OXFORD, Conn.--(BUSINESS WIRE)--RBC Bearings Incorporated (Nasdaq: ROLL), a leading international manufacturer of highly-engineered precision bearings and components for the industrial, defense and aerospace industries, today reported results for the fourth quarter of fiscal year 2018.
Key Highlights
- Organic net sales growth of 13.5% in the fourth quarter 2018 and 10.0% for fiscal year 2018
- Adjusted diluted EPS for the fourth quarter of $1.08 increased 20.0% and full year fiscal 2018 adjusted diluted EPS of $3.87 increased 22.1%
- Adjusted operating income was 20.2% of net sales for fiscal 2018 compared to 19.7% for the same period last year
- Full year fiscal 2018 operating cash flow of $130.3 million increased 28.7%
Fourth Quarter Financial Highlights
($ in millions) | Fiscal 2018 | Fiscal 2017 | Change | |||||||||||||||
GAAP | Adjusted (1) | GAAP | Adjusted (1) | GAAP | Adjusted (1) | |||||||||||||
Net sales | $179.9 | $179.9 | $160.2 | $160.2 | 12.3% | 12.3% | ||||||||||||
Gross margin | $69.7 | $69.7 | $63.2 | $63.2 | 10.3% | 10.3% | ||||||||||||
Gross margin % | 38.8% | 38.8% | 39.5% | 39.5% | ||||||||||||||
Operating income | $37.9 | $38.3 | $34.4 | $34.4 | 10.3% | 11.5% | ||||||||||||
Operating income % | 21.1% | 21.3% | 21.5% | 21.5% | ||||||||||||||
Net income | $26.7 | $26.4 | $21.6 | $21.6 | 23.6% | 22.3% | ||||||||||||
Diluted EPS | $1.09 | $1.08 | $0.90 | $0.90 | 21.1% | 20.0% | ||||||||||||
(1) Results exclude items in reconciliation below. |
Twelve Month Financial Highlights
($ in millions) | Fiscal 2018 | Fiscal 2017 | Change | |||||||||||||||
GAAP | Adjusted (1) | GAAP | Adjusted (1) | GAAP | Adjusted (1) | |||||||||||||
Net sales | $674.9 | $674.9 | $615.4 | $615.4 | 9.7% | 9.7% | ||||||||||||
Gross margin | $258.1 | $258.1 | $229.6 | $233.2 | 12.4% | 10.7% | ||||||||||||
Gross margin % | 38.2% | 38.2% | 37.3% | 37.9% | ||||||||||||||
Operating income | $128.1 | $136.1 | $113.7 | $121.4 | 12.7% | 12.2% | ||||||||||||
Operating income % | 19.0% | 20.2% | 18.5% | 19.7% | ||||||||||||||
Net income | $87.1 | $94.3 | $70.6 | $75.4 | 23.4% | 25.0% | ||||||||||||
Diluted EPS | $3.58 | $3.87 | $2.97 | $3.17 | 20.5% | 22.1% | ||||||||||||
(1) Results exclude items in reconciliation below. |
“The fourth quarter completed a tremendous year for RBC Bearings and I couldn’t be more pleased with our performance,” said Dr. Michael J. Hartnett, Chairman and Chief Executive Officer. “Most of our industrial and aerospace markets contributed to achieve strong organic growth and free cash flow generation supported a net debt reduction of over 100 million dollars over the year.”
Fourth Quarter Results
Net
sales for the fourth quarter of fiscal 2018 were $179.9 million, an
increase of 12.3% from $160.2 million in the fourth quarter of fiscal
2017. Excluding RBC Canada, organic net sales increased 13.5% for the
fourth quarter and 10% for the full year fiscal 2018. Net sales for the
aerospace markets increased 4.6% and the industrial markets increased by
26.4%. Organically, net sales in the aerospace and industrial markets
increased by 6.4% and 26.3% respectively. Gross margin for the fourth
quarter of fiscal 2018 was $69.7 million compared to $63.2 million for
the same period last year. Gross margin as a percentage of net sales was
38.8% in the fourth quarter of fiscal 2018 compared to 39.5% for the
same period last year.
SG&A for the fourth quarter of fiscal 2018 was $29.6 million, an increase of $3.4 million from $26.2 million for the same period last year. As a percentage of net sales, SG&A was 16.4% for the fourth quarter of fiscal 2018 compared to 16.4% for the same period last year. The increase was primarily due to higher personnel related expenses of $2.2 million, $0.3 million of additional incentive stock compensation and other items of $0.9 million.
Other operating expenses for the fourth quarter of fiscal 2018 totaled $2.2 million compared to $2.6 million for the same period last year. For the fourth quarter of fiscal 2018, other operating expenses were comprised primarily of $2.3 million of amortization of intangible assets offset by $0.1 million of other items. Other operating expenses last year consisted of $2.4 million in amortization of intangible assets and $0.2 million of other items.
