RBC Bearings Incorporated Announces Fiscal 2010 Second Quarter Results

October 30, 2009 8:00 AM EDT

OXFORD, Conn.--(BUSINESS WIRE)-- RBC Bearings Incorporated (Nasdaq: ROLL), a leading international manufacturer of highly-engineered precision plain, roller and ball bearings for the industrial, defense and aerospace industries, today reported results for the second quarter ended September 26, 2009.

Second Quarter Highlights

($ in      Q2 Fiscal 2010           Q2 Fiscal 2009          Change
millions)

           GAAP      Adjusted (1)   GAAP      Adjusted (1)  GAAP     Adjusted
                                                                     (1)

Net sales  $ 63.7                   $ 94.3                  -32.5 %

Gross      $ 19.1    $ 20.0         $ 30.2    $ 30.9        -36.8 %  -35.2 %
margin

Gross        30.0 %    31.4 %         32.0 %    32.7 %
margin %

Operating  $ 7.2     $ 8.5          $ 15.2    $ 16.6        -52.3 %  -48.8 %
income

Net        $ 4.4     $ 5.3          $ 9.6     $ 10.7        -54.1 %  -50.6 %
income

Diluted    $ 0.20    $ 0.24         $ 0.44    $ 0.49        -54.5 %  -51.0 %
EPS

(1) Results exclude items in reconciliation below.

Six Month Highlights

($ in      Q2 Fiscal 2010           Q2 Fiscal 2009           Change
millions)

           GAAP       Adjusted (1)  GAAP       Adjusted (1)  GAAP     Adjusted
                                                                      (1)

Net sales  $ 127.4                  $ 186.7                  -31.8 %

Gross      $ 39.0     $ 40.4        $ 60.8     $ 61.8        -35.8 %  -34.7 %
margin

Gross        30.6  %    31.7 %        32.6  %    33.1 %
margin %

Operating  $ 15.0     $ 17.0        $ 32.2     $ 34.1        -53.4 %  -50.3 %
income

Net        $ 9.5      $ 10.6        $ 20.3     $ 21.9        -53.3 %  -51.5 %
income

Diluted    $ 0.44     $ 0.49        $ 0.93     $ 1.01        -52.7 %  -51.5 %
EPS

(1) Results exclude items in reconciliation below.

"We are extremely proud of the way management responded to the sudden and unprecedented changes in market demand for our products that were the direct consequence of the international financial crisis. A sharp focus was maintained on sales, service, and profitability while a simultaneous restructuring of the business to the new reality of demand took place," said Dr. Michael J. Hartnett, Chairman and Chief Executive Officer. "Our outlook today is for a business expansion over the balance of the year in most of our served markets."

Second Quarter Results

Net sales for the second quarter of fiscal 2010 were $63.7 million, a decrease of 32.5% from $94.3 million in the second quarter of fiscal 2009. The decrease of 32.5% was driven by a decrease of 43.4% in our industrial business and by a 23.5% decrease in net sales in our aerospace and defense business. Gross margin for the second quarter was $19.1 million compared to $30.2 million for the same period last year. Gross margin as a percentage of net sales was 30.0% in the second quarter of fiscal 2010 compared to 32.0% for the same period last year. The decline in gross margin percentage was mainly driven by the current economic downturn combined with start-up costs associated with the Company's expansion into new bearing products. Gross margin as a percentage of net sales, excluding $0.9 million of start-up costs, was 31.4% compared to 32.7% for the same adjusted period last year.

Operating income decreased 52.3% to $7.2 million for the second quarter of fiscal 2010 compared to $15.2 million for the same period last year. As a percentage of net sales, operating income was 11.4% compared to 16.1% for the same period last year. Operating income excluding start-up costs associated with the expansion into new bearing products and restructuring and moving costs was $8.5 million, a decrease of 48.8% compared to adjusted operating income for the same period last year. As a percentage of net sales, operating income, excluding these charges, was 13.3% compared to 17.6% for the same adjusted period last year.

Interest expense, net for the second quarter of fiscal 2010 was $0.5 million, compared to $0.7 million for the same period last year.

