ROLL - Earnings call transcript Q2 2020 | RBC Bearings Incorporated

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Operator

Good day ladies and gentlemen and welcome to the RBC Bearings Fiscal 2020 Second Quarter 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. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. IR. Alpha with Donovan Chris Sir, please ahead. go

Chris Donovan

Good Bearings fiscal and thank conference you RBC for us joining XXXX for call. morning second earnings quarter

Hartnett, Vice President, the Dr. Financial Officer, Executive With today Operating Chief and Chairman, Officer. Chief J. Officer; Bergeron, on Chief President A. me Daniel and and call Michael are

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

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

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

Michael Hartnett

and good you morning. Thank

$XXX.X the same Organic for sales quarter growth XXXX $XXX.X million X.X% were quarter the of million the for Net period versus a fiscal X.X%. year, was last second increase. for

sales fiscal For net at represented aerospace with products our the quarter of products second of XXXX, industrial sales XX.X% of XX.X%.

green to XX.X% of with outlook This in million were as was seeing X% as the some of year. last and fourth income a and this over aircraft the our Gross early to a strong year, sales. versus of increase X.X% industrial with increase. year, encouraged in quarter We are the businesses quarter pleased $XX.X shoots be same million performance or XX.X EBITDA million was our a $XX.X versus continue net markets. for X.X% margin for $XX.X the or last million increase. a period quarter million was $XX.X compares last XX.X% Operating

Sales we products distribution the market and were organic over down basis. down comps. down X%, year in period up so X%, some were was industrial difficult on last year-over-year was a and was OEM of against X% after the expansion X.X% Industrial

opposite Aerospace and picture. the paint markets defense

were today organic bring night sales and aerospace Supply and driven industrial external Aero second new OEM were continued The ease up were online. OEM basis. approvals Aerospace up sales an quarter on XX.X%, and net are XX.X% and markets as chain capacity day. by defense we organic internal constraints, to and aftermarket. and

constraint add production will areas. capacity to these be to we and continue continue plants in Some

continue sector -- manufacturing double-digit as next and businesses introduce well are in QX this will as our we to point quarters additional growth well quarter, the Max capacity level the of The can FAA XXXX. and likely year, most enter contracts aerospace to accelerated. are When we is revenues. the At new third perform booked in we our XXX hope convert calendar production several its into at for receive our certifications,

rate products aircraft to growth steepened our expect further. We

the QX constrained. in as to the are of the production the outlook feel implants Max for plane rate effects impact is beginning production of are see Today, we we not that the where to beginning reduced

and 'XX and both and of FY for new capacity in add support our well requirements to continue and positioned We regard processes customers' be this beyond. should

million growth are year. organic in we sales expecting which and an rate $XXX over to regards With our $XXX of last approximately X% results between million second quarter,

performance. on now the turn for Dan financial more will details the to call I over

Dan Bergeron

Mike. Thanks,

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

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

mainly of XXXX expense For of fiscal $X.X the consisted the other and mainly second operating million million acquisition last the of same $X.X expenses quarter million $X.X were the period of million. $X.X of of other year by offset of intangible Other costs assets. comprised assets in intangible of amortization and amortization operating income for

$XX.X of the fiscal basis, million $XX.X of in to adjusted operating have second for second the adjusted income XXXX. income million of XXXX. compared operating operating $XX.X was fiscal to quarter an second income quarter million of of would the fiscal fiscal XXXX for quarter On the million income period been Operating $XX.X same XXXX for for compared

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

per adjusted fiscal XXXX per per per compared second of share second share per $X.XX of alluded basis period earnings share quarter quarter year. period $X.XX for diluted share was to adjusted of year an $X.XX XXXX fiscal per to an share for Diluted the last EPS same was $X.XX earnings share the on same last for compared for the the

generated $XX.X million from $XX.X month XXXX in to operating XXXX year. compared period fiscal cash in $XX.X cash fiscal in last million of the activities year million month activities to period $XX for last company the six cash six to million the operating the same for period from compared the for flow, quarter and second Turning

in compared the quarter million million CapEx period second was six period $XX.X $XX.X a were month XXXX fiscal the the $X.X same $XX.X On million expenditures million to year. last Capital compared of year. to same for for last basis,

$XX.X month million for debt million. $XX.X September million XX debt. six of and hand pay the XXXX was of on company cash as down Total and debt down In quarter, of the second $XX.X was million the paid we fiscal XXXX, $XX.X period

the back to operators the Q&A call begin to now turn over the I'll session.

