be into would capacity I care not obviously number to current that, we beyond to nine considered our of And our going over of of some base. our small the cash to some six next convert acquisitions; going our – we've take first months. expanding capacity so existing Well, expect a to is think and of use small,

Kristine Tan Liwag

Great. Thank you.

Operator

is KeyBanc ahead. Your line next of from Steve Markets. with question Please go Barger Capital the

Steve Barger

Hey, good morning.

Dr. Michael J. Hartnett

Good morning, Steve.

Daniel A. Bergeron

Steve. morning, Good

Steve Barger

do and enough you to you have do machine order just on you plan capacity need lead the are current how the where for need now visibility? what for environment? And machine right you now the tools Mike, right broadly-speaking, for times take given

Dr. Michael J. Hartnett

three asked there, you think questions I Yeah, Steve. Okay.

Steve Barger

just two. I think,

Dr. Michael J. Hartnett

installing – lead to machinery metal available time unless want the isn't XX depends you're install. upon cuts that days. and an it there than chips, issue readily highly much of machining time Often, specialized mean immediately, Yeah, if I what basically available it's equipment on machinery is dependent you of turns that the and it's that's less typically lead is kind there. so

If grinding place What that's equipment We're we you're order grinding are for been some we're much are time. for on probably not specialized of – in we a for looking too looking equipment, the has that. year. that putting

tricky cycle treating in be we're So that's also has be there treating equipment, before place you're for disassembled and cycle if equipment looking a to to that and demonstrated tested and it's good and heat specialized can heat year a your and because the shipped site.

the So some with time that's been contract kind of where we are. lead And good long suppliers for time, we're for items, our in so we've there.

five In contract for out supplier existing there contract typically then existing business existing contract months there's at that our point happens go and and phase an we're will the will timing, that normally months displacing when what contract and will supplier if terms to and new of have years. over and like the that we begin XX supplier, a XX is something

that contract my of and been which you it we performance catch plan there's support have the runway that place behind all that because plenty in get be is production of want through mode today period the the establish important and we needs equipment performance well never to don't to are experience and on ahead do here needed where that establish So up. a contracts in the because to really has footprint number have you our period, capital to of

all terms of that know in planning shape the of the it's I cycle we're So part good to and extent of. in

Steve Barger

what to issue are workforce Do talked doing in labor. you you've being guys? past, the available they capacity the machines in come recruit man the bigger have you or as those to around about And, the Great. skilled

Dr. Michael J. Hartnett

disproportionately, provided we're really automation. we've and Well, focused, on

on automate for processes, we us. in work plant and as the it it's and so to other labor labor And frees our just work attrition, projects through very manageable our just been up that it plant or elsewhere go leaves that's can to

Steve Barger

at on last a or just then this have similar managers in Okay. of engineering that issue, take front? design, do you can that quotes And program on limited you and all terms are question question new but on

Dr. Michael J. Hartnett

the unit-dependent. for – limited, that's very business not part, It's most we're but

Some them their today job have so what make plate around run plate, have are and to they on my capacity on plate overwhelmed is with their of sure of more than what they them their and is have full. some

Steve Barger

Got it.

to in You remain existing right about mentioned customers several general, are industrial industrial for that end-markets Can talk really forward and programs you sensitive look just, strong. for the new now? or price pricing how

Dr. Michael J. Hartnett

price about a Well, have lot we're we're best give up, them. and when to we going tariffs not so us a and customers us them disappoint doing increase industrial of our calling asking to these

Steve Barger

for you pretty one you expectations Dan, about fast. Did that flow last given required the numbers to the me. free investments your take? went need year talk guys cash And through for you

Daniel A. Bergeron

Yeah.

X.X% kind I I so it X.X%. so think I our to and think – over range. be a of normally of think of going X% that's are projects to CapEx around lot A sales, that these higher year to this CapEx folding be at will kind little in XXXX, fiscal runs where year be X% we'll this of

Steve Barger

net in at cash similar convert as it And has years operating think? past, flow metric will a you income

Daniel A. Bergeron

Yeah.

more a whip some the So getting raw and low we QX. QX in we've a (XX:XX:XX) I spent material think build on inventory floor, on little in so

the I the for of So going each that rest year. see investment quarter don't type for of

at of at I internally, to and our be good million we down least again is goal, should once least shape debt. So think pay in pretty $XXX

Steve Barger

Thanks. Perfect.

Operator

would further like time. turn to conference Hartnett. back this I at I'm Dr. questions to hearing the no now

Dr. Michael J. Hartnett

to the forward to look today day. everybody's speaking thank after Well, Okay. quarter. Good again we second you. appreciate I interest and you

Operator

have Thank participation gentlemen, your for and wonderful and day. you conference. Ladies a concludes this today's

disconnect. now may You all

RBC Bearings (RBC) 2 Aug 182019 Q1 Earnings call transcript