Other non-operating expense was $0.1 million for the second quarter of fiscal 2010. This was mainly comprised of foreign exchange losses on inter-company loans between our U.S. division and international division. Since these loans are not considered long-term in nature, the resulting translation losses are included in net income.

For the second quarter of fiscal 2010, the Company reported net income of $4.4 million compared to net income of $9.6 million in the same period last year. Excluding the after-tax start-up costs associated with the expansion into new bearing products, restructuring and moving costs, and the foreign exchange loss, net income decreased 50.6% to $5.3 million compared to $10.7 million for the same adjusted period last year.

Six Month Results

Net sales for the six month period ended September 26, 2009 were $127.4 million, a decrease of 31.8% from $186.7 million for the six month period ended September 27, 2008. Gross margin for the six month period ended September 26, 2009 was $39.0 million compared to $60.8 million for the same period last year. Gross margin as a percentage of net sales was 30.6% for the six month period of fiscal 2010 compared to 32.6% for the same period last year. The decline in gross margin percentage was mainly driven by the current economic downturn combined with start-up costs associated with the Company's expansion into new bearing products. Gross margin as a percentage of net sales, excluding $1.4 million of start-up costs, was 31.7% compared to 33.1% for the same adjusted period last year.

For the six month period ended September 26, 2009, the Company reported operating income of $15.0 million compared to $32.2 million for the same period last year. Operating income excluding start-up costs associated with the expansion into new bearing products and restructuring and moving costs was $17.0 million for the six month period ended September 26, 2009 compared to $34.1 million for the same adjusted period last year. Operating income as a percentage of net sales excluding these charges was 13.3% for the six month period ended September 26, 2009 compared to 18.3% for the same adjusted period last year.

Interest expense, net for the six month period ended September 26, 2009 was $0.9 million, a decrease of $0.4 million, from $1.3 million for the same period last year.

Other non-operating expense was a gain of $0.2 million for the six month period ended September 26, 2009. This was mainly comprised of foreign exchange gains on inter-company loans between our U.S. division and International division. Since these loans are not considered long-term in nature, the resulting translation gains are included in net income.

Net income for the six month period ended September 26, 2009 was $9.5 million compared to net income of $20.3 million for the same period last year. Excluding the after-tax start-up costs associated with the expansion into new bearing products, restructuring and moving costs, and the foreign exchange gain, net income was $10.6 million compared to $21.9 million for the same adjusted period last year.

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 866-783-2141 (international callers dial 857-350-1600) and enter conference ID # 27465595. An audio replay of the call will be available from 2:00 p.m. ET on Friday, October 30th until 11:59 p.m. ET on Friday, November 6th. The replay can be accessed by dialing 888-286-8010 (international callers dial 617-801-6888) and entering conference call ID # 82308929. 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 generally accepted accounting principles ("GAAP"), this press release also discloses non-GAAP results of operations that exclude certain charges. These non-GAAP measures adjust for charges 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 GAAP. A reconciliation of the non-GAAP measures disclosed in the press release with the most comparable 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 requiring sophisticated design, testing, and manufacturing capabilities for the diversified industrial, aerospace and defense markets. Headquartered in Oxford, Connecticut, RBC Bearings currently employs approximately 1,724 people and operates 23 manufacturing facilities in four countries.

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, the Company's ability to meet its debt obligations, 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 Annual Report filed on Form 10-K. The Company does not intend, and undertakes no obligation, to update or alter any forward-looking statement.

