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Key Highlights
-
First quarter net sales of
$354.1 million increased 126.7% over last year; organic net sales up 13.1%. -
First quarter gross margin of
$141.2 million , 39.9%. - First quarter EBITDA of 27.4%; adjusted EBITDA of 28.4% vs last year adjusted EBITDA of 29.0%.
-
Second quarter outlook shows net sales of
$355 million to$365 million , a growth rate of 121% to 127%. -
First quarter GAAP diluted EPS
$1.09 , adjusted diluted EPS$1.19 , and new adjusted diluted EPS$1.79 .
First Quarter Financial Highlights
|
($ in millions) |
Fiscal 2023 |
|
Fiscal 2022 |
|
Change |
|||||||||||||
|
GAAP |
Adjusted (1) |
GAAP |
Adjusted (1) |
GAAP |
Adjusted (1) |
|||||||||||||
|
Net sales |
$ |
354.1 |
|
|
$ |
156.2 |
|
|
126.7 |
% |
|
|||||||
|
Gross margin |
$ |
141.2 |
|
$ |
63.8 |
|
121.3 |
% |
||||||||||
|
Gross margin % |
|
39.9 |
% |
|
40.8 |
% |
|
|
||||||||||
|
Operating income |
$ |
64.5 |
|
$ |
68.3 |
|
$ |
29.3 |
|
$ |
29.9 |
|
119.9 |
% |
128.5 |
% |
||
|
Operating income % |
|
18.2 |
% |
|
19.3 |
% |
|
18.8 |
% |
|
19.1 |
% |
|
|
||||
|
Net income |
$ |
37.4 |
|
$ |
40.2 |
|
$ |
24.0 |
|
$ |
24.3 |
|
55.7 |
% |
65.6 |
% |
||
|
Net income available to
|
$ |
31.7 |
|
$ |
34.5 |
|
$ |
24.0 |
|
$ |
24.3 |
|
31.8 |
% |
41.9 |
% |
||
|
Diluted EPS |
$ |
1.09 |
|
$ |
1.19 |
|
$ |
0.95 |
|
$ |
0.96 |
|
14.7 |
% |
24.0 |
% |
||
|
New Diluted EPS |
|
$ |
1.79 |
|
|
|
$ |
1.22 |
|
|
|
46.7 |
% |
|||||
|
(1) Results exclude items in reconciliation below. |
||||||||||||||||||
“We are pleased to report, revenues were strong across the majority of our end markets in both the industrial and aerospace sectors,” said Dr.
First Quarter Results
Net sales for the first quarter of fiscal 2023 were
SG&A for the first quarter of fiscal 2023 was
Other operating expenses for the first quarter of fiscal 2023 totaled
Operating income for the first quarter of fiscal 2023 was
Interest expense, net, was
Income tax expense for the first quarter of fiscal 2023 was
Net income for the first quarter of fiscal 2023 was
Diluted EPS for the first quarter of fiscal 2023 was
Backlog as of
Outlook for the Second Quarter Fiscal 2023
The Company expects net sales to be approximately
Restatement of Previously Issued Consolidated Financial Statements
On
The need for the restatement arose out of the Company’s reexamination of the timing of the Company’s recognition of stock-based compensation, a non-cash item, for awards granted to the CEO and COO in light of their employment agreements as then in effect, which historically included provisions that (i) would accelerate the vesting of all the CEO’s then-unvested shares of restricted stock and stock options in the event that he voluntarily resigns from employment or provides the Company with notice that his employment agreement will not renew, and (ii) would accelerate the vesting of all the COO’s then-unvested shares of restricted stock and stock options in the event that he provides the Company with notice that his employment agreement will not renew. Historically, the Company recognized stock-based compensation for restricted stock awards granted to the CEO and COO over the three-year vesting period and option awards over the five-year vesting period stated in the agreements underlying these awards, but
The CEO and COO’s employment agreements have been amended to remove the provisions referred to above (which the Company, the CEO and COO consider to be a technical mistake causing the employment agreements to not reflect the parties’ mutual agreement) so the Company will recognize stock-based compensation for restricted stock and option awards granted in the future to the CEO and COO over the full three- and five-year vesting periods, respectively, rather than over the shorter service period applicable to the prior awards.
The change in the recognition of stock-based compensation is a non-cash item that affects the timing of recognition but not the total amount of the corresponding compensation expense for each award. The following table shows the Company’s SG&A and operating income for the Affected Periods as previously reported and as restated:
|
|
(in thousands) |
||||||
|
|
As Previously
|
Restatement
|
As
|
||||
|
|
Fiscal Year Ended |
||||||
|
Selling, general and administrative expenses |
$ |
158,634 |
$ |
8,969 |
|
$ |
167,603 |
|
Operating income |
$ |
130,063 |
$ |
(8,969 |
) |
$ |
121,094 |
|
|
Fiscal Year Ended |
||||||
|
Selling, general and administrative expenses |
$ |
106,000 |
$ |
(3,217 |
) |
$ |
102,783 |
|
Operating income |
$ |
111,458 |
$ |
3,217 |
|
$ |
114,675 |
|
|
Fiscal Year Ended |
||||||
|
Selling, general and administrative expenses |
$ |
122,565 |
$ |
7,418 |
|
$ |
129,983 |
|
Operating income |
$ |
156,785 |
$ |
(7,418 |
) |
$ |
149,367 |
The change in the recognition of stock-based compensation described above does not impact the Company’s (i) liquidity or cash flows from operating activities, investing activities and financing activities during the Affected Periods, (ii) Adjusted EBITDA non-GAAP financial measure, or (iii) compliance with its obligations under any material agreement, including the financial covenants contained in the agreements governing its outstanding indebtedness.
