RBC Bearings Inc (NASDAQ:ROLL)
Q4 2021 Earnings Call
May 21, 2021, 11:00 a.m. ET
- Prepared Remarks
- Questions and Answers
- Call Participants
Good day, and thank you for standing by. Welcome to the RBC Bearings’ Fiscal 2021 Fourth Quarter Earnings Call. At this [Operator Instructions] Please be advised that today’s conference may be recorded. [Operator Instructions]
I’d now like to hand the conference over to your host today, Mr. Will Stack with Alpha IR. Please go ahead.
Will Stack — Investor Relations
Good morning and thank you for joining us for RBC Bearings’ fiscal 2021 fourth quarter earnings conference call. With me on the call today are Dr. Michael J. Hartnett, Chairman, President and Chief Executive Officer; Daniel A. Bergeron, Director, Vice President and Chief Operating Officer; and Robert Sullivan, Vice President and Chief Financial Officer. Before beginning today’s call, let me remind you that some of the statements made today will be forward looking and are made under the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings’ recent filings with the SEC for a more detailed discussion of the risks that could impact the company’s future operating results and financial condition. These factors also described in greater detail in the press release and on the company’s website. In addition, reconciliation between GAAP and non-GAAP financial information is included as part of the release and is available on the company’s website.
Now, I’ll turn the call over to Dr. Hartnett.
Michael J. Hartnett — Chairman, President and Chief Executive Officer
Thank you, Will. Good morning and welcome. Net sales for the fourth quarter of fiscal 2021 were $160.3 million versus $185.8 million for the same period last year, a decrease of 13.7%. For fourth quarter of 2021, sales of industrial products represented 47% of our net sales with aerospace products at 53%. Gross margin for the quarter was $62.5 million or 39% of net sales. This compares to $76.6 million or 41.2% for the same period last year. Operating income was $29.7 million, 18.6% of net sales compared to last year’s $43.5 million or 23.4% respectively.
Adjusted EBITDA was $45.9 million, 28.6% of net sales compared to $56.3 million and 30.3% of net sales for the same period last year. We ended the quarter with $241.3 million of cash and securities and $16.1 million of debt. Year-to-date free cash flow was a record $140.7 million. We entered the fourth quarter and saw a substantial strengthening of our industrial sector. All markets participated, industrial distribution, mining, machine tool, rail, semiconductor machinery, marine, and wind. We also saw a substantial increase quoting and contract activity from the aerospace sector.
Sales of industrial products were up 12.9% from last year led by OEM, which was up 15.1%. Sequential quarter comparisons show industrials were up by 16.8% led by a distribution at 21.3%. Industrial distribution gave a very strong showing during the period across all product lines and geographies. In fact, we could have sold more if we had stock in many of the mixed items. We are busy today on inventory replenishment and increasing many key stocking positions. Marine, the build-out of the Virginia and Columbia submarine fleets continue. We have completed Block 4 build-out of the Virginia class and are starting in the next 10 boat contract this month.
We are also preparing for the Columbia to begin production cycle in calendar year 2022. On semiconductor, the race to expand semiconductor manufacturing is driving requirements for machinery and components at levels we haven’t experienced before. As you know, this is driven by demand for computers and automobiles, phones, games, self-driving cars, 5G technology, etcetera. Over the past 20 years, we have diligently built out very strong positions with the machine builders and achieved considerable design excellence, manufacturing scale and reputation in these markets. We are now realizing the benefits of all these efforts.
Turning to Aerospace and Defense, the fourth quarter fiscal 2021 net sales were down 28.6% on a quarter-over-quarter basis, but up sequentially 4.5%. Boeing is slowly increasing demand for products for the 737 MAX suppliers as they consume their excess inventory positions. We are pleased to see the turnaround in consumption here and expect each quarter to be better than the last going forward. We are planning to support a 140 to 150 plane build-out this year moving to 350 to 400 737 MAXs next year. Given the new rules for vaccinated travelers to Europe we expect to see an improved outlook for the 777 and the 787 ships and their build rates by the end of the summer or sooner.