Operator

Instructions] And from comes Skibitski of Alembic with Pete Global. your question [Operator the first line

Pete Skibitski

Good of just second how to the morning guys. year. operating in of It looks up -- the the half get a margins the sense half, in seeing you're want year-over-year first Hey guys, half. you're margins like first

volumes. think looks it's half, it tougher the I good on margin but Second a you're comp wise little like about feeling side,

or should Max So, how much return to expect up can we and the in to half be of period-over-period to they tied second margins we not have whether service? kind are

Michael Hartnett

beginning guidance margins. gross gave XX bps of Yes. Well, year we at on the the

this the XX.X% compared for months we're XX.X% year six So, at to first last year.

cost little margin, for in So, the short to on mind. gross able we were a keep target the but

So adjusted last at we're compared operating on to XX.X%. year, year-to-date, XX.X% income

So, we're a XX improvement. bp

So, I think year. that's going to steady through stay the

try margins going to cost I and see improvement and the falling XX keep comfortable we'll to think, I control QX the under operating also. income. But down bp into improve QX we'll the think we're with

Pete Skibitski

Okay.

are Sounds certain are in shoots quarter maybe starting your the expand already great. can maybe within you Mike, more green then, And there? showing or industrial fourth on and do maybe comments signs those, to subsectors industrial, about

Michael Hartnett

inventories fourth of now, quarter you industrial things third couple is section. normally the third in what on have quarter calendar that Right our everybody Well, quarter, there's go or year, a on, the the bonuses. they set trying some in to with capital. turn objective their run for is inevitably can't level the to their that had that the of manage And artificial working kingdom businesses

in the quarter, businesses So, gas can calendar, these properly. the every what you first our is all companies in year inventory replenishing see terms their hit so they fourth quarter, of run

sort just very we some promising, which we're the addition promising. -- coming standard a which that's accounts going mean of for some us. And contracts on existing contracts in procedure volumes volumes in us next But are have -- are industrial we year. world I So to increased to are operating And pickup [indiscernible]. bring in some accounts that, we which see new industrial new on in industrial seeing have equally new

Pete Skibitski

the incremental year. been I business And to is think that get to, great. sounds all next you've That better expecting submarine

kind gave the addition of optimism? kind of in So to you the submarine commentary just

Michael Hartnett

That has submarine just, with business. the nothing That to do yes…

Pete Skibitski

Great.

lot Gentlemen, but more and this about looking ops Okay. you just from guys, Mike, think that's me. that maybe inventory. It we of year. question quarter Dan, this cash like quarter? it's not is talking a inventory yourselves number, looks last you're through you've built of the the for for reverse Should it the and at third maybe not the the half looks fourth first by like, quarter

Dan Bergeron

going decelerating we compared in At down, of the XXX. year. going into to to in going September been afternoon, It's but Q the inventory this end million XXX.X this at slowing file September year ended the Yes. we're

by builds the backing side it's So and of industrial side. some it's offset on off now, the being of aerospace some on

Pete Skibitski

Thanks great. Okay, guys.

Operator

of comes America. Liwag Your line of the Kristine Bank from next question with

Kristine Liwag

a today? coping than also, chain like volumes are your with And where Hi, at XX for guys. then is with your with at generally Can you quarter you the per XXX there's sounds color that some With Mike, producing it XX that of you month commentary production good XX. some give more and morning change previously supply last rate. how today, at mentioned lower you're XXX anticipated?

Michael Hartnett

we relative supply are Well, the to chain.

We supply are chain. the

fine. So we're just coping

at of what XX, what are some produced products I we're from the the a we The thirties. little these in products high each which more is see come have some are think business is, But running are a depending is than plan. aircraft running in summer of sectors XX. running upon being different at seeing

plants widespread capacity by of it So is demand. demand planes. you our Max And it just being of what is has see this for which these throttled kind is. the one In of

quarter, all probably believers in Max corrected. into our will someday are the a production million and back few come that's this we dollars So that gets which

the production off up. constraint get we're I we period in catch Did your but question using or this So, interim to where track? did plants answer we're

Kristine Liwag

for that. eventual then you'll question it's see going and guess you into I for year. planning in you, see the production. that to is see eventually of bottlenecks where if coping how of ramp I general your maybe could that margin just Well, your rate supplier Boeing's are airplane some increase. nature to cope guys you then, in your -- also, guess to and understanding rate the the once lower could my how And they're you're a outlook affect some peers, service, goes the today volumes some of suppliers Are how more the this with we sort seeing with

Michael Hartnett

the approval through Well, serious cycle in the of a installed these lot processes able of new that's, built of sector. the that's now the now, these special lot processes one now that bypass for in we in and a we're going subcontractors. plant. industry's and we there's the bottlenecks and reason and of And a bottlenecks constraints this that right production to And these Kristine, reason now use feeling sort on by lot uses we'll them turn that the one be internal a plant

when XXX of going So just us is these if XXX production, in the for production timing comes and back perfect into the terms to for products. the be internal

day is XX which delayed that plants great have dollars the not we're it'll constraint to a soon. the on coming constrained couple out Now, quarter, through delayed aren't I If then impact going revenues. think constrained, calendar that that of fourth be is plants will are of have first more if it's sort quarter, million and the problem our of probably our a

quarter. think that business, by the I really be positioned well to service fourth of to end we're certainly going our So,

