ROLL - Earnings call transcript Q3 2020 | RBC Bearings Incorporated

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Third Quarter 2020 RBC Bearings Earnings Conference call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. Instructions] [Operator

like Hamilton conference go with now speaker to ahead. hand Brooks today, Alpha to would over the your I IR. Please

Brooks Hamilton

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

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

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

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

Michael Hartnett

year, was sales X.X% Bruce, and quarter million last good the increase. the Thank the $XXX you, of Organic for X.X%. morning. for a XXXX for quarter period same were Net growth fiscal third versus million $XXX.X

at our of quarter sales fiscal third of products products XX% the sales XX%. net For industrial represented and aerospace XXXX, of

last of $XX.X year. sales. to for million, last or This quarter income increase. for of margin million over X.X% $XX.X the year, million, net net or XX.X% Adjusted X.X% compares the increase $XX.X operating gross million was Adjusted a was XX.X% EBITDA a XX.X% same period $XX.X sales. was

in had products by logistics the changes, certainly accelerated to to causing to its and suppliers, other Boeing's rescheduling accommodations made MAX MAX the replace noises, our challenges delayed driven support be quarter products. and schedule began to The schedule challenge

these changes end revenue you were As see, in bottom we guidance can came our period. and accommodate many for the at of the able to of

prime products products days We of on last quarter complex production year. fell long X.X% very completion delays, as of with assemblies holidays. a did down a which a sales delay, with products The short year. our mis-scheduled. Sales sales flat this Without here products some typical is variance industrial in technical and marine on of of in from were miss have area, last-minute been last on result industrial would the

component to markets strong oil train. XX.X%. international industrial Sales expanded by mining perform defense The industrial OEM semiconductor were of to classic and goods, to well. distribution, general the organic ground be X.X%. lineup defense The capital weak and and gas. markets aftermarket and continue in sales continue this Aerospace markets was our The

third The XX%. quarter up organic were net sales

driven OEM and defense aero and both basis. and were Important markets airframe, organic were sales missiles. up XX.X% engine, Aerospace by an OEM on were space contributing here defense. Aero

are Turkey a We these Bearings. products by also few benefit in made being now see of as some made previously RBC

a and quarter XXX the for beyond. fog creates sales and MAX today's around certain rates outlook challenge The production of setting fourth outlook on amount

April. This year, and $XXX,XXX. This our content production on towards ship plus know, matter, greatest year been next in has you As impact ship our we per into rates our has over new sales new per its as trailing as approximately the $XXX,XXX attention fiscal will mature. move climb contracts

from Boeing monthly guidance our on a are by monthly and broad from customers. production down MAX standing specific of rate received for flow schedules We've a

year. million which rate of X.X% growth we're to approximately to be expecting results to in sales last $XXX X.X% quarter, organic $XXX Regarding our over million, our fourth

to expect into the impact year into the to is baked have estimate next we MAX fair production on shift of revenues this We as $X a reschedules. We this think result QX. projection of a million

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

Daniel Bergeron

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

fiscal of to compared period XX.X% last third SG&A year. same percentage was a the As sales, for XXXX the net for XX% quarter of

of expense quarter year. of $X.X last for same XXXX million $XX.X for expense operating million Other to third fiscal of compared period expense the was the

amortization the $X.X mainly last For sale the million. the year the of costs assets. the Other division million with mainly of of $X.X comprised $XX.X of by associated operating quarter third expenses in other were expense of Miami operating in the consisted assets, amortization million of intangible intangible $X.X income and other for of period of fiscal XXXX, million same offset

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

to the On would On income million income the been nine in the XX.X% basis, for period a an same was net income for sales have months XXXX. for adjusted $XXX.X fiscal operating year-to-date or of net of XXXX, basis, million first XXXX. adjusted of of first XX.X% income of nine compared operating or of $XXX.X for compared first nine million the of sales months fiscal operating to $XXX.X fiscal fiscal million operating $XX.X months XXXX,

of of improvement percentage bps. net a year-over-year is a XX sales, As this

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

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

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

a quarter was to $XX.X last XXXX, quarter period Capital year. last XX.X for $XX.X XXXX, to expenditures the of the million million same million basis, compared fiscal of of common compared same the The to million year. repurchases period million $XX.X period nine-month for year. X.X million were CapEx a On compared share the On in million third for the to the repurchased million for shares same same $X.X $X.X compared nine-month $X.X common third were nine-month last year. last fiscal company in period nine-month basis,

on as XXXX the fiscal million paid was third $XX.X of down $XX.X and the for cash December million XX, nine-month million. Total quarter debt. and In XXXX, $XX.X hand of debt, of the company of down debt million period, $XX.X was paid

Q&A operator back begin call to the now to the to turn the over like session. I'd

Operator

Thank you.