Operating income for the fourth quarter of fiscal 2018 was $37.9 million compared to operating income of $34.4 million for the same period last year. Excluding costs associated with restructuring, operating income would have been $38.3 million for the fourth quarter of fiscal 2018. Excluding these adjustments, operating income as a percentage of net sales would have been 21.3% compared to 21.5% for the same period last year.
Interest expense, net was $1.8 million for the fourth quarter of fiscal 2018 compared to $2.0 million for the same period last year.
Income tax expense for the fourth quarter of fiscal 2018 was $9.1 million compared to $10.7 million for the same period last year. Our effective income tax rate for the fourth quarter of fiscal 2018 was 25.5% compared to 33.2% for the same period last year. Tax provision was impacted by the adoption of the Tax Cuts and Jobs Act (TCJA) signed into law by the President on December 22, 2017. The income tax expense includes approximately $0.3 million benefit related to the one-time repatriation transition tax and approximately $0.3 million benefit associated with the revaluation of deferred tax liabilities. The income tax expense also includes approximately $1.0 million of benefit associated with the adoption of ASU No. 2016-09 “Improvements to Employee Share-Based Payment Accounting” and reflects the lower blended statutory rate as a result of the enactment of TCJA.
Net income for the fourth quarter of fiscal 2018 was $26.7 million compared to $21.6 million for the same period last year. On an adjusted basis, net income would have been $26.4 million for the fourth quarter of fiscal 2018, compared to an adjusted net income of $21.6 million for the same period last year.
Diluted EPS for the fourth quarter of fiscal 2018 was $1.09 per share compared to $0.90 per share for the same period last year. On an adjusted basis, diluted EPS for the fourth quarter of fiscal 2018 would have been $1.08 per share compared to an adjusted diluted EPS of $0.90 per share for the same period last year, an increase of 20.0%.
Backlog, as of March 31, 2018, was $392.1 million compared to $354.1 million as of April 1, 2017.
Outlook for the First Quarter Fiscal 2019
The
Company expects net sales to be approximately $171.0 million to $174.0
million in the first quarter fiscal 2019. This would result in a growth
rate of approximately 4.3% to 6.2% on a year over year basis and organic
growth rate of approximately 6.3% to 8.2% on a year over year basis.
Live Webcast
RBC Bearings
Incorporated will host a webcast at 11:00 a.m. ET today 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 844-419-1755 (international callers
dial 216-562-0468) and provide conference ID # 8883418. An audio replay
of the call will be available from 2:00 p.m. ET May 30th, 2018 until
2:00 p.m. ET June 6th, 2018. The replay can be accessed by dialing
855-859-2056 (international callers dial 404-537-3406) and providing
conference call ID # 8883418. 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
U.S. GAAP. A reconciliation of the non-GAAP measures disclosed in the
press release with the most comparable U.S. GAAP measures are included
in the financial table attached to this press release.
About RBC Bearings
RBC Bearings
Incorporated is an international manufacturer and marketer of highly
engineered precision bearings and components. 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 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,”
“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, geopolitical factors, future levels of general industrial
manufacturing activity, future financial performance, 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,
including the impact of the TCJA, 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 | Twelve Months Ended | ||||||||||||||||||
March 31, | April 1, | March 31, | April 1, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Net sales | $ | 179,877 | $ | 160,210 | $ | 674,949 | $ | 615,388 | |||||||||||
Cost of sales | 110,151 | 96,981 | 416,838 | 385,792 | |||||||||||||||
Gross margin | 69,726 | 63,229 | 258,111 | 229,596 | |||||||||||||||
Operating expenses: | |||||||||||||||||||
Selling, general and administrative | 29,589 | 26,226 | 113,124 | 102,922 | |||||||||||||||
Other, net | 2,197 | 2,614 | 16,846 | 12,981 | |||||||||||||||
Total operating expenses | 31,786 | 28,840 | 129,970 | 115,903 | |||||||||||||||
Operating income | 37,940 | 34,389 | 128,141 | 113,693 | |||||||||||||||
Interest expense, net | 1,803 | 2,047 | 7,507 | 8,706 | |||||||||||||||
Other non-operating (income) expense | 321 | 52 | 783 | 103 | |||||||||||||||