Kristine Liwag

business, color. also can of the in helpful industrial talk And terms order general and markets really end growth you're activity? in That's seeing you what your and about

Dan Bergeron

Yes.

the X%. organically about X.X% were So about side for down we quarter, on industrial Kristine and the

just XX% there, drivers take sales the took. quarter. to if about And out the one the big and in So million acquisition, the and is first, major of that's the was $X.X down oil quarter we Swiss you gas the equivalent in Tool

if took flat would've of we equation, out we the industrial that year-over-year sales. So on our been basically

signs little and our on where we're inventories was seeing equipment had correcting the on So, was and we earlier, oil and their marine about business. talking I think side the QX, a in semiconductor some industrial general slow the back Mike side distribution where they're points industrial of positive gas, mining

kind So on the of that's industrials.

Kristine Liwag

you very Thank much.

Operator

CLK. question next with comes line Godfrey Your from the George of

George Godfrey

for and have what coming just on thoughts thought to back to is Max What scenario you your down the I something the some more all supply about comments like thinking to or get were in, chain XX that production if And that XXX about? Thanks. or about to gets or or about? you Have heard more service production pessimistic you're of outlook. if, pushed go XX next or Thank is more Boeing morning. plants summer? Good what question. you back the for that that want the a business coming taking take what means out a the dire into thought taking

Michael Hartnett

of Well, far I the mean, are our business, XXX our the Max. dimensions beyond business

contributor XXX what the is we for Although max do. to an important

$XXX,XXX I think more than it's per no secret plane. a we have

So, a we'd be it's the great a delay news, wouldn't it. in get production through but

programs coming and door closes, On the through other other when are other the hand, alive there's opens. one door and that

George Godfrey

up? And is AXXX could meet? owners that in down started from be production something winding that address Neo something if down you'd to Is up had you go to the or ramp ramp Max the prepared to or

Michael Hartnett

for bearing different a same same the ships a kind have it's product bearing Neo many numbers Yes. Max that both basically cases. It's use we sort this generic produce in produce. of but the of part mean and they we Well, extent I that to set and large a the

lot is a mix that of same. the So,

is Some isn't mix of generic mix. different, all that it so

George Godfrey

Got in relative last now. the release But be in that or difference current year, in next the last days, it. the And quarter to press we're days quarter correct? the call no production four then, would five there out you in fewer question or my the

Michael Hartnett

last That's correct. year. the same This was

George Godfrey

Okay. Thank you very much.

Operator

Your Global. Seaport line comes from with Josh of next question Sullivan the

Josh Sullivan

morning. Good

cut? program? way chain Just given where at you you on working this I large ships don't for And did the point? supply a XXX on XXX you've think that can that. then, values you? on do you know see you that Just about the Is that talk are its the already through the if ever program

Michael Hartnett

Well, I what think equally they that thing. I ship are us. the to one month? I XXX that's And, plane is important off think what Is right backing heard? per

Josh Sullivan

think, I it's two.

Michael Hartnett

the it's Max doesn't much comes a think if effect the onboard have Yes. replaces of XXXx, particularly reasonable if I whatever, timeframe board -- on in and full. the have our hands XXXx it's I mean us, an it on and we'll probably, it comes

Dan Bergeron

important most the XXXx. And platform us the be would for

Josh Sullivan

on now? service? you Have poll the [ph] Just that in and seen [boarding entering on program guidance of the some any changes Sky] right given

Michael Hartnett

Yes. the sort at of bringing demand. to they're some their We've time the but up same XXX accommodate seen delay, market

on content very XXX good. our So, is the

Our the content on probably XX% better. is XXXx

Josh Sullivan

were the forward CR And some any on impact correctly. on five in year Has Do changeover, submarine it timing that switching the to then, if just that? I business, to five? delays just this on the remember see Is over changes think earlier having going the negotiations block the there Has I any better? progression you block it gotten accelerated?