Our America. of the Liwag in comes first Bank question queue Kristine with from

is now open. line Your

Kristine Liwag

good Hi, guys. morning,

Daniel Bergeron

morning. Good

Michael Hartnett

Kristine. Good morning,

Kristine Liwag

do the you? it time? expect about know Can press XXX the of ship you more much out in I rate Boeing gave how But release, provide details pause? affects producing then set what also, you to will affect And you this How in content. volume be your change margins? kind you during

Michael Hartnett

Kristine, questions, but one. us You I easiest always expected ask the that

on $XX a impact XXXX million the So is sales fiscal about gross as number.

about in production about offset And to in production rate. work a to down XXX-XXXX rate equivalent number Let increase the month. MAX the because five me production that rate five MAX it is per equivalent that's is ships ships, that increase net to by

have tell, So change And idea at production – that's to we of And from I'm a Boeing their rate rough production sure near to as next subject can monthly the rate and we on going year. was what last what year. as be is looked we between going XX that the per be ships to is the and We're ships XX-month equivalent under month. about over there XXX produced per and the XXX that's about MAX month the Boeing period. reschedule XXXNG, next guidance ships XXXX, averaging the to were XX.X

in per the the So decrease ships against per if and a ships XX.X month. month I at XXXX to that's per about XX per And produced in million come $XXX,XXX I bump million an production. increase going there. been I month for older last $X And last be year from ships XXX equivalents we're program, those take XX to XXXs $XX.X five about ship ship, by And the add in by seeing offset about to that have increase going is $XX.X what into year's that's And put seeing spares million. offset for we're a the rate. that probably that's demand

net the at comes period. the $XX.X million XX-month over So

So headwind to of vertical the side as bring approvals delay. has to time extra required allows per play. MAX of like a online that's quarter into bring $X a and integration $X to And as million to actually us process more million something the it MAX result positive it the also,

when So that turns parts we're the producing efficiently volume more these on.

the So that's now, situation viewing we're right Kristine. how

Kristine Liwag

helpful. really much. very Thank That’s you

Operator

with Alembic Instructions] Pete next [Operator Our Skibitski comes the question you. from Thank line of Global.

open. Your line now is

Pete Skibitski

to just follow-up good on that. Hey, Mike, morning guys.

to maybe of slowly your in it second they reaccelerate So half more restart half mean, think Boeing Is we and on the in will weighted, I way to starts work? the first production MAX headwinds that kind of should the kind will of be XXXX? assuming the calendar summertime, start

Michael Hartnett

that's it Yes, exactly. how see we

Pete Skibitski

okay. Okay,

maybe accelerating we the back aerospace of heavily in close overall, in that fiscal So half think to having and or XXXX half? – about the then down maybe first should pretty being

Michael Hartnett

that's aerospace the side that more. from that there's in some how it. seeing offset defense some think I we're are additional I volumes that mean, flowing will Yes, being

that. and flat we maybe the spreading for little the quarter, first see first aerospace So second than bit a may but quarter, better maybe a into

Pete Skibitski

a Lockheed's out follow-up that F-XX? Can you talk Okay, benefited the that content obviously on all? about like touched bringing on of you. it on Turkey, Or at – your that, you okay. quantify Yes, sounds I the maybe bringing F-XX work guess,

Michael Hartnett

Yes.

us I it we're in there is which programs are there seeing the that do lot that with Turkey, biggest think in to benefiting the produced way, other were – that has being a were benefit missiles. and a more significant – was non-F-XX were

Pete Skibitski

I see, see, okay. I

just different program? this decision, related to is F-XX So a the but

Michael Hartnett

It's Yes, of it's addition a It's a small a us. to one not impact meaningful program. divisions. for different our

Pete Skibitski

Okay.

great. I industrial on in last side. ISM pickup one We the several first Maybe in the was January curious saw PMI just time for the from Okay, me. months.