RBC Bearings Incorporated

Consolidated Statements of Operations

(dollars in thousands, except share and per share data)

(Unaudited)

                     Three Months Ended            Six Months Ended

                     September 26,  September 27,  September 26,   September 27,

                     2009           2008           2009            2008

Net sales            $ 63,657       $ 94,294       $ 127,389       $ 186,674

Cost of sales          44,564         64,077         88,392          125,902

Gross margin           19,093         30,217         38,997          60,772

Operating expenses:

Selling, general       11,132         13,952         22,751          27,079
and administrative

Other, net             724            1,097          1,230           1,479

Total operating        11,856         15,049         23,981          28,558
expenses

Operating income       7,237          15,168         15,016          32,214

Interest expense,      460            650            929             1,331
net

Loss on early
extinguishment of      -              -              -               319
debt

Other non-operating    85             249            (240       )    166
expense (income)

Income before          6,692          14,269         14,327          30,398
income taxes

Provision for          2,288          4,681          4,856           10,127
income taxes

Net income           $ 4,404        $ 9,588        $ 9,471         $ 20,271

Net income per
common share:

Basic                $ 0.20         $ 0.44         $ 0.44          $ 0.94

Diluted              $ 0.20         $ 0.44         $ 0.44          $ 0.93

Weighted average
common shares:

Basic                  21,591,779     21,567,551     21,587,193      21,564,463

Diluted                21,746,552     21,761,677     21,718,805      21,771,849

                     Three Months Ended            Six Months Ended

                     September 26,  September 27,  September 26,   September 27,

Reconciliation of
Reported Operating   2009           2008           2009            2008
Income to

Adjusted Operating
Income:

Reported operating   $ 7,237        $ 15,168       $ 15,016        $ 32,214
income

Large bearing          892            645            1,374           1,043
start-up costs

Restructuring and      354            389            562             487
moving costs

Disposal of fixed      -              370            19              400
assets

Adjusted operating   $ 8,483        $ 16,572       $ 16,971        $ 34,144
income

Reconciliation of
Reported Net Income  Three Months Ended            Six Months Ended
and

Net Income Per
Common Share to      September 26,  September 27,  September 26,   September 27,
Adjusted Net

Income and Adjusted
Net Income Per       2009           2008           2009            2008
Common Share:

Reported net income  $ 4,404        $ 9,588        $ 9,471         $ 20,271

Large bearing          587            433            908             696
start-up costs (1)

Restructuring and      233            261            372             325
moving costs (1)

Disposal of fixed      -              249            13              267
assets (1)

Loss on early
extinguishment of      -              -              -               213
debt (1)

Foreign exchange
loss (gain) on         56             167            (159       )    111
inter-company loans
(1)

Adjusted net income  $ 5,280        $ 10,698       $ 10,605        $ 21,883

(1) Item was tax
effected at the
effective tax rate.

Adjusted net income
per common share:

Basic                $ 0.24         $ 0.50         $ 0.49          $ 1.01

Diluted              $ 0.24         $ 0.49         $ 0.49          $ 1.01

Adjusted weighted
average common
shares:

Basic                  21,591,779     21,567,551     21,587,193      21,564,463

Diluted                21,746,552     21,761,677     21,718,805      21,771,849

                     Three Months Ended            Six Months Ended

                     September 26,  September 27,  September 26,   September 27,

Segment Data, Net    2009           2008           2009            2008
External Sales:

Roller bearings      $ 17,311       $ 25,666       $ 32,879        $ 50,623
segment

Plain bearings         30,262         43,181         61,262          86,896
segment

Ball bearings          11,370         16,555         23,612          31,601
segment

Other segment          4,714          8,892          9,636           17,554

                     $ 63,657       $ 94,294       $ 127,389       $ 186,674

                     Three Months Ended            Six Months Ended

                     September 26,  September 27,  September 26,   September 27,

Selected Financial   2009           2008           2009            2008
Data:

Depreciation and     $ 2,976        $ 3,250        $ 5,867         $ 6,416
amortization

Incentive stock
compensation         $ 707          $ 553          $ 1,453         $ 1,105
expense

Cash provided by
operating            $ 4,610        $ 2,230        $ 21,379        $ 23,943
activities

Capital              $ 1,751        $ 6,451        $ 6,021         $ 11,020
expenditures

Total debt                                         $ 63,005        $ 51,190

Cash and short-term                                $ 41,620        $ 9,262
investments

Total debt minus
cash and short-term                                $ 21,385        $ 41,928
investments

Backlog                                            $ 160,530       $ 239,939

    Source: RBC Bearings Incorporated

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