Dan Bergeron

we it's I be shape. good conditions, terms we think are and going right so where was thought we be, through and going on final should pretty negotiations it in time

Josh Sullivan

All right. Thanks the time. for

Operator

Ciarmoli Your with next the of question from Michael comes SunTrust. line

Michael Ciarmoli

for taking Hey, guys. Thanks good the morning question.

insourced XXX to units I Just I If of I mean, lot are got situation have a overhead and kind issues. suggested lot. going you looking some of too be a how down, we've getting never you've the are mean, XX here. you going to on, year you're capacity a goes at, looking some I you've already. XX about feeling facilities XX of had delayed. talking guys lighter been the where is much your a XXXX you could that at mean, mean, aerospace mean month, is I per the that you've absorption volume capacity,

Michael Hartnett

see developing that don't scenario for us. We

is We being one by have affected Max slow that XXX only facility down. the

production are I much facilities as other The very said, constraints.

disaster but this of mean likelihood is for zero. I that think Max I the is come into think service, back yes, the doesn't I industry, So, if a a

they'll two, through of a maybe It's new it. think and or timing through it. but a CEO they'll get get matter I

Michael Ciarmoli

if if this delayed to return you headwind that to starts at you I this opted they is service, Max flying, later If February, a get on a more, the When say, December that, keep we get not does mean, -- to rate XX. rate guys? we take hold XX they but

Michael Hartnett

it's of No. that, don't, optimism chain its capable supply making of there. is XX robustness. first their don't think think don't I think all, that I I notwithstanding don't I about

very it's supply it's are the better And deal we'll less, chain for would have if maintaining around based XX. year models it. if think with amount of next more, XX, our difficulty I a great it's

are think kind of we And drop whole think that's the is I -- now. everybody where waiting next right program. for So shoe to I the and the on

Michael Ciarmoli

quarter And Is up mean, then, that it. case? you some fact blow still that challenged on lower a maybe I the ago, in Got knew suppliers just, being two that a just Is more you hinted maybe about at to share picking I think you one you guys the share. that that that or you rate -- there? can talked out topic. at were of softening, I taking were

Michael Hartnett

production one as mitigating having definitely of products of a the that's reasons the why to our of difficulty constraint we're is some plans, volumes. their That's plants. these Yes, getting in so our great deal competition

Michael Ciarmoli

right. back Thanks queue. jump the in I'll All guys. Okay.

Operator

line of next Steve Your from comes KeyBanc Markets. the Barger with question Capital

Steve Barger

Mike, industrial Hey, seeing replenishment. the the equipment? is some flow those industrial and to in good production thought and remind Can pretty you wanted and end inventory some next that some distribution we're back Because at markets go construction year-over-year to going and just of year order like which exposure things lower off-highway and commentary lead through to I to us about of sizable levels. morning. to contraction, to should general your

that? on color any just So

Michael Hartnett

the… our our, exposure On to

Steve Barger

thing. Highway construction equipment, sort that cranes, of

Michael Hartnett

a a Timken sector but kind have don't seems it's sector. It's the for that We us, exposure of Yes. to smaller meaningful have.

speak him to more am, Dan's in it. I'll sector numbers that on think I the current let but probably I than

Dan Bergeron

Yes.

big have lot us hauling on. a where our of content it's we For the in trucks sector, that

the mainly activity mind And by and activity in driven the it's commodity mines. so

Steve Barger

Okay.

construction of exposure all? at much that traditional equipment kind not to So

Michael Hartnett

have we sizable see to it's Well, not market mine like but we haul heavy trucks. would and exposure it, in a

Steve Barger

Right.

oil as that. earlier, So something like and more of described you like the size of gas

Dan Bergeron

probably even, there type $XX market. around million Yes, maybe million $X to

Steve Barger

you. Got

Okay. Swiss strategic And buying switching gears, the Tools? about you rationale for can talk just

Michael Hartnett

to you Yes. know? What would like

Steve Barger

for Probably of tools it and looks with a does supplier right? portfolio? how your turning niche like fit boring, that So

Michael Hartnett

Well, be -- the blade before machining and the once and the it. Switzerland, and liked like razor a And those where market tools and in boring in a markets turning replaces you definitely and that we its product for market. new grinding a markets yes, we cycle XXx market. it's It's we to like life bearing like Xx product has it or sell replaced make

So level that's the more nature a sector liked work and that we product do that and in of we it. intend lot to

Steve Barger

market and really So play? consolidation a this scale is

Michael Hartnett

franchises Well know operates that support and the is we it we market a companies we in in we those for we needed manufacturing know it have markets. strong that and feel defensible where technologies to look good the how And it. know players

Steve Barger

And the I know you that's can about margin great. small, And talk it's profile? but

Michael Hartnett

Big.

Steve Barger

Is it corporate? to accretive

Michael Hartnett

Yes, substantially.

Steve Barger

Got it. Thanks.

Operator

like this [Operator no we back conference will the Instructions] Dr. And at Hartnett. turn questions. to now time to have I

Michael Hartnett

for for call again January. that and once the Good second in call to completes thanks the Well, talking we Okay. participating conference forward you in our again quarter. look to day. And

Operator

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

disconnect. You may all

RBC Bearings (RBC) 1 Nov 192020 Q2 Earnings call transcript