the PMI? kind fourth early So for Are of there the in recovery you. just kind for quarter based wondering, any of this days kind seeing you indicator on of

Daniel Bergeron

Pete, On the – in it up was quarter, distribution side, the QX, XX%. on industrial the

some a Swiss that was it. to of of Now due Tool big chunk

just pull if of ago. quarters Swiss tool So, I company out acquired the we two there,

on growth was X.X%. distribution industrial about Our

stop, we've in and So, a we're starting that to that to going seen quarter. the fourth traction move see very in

Mike vehicles some military then fracking, in third being markets RBC into gas, and was semiconductor, be down type our our marine other and traditional And the oil then it's activity. general just that mainly quarter, on down going quarter continue offset like As significantly, the just classic by industrial and timing. in, markets business will we operate but and to said like mining our meaning, that fourth

getting RBC up offsetting classic so will QX, we're on that the And in some nicely that from our again, this Markets. of be headwinds

Pete Skibitski

Okay.

maybe you're the thinking? that headwinds us. the kind Is So are behind what of of worst industrial

Daniel Bergeron

certain I think they and not better. and already markets, are Yes, in doing others they're improving

we So still – and I’d ways think oil have go. I to gas,

fracking, start once on the in out is bottomed lot I think, gas in will QX. in but the comps quarter, easier and that a fourth oil get

Pete Skibitski

be Right, production that's kind right? you, ramp the for you, you of know okay. to saw program a nice I Colombia And ahead of supposed

Michael Hartnett

next complicated Yes. year the Block trailing going now – to in Well, fiscal that that's and these into year. we're Virginia off and then this program, parts IV last we're getting

program. single boat boat because of So a a kind V nine-boat right, at the and now, Block single we're build is

So this boat two a second the in half single starting to the on we're back to running of go a ships average year month. program probably into

work go year next And And side I think, growth do the and XXXX, the but of design to course, on continuing engineering the doesn't we're business. really production, that so we Columbia, nice marine should XXXX. into into see some of on

Pete Skibitski

it. for thanks guys. Appreciate Okay, the color,

Operator

you. Thank

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

now open. line Your is

Steve Barger

good guys. Hey, morning,

Michael Hartnett

Good morning, Steve.

Steve Barger

flow do margins impact side. When is free What headwind happens year? this think the you you manage through aerospace the inventory and you’ll revenue whatever process into on and the to next expect cash next through how quarter

Daniel Bergeron

anything Yes. Steve, I don't think it's major.

to growth total year, be rate. into not at I negative going think company, a next we're going on

top-line is depends So on it out guidance that. more where and we'll all our coming give

get conference close divisions. expecting now, the inventory think quarter build program XXXX our end we at I our fourth But the on our We’re look, May. to to when call we'll of top right at probably most of of

And pretty year generation so for good we should see flow from operations. year next a cash

Steve Barger

the going side, last into the comps question the get lot a quarter. back to Okay. industrial And next on easier

about talked You timing. Marine

Given the flat puts or you down and can or you next is do industrial organic think be up? takes, quarter

Daniel Bergeron

should will pretty but our be by mean, offset much be classic be Marine. industrial I I will it little, think for flat. down QX, our we a

Steve Barger

price Are on you volume you're that of causing Yes, competitors okay. seeing classic this given really share to more term. Or use shifts? markets are coming the in that some aggressively your is seeing a function? the And just weakness

Daniel Bergeron

It's function. QX bit in and Mike share we that we're picking on And purely industrial fiscal If on definitely green the feel been we in that impact little QX the talked XXXX. referenced that anything, a then side we've volume working market will up QX, marketplace. about a had shoots

Steve Barger

so the on share think in markets? mining and oil gas kinds industrial and I taking of you're understand, or on So just you other

Daniel Bergeron

markets. other On

Steve Barger

Got Okay. it, thanks.

Operator

today's This Michael the session. like to would call closing concludes back turn Dr. question-and-answer to you. Hartnett Thank now for remarks. I

Michael Hartnett

appreciate And look speaking RBC for you your to we interest. again forward Well, you in Okay. interest our and fourth your after quarter. thank to

Operator

you for concludes this Ladies participating. Thank and conference call. today's gentlemen,

disconnect. now may You

RBC Bearings (RBC) 4 Feb 202020 Q3 Earnings call transcript