We are currently supporting audits of our production capacities by both Boeing and Airbus personnel as laid plans to build — to increase their production rates. Airbus currently at 40 to 42 A320 series per month is targeted to their well-known goal of 60 ships per month. As reported earlier the plan is to build 800 total ships of all designs in 2022. Space — moving to space, there’s a claim space is the new aerospace. We are active with many of the daily headline names supplying components as diverse as bearings for rocket engines, fins for directional control, structures for landing gear, actuation devices, low friction cryogenic components.
The pace is always fast and the development path normally uncertain but we like where this is going and doing whatever we can so that we’re not the bottleneck on the process of landing a man on Mars. This can develop into a significant business scale for RBC as the plans of the significant entrepreneurs are realized over the next few years. More of this on future calls. And finally defense, we certainly have a dream portfolio in terms of platform composition and outlook and expect continued strength from this sector for many years. Regarding our fourth quarter we are expecting sales to be between $154 million and $158 million. It’s a little bit hard to predict these numbers today, and I’m sure that we’ll be talking about that more later in the call. So, I’ll defer to that discussion.
And I’ll now turn the call over to Dan and Rob for more detail on the financial performance.
Robert M. Sullivan — Vice President, Chief Financial Officer
Thank you, Mike. Since Mike has already covered net sales and gross margin, I’ll jump down to SG&A. SG&A for the fourth quarter of fiscal 2021 was $27.4 million compared to $31.0 million for the same period last year. The decrease was mainly due to lower personnel costs of $3.4 million and $0.5 million of other items offset by $0.3 million of higher share-based compensation costs. As a percentage of net sales, SG&A was 17.1% for the fourth quarter of fiscal 2021 compared to 16.7% for the same period last year. Other operating expense for the fourth quarter of fiscal 2021 was expense of $5.3 million compared to expense of $2.1 million for the same period last year.
For the fourth quarter of fiscal 2021, other operating expenses were comprised mainly of $2.5 million in amortization of intangible assets, $1.5 million of costs associated with a cyber event, $1.0 million of restructuring costs and related items, and $0.3 million of other items. Other operating expense for the same period last year consisted mainly of $2.6 million in amortization of intangible assets, $0.8 million of restructuring costs and $0.1 million of other items, offset by $1.4 million gain on the sale of a surplus building. Operating income was $29.7 million for the fourth quarter of fiscal 2021 compared to operating income of $43.5 million for the same period in fiscal 2020. On an adjusted basis, operating income would have been $32.5 million for the fourth quarter of fiscal 2021 compared to adjusted operating income of $43.0 million for the fourth quarter of fiscal 2020.
For the fourth quarter of fiscal 2021, the company reported net income of $25.0 million compared to net income of $33.
8 million for the same period last year. On an adjusted basis, net income would have been $27.4 million for the fourth quarter of fiscal 2021 compared to adjusted net income of $33.1 million for the same period last year. Diluted earnings per share were $0.99 per share for the fourth quarter of fiscal 2021 compared to $1.35 per share for the same period last year. On an adjusted basis, diluted earnings per share for the fourth quarter of fiscal 2021 was $1.08 per share compared to adjusted diluted earnings per share of $1.33 per share for the same period last year.
During the cash flow, the company generated $41.9 million in cash from operating activities in the fourth quarter of fiscal 2021 compared to $44.4 million for the same period last year and $152.5 million in cash from operating activities for the full-year fiscal 2021 compared to $155.6 million for the full year last year. Capital expenditures were $3.0 million in the fourth quarter of fiscal 2021 compared to $9.7 million for the same period last year. On a 12-month basis, capital expenditures were $11.8 million compared to $37.3 million last year. Free cash flow for the full year, which includes cash from operating activities less capital expenditures was $140.7 million for fiscal 2021 compared to $118.3 million in fiscal 2020. Total debt as of April 3, 2021 was $16.1 million. And cash and marketable securities on hand was $241.3 million.
I would now like to turn the call back to the operator for the question-and-answer session.
Questions and Answers:
[Operator Instructions] Our first question comes from Pete Skibitski with Alembic Global Advisors.
Peter Skibitski — Alembic Global Advisors — Analyst
Hey. Good morning, Mike and Dan and Rob. Nice quarter.
Michael J. Hartnett — Chairman, President and…