Income before income taxes | 35,816 | 32,290 | 119,851 | 104,884 | |||||||||||||||
Provision for income taxes | 9,139 | 10,705 | 32,710 | 34,261 | |||||||||||||||
Net income | $ | 26,677 | $ | 21,585 | $ | 87,141 | $ | 70,623 | |||||||||||
Net income per common share: | |||||||||||||||||||
Basic | $ | 1.11 | $ | 0.91 | $ | 3.64 | $ | 3.00 | |||||||||||
Diluted | $ | 1.09 | $ | 0.90 | $ | 3.58 | $ | 2.97 | |||||||||||
Weighted average common shares: | |||||||||||||||||||
Basic | 24,056,839 | 23,713,311 | 23,948,565 | 23,521,615 | |||||||||||||||
Diluted | 24,483,990 | 23,984,298 | 24,363,789 | 23,784,636 | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
Reconciliation of Reported Gross Margin to | March 31, | April 1, | March 31, | April 1, | |||||||||||||||
Adjusted Gross Margin: | 2018 | 2017 | 2018 | 2017 | |||||||||||||||
Reported gross margin | $ | 69,726 | $ | 63,229 | $ | 258,111 | $ | 229,596 | |||||||||||
Inventory purchase accounting adjustment | - | - | - | 382 | |||||||||||||||
Integration and restructuring | - | - | - | 3,215 | |||||||||||||||
Adjusted gross margin | $ | 69,726 | $ | 63,229 | $ | 258,111 | $ | 233,193 | |||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
Reconciliation of Reported Operating Income to | March 31, | April 1, | March 31, | April 1, | |||||||||||||||
Adjusted Operating Income: | 2018 | 2017 | 2018 | 2017 | |||||||||||||||
Reported operating income | $ | 37,940 | $ | 34,389 | $ | 128,141 | $ | 113,693 | |||||||||||
Inventory purchase accounting adjustment | - | - | - | 382 | |||||||||||||||
Integration and restructuring | 397 | - | 7,982 | 7,282 | |||||||||||||||
Adjusted operating income | $ | 38,337 | $ | 34,389 | $ | 136,123 | $ | 121,357 | |||||||||||
Reconciliation of Reported Net Income and Net Income | Three Months Ended | Twelve Months Ended | |||||||||||||||||
Per Common Share to Adjusted Net Income and | March 31, | April 1, | March 31, | April 1, | |||||||||||||||
Adjusted Net Income Per Common Share: | 2018 | 2017 | 2018 | 2017 | |||||||||||||||
Reported net income | $ | 26,677 | $ | 21,585 | $ | 87,141 | $ | 70,623 | |||||||||||
Inventory purchase accounting adjustment (1) | - | - | - | 257 | |||||||||||||||
Integration and restructuring (1) | 323 | - | 6,991 | 4,987 | |||||||||||||||
Foreign exchange translation loss (gain) (1) | 258 | - | 408 | (199 | ) | ||||||||||||||
TCJA repatriation transition tax | (325 | ) | - | 9,166 | - | ||||||||||||||
TCJA revaluation of deferred tax liabilities | (273 | ) | - | (8,981 | ) | - | |||||||||||||
Discrete tax reserve loss (benefit) | (269 | ) | - | (406 | ) | (238 | ) | ||||||||||||
Adjusted net income | $ | 26,391 | $ | 21,585 | $ | 94,319 | $ | 75,430 | |||||||||||
(1) After tax impact. | |||||||||||||||||||
Adjusted net income per common share: | |||||||||||||||||||
Basic | $ | 1.10 | $ | 0.91 | $ | 3.94 | $ | 3.21 | |||||||||||
Diluted | $ | 1.08 | $ | 0.90 | $ | 3.87 | $ | 3.17 | |||||||||||
Weighted average common shares: | |||||||||||||||||||
Basic | 24,056,839 | 23,713,311 | 23,948,565 | 23,521,615 | |||||||||||||||
Diluted | 24,483,990 | 23,984,298 | 24,363,789 | 23,784,636 | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
March 31, | April 1, | March 31, | April 1, | ||||||||||||||||
Segment Data, Net External Sales: | 2018 | 2017 | 2018 | 2017 | |||||||||||||||
Plain bearings segment | $ | 81,899 | $ | 72,593 | $ | 296,708 | $ | 277,700 | |||||||||||
Roller bearings segment | 35,806 | 28,697 | 132,021 | 109,483 | |||||||||||||||
Ball bearings segment | 19,050 | 16,469 | 67,806 | 58,448 | |||||||||||||||
Engineered products segment | 43,122 | 42,451 | 178,414 | 169,757 | |||||||||||||||
$ | 179,877 | $ | 160,210 | $ | 674,949 | $ | 615,388 | ||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
March 31, | April 1, | March 31, | April 1, | ||||||||||||||||
Selected Financial Data: | 2018 | 2017 | 2018 | 2017 | |||||||||||||||
Depreciation and amortization | $ | 7,164 | $ | 6,894 | $ | 28,360 | $ | 27,372 | |||||||||||
Incentive stock compensation expense | $ | 3,506 | $ | 3,197 | $ | 13,403 | $ | 12,111 | |||||||||||
Adjusted operating income plus depreciation/amortization | |||||||||||||||||||
plus incentive stock compensation expense | $ | 49,007 | $ | 44,480 | $ | 177,886 | $ | 160,840 | |||||||||||
Cash provided by operating activities | $ | 37,793 | $ | 26,667 | $ | 130,289 | $ | 101,242 | |||||||||||
Capital expenditures | $ | 7,434 | $ | 6,479 | $ | 27,976 | $ | 20,894 | |||||||||||
Total debt | $ | 173,355 | $ | 269,800 | |||||||||||||||
Cash and short-term investments | $ | 54,163 | $ | 38,923 | |||||||||||||||
Repurchase of common stock | $ | 4,992 | $ | 4,754 | |||||||||||||||
Backlog | $ | 392,085 | $ | 354,068 |