The Company plans to restate the financial statements as of and for the Affected Periods in an amendment to the 2022 Annual Report on Form 10-K to be filed with the
In addition, the Company’s management has concluded that there was a material weakness in internal control over financial reporting during the Affected Periods relating to the error described above. The Company’s remediation plan with respect to such material weakness will be described in the amendment to the 2022 Annual Report on Form 10-K to be filed with the
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Non-GAAP Financial Measures
In addition to disclosing results of operations that are determined in accordance with
Adjusted Operating Income
Adjusted operating income excludes acquisition expenses including the impact of acquisition-related fair value adjustments in connection with purchase, restructuring and other similar charges, gains or losses on extinguishment of debt, and other non-operational, non-cash or non-recurring losses. We believe that adjusted operating income is useful in assessing our financial performance by excluding items that are not indicative of our core operating performance or that may obscure trends useful in evaluating our continuing results of operations.
Adjusted Net Income and Adjusted Earnings Per Share
Adjusted net income and adjusted earnings per share (calculated on a diluted basis) exclude acquisition expenses including the impact of acquisition-related fair value adjustments in connection with purchase, restructuring and other similar charges, gains or losses on divestitures, discontinued operations, gains or losses on extinguishment of debt, and other non-operational, non-cash or non-recurring losses, net of their income tax impact. We believe that adjusted net income and adjusted earnings per share are useful in assessing our financial performance by excluding items that are not indicative of our core operating performance or that may obscure trends useful in evaluating our continuing results of operations.
New Adjusted Net Income and New Adjusted Earnings Per Share
New adjusted net income and new adjusted earnings per share excludes non-cash expenses for amortization related to acquired intangible assets, stock compensation and amortization of deferred finance fees, net of their income tax impact. We believe that new adjusted net income and new adjusted earnings per share are useful in assessing our financial performance by excluding items that are not indicative of our core operating performance or that may obscure trends useful in evaluating our continuing results of operations.
EBITDA
EBITDA represents earnings from continuing operations before interest and other debt related activities, taxes, depreciation and amortization and stock compensation expense. EBITDA is presented because it is an important supplemental measure of performance and it is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA is also presented and compared by analysts and investors in evaluating our ability to meet debt service obligations. Other companies in our industry may calculate EBITDA differently. EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of operating performance or any other measures of performance derived in accordance with GAAP. Because EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business.
Adjusted EBITDA
Adjusted EBITDA is the term we use to describe EBITDA adjusted for the items summarized in the Reconciliation of GAAP to Non-GAAP Financial Measures table below. Adjusted EBITDA is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors, excluding non-operational, non-cash or non-recurring losses or gains. In view of our debt level, it is also provided to aid investors in understanding our compliance with our debt covenants. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA varies from others in our industry. Adjusted EBITDA should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for, analysis of our results as reported under GAAP. For example, Adjusted EBITDA does not reflect: (a) our capital expenditures, future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements for, our working capital needs; (c) the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt; (d) tax payments that represent a reduction in cash available to us; (e) any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; or (f) the impact of earnings or charges resulting from matters that we and the lenders under our credit agreement may not consider indicative of our ongoing operations. In particular, our definition of Adjusted EBITDA allows us to add back certain non-cash, non-operating or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur, vary greatly and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results. In addition, certain of these expenses can represent the reduction of cash that could be used for other corporate purposes. Further, although not included in the calculation of Adjusted EBITDA below, the measure may at times allow us to add estimated cost savings and operating synergies related to operational changes ranging from acquisitions to dispositions to restructurings and/or exclude one-time transition expenditures that we anticipate we will need to incur to realize cost savings before such savings have occurred. Further, management and various investors use the ratio of total debt less cash to Adjusted EBITDA (which includes a full pro-forma last-twelve-month impact of acquisitions), or "net debt leverage", as a measure of our financial strength and ability to incur incremental indebtedness when making key investment decisions and evaluating us against peers. Lastly, management and various investors use the ratio of the change in Adjusted EBITDA divided by the change in net sales (referred to as “incremental margin” in the case of an increase in net sales or “decremental margin” in the case of a decrease in net sales) as an additional measure of our financial performance and is utilized when making key investment decisions and evaluating us against peers.
About
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 following: 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,” “would,” “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, the COVID-19 pandemic, geopolitical factors, future levels of aerospace/defense and industrial market activity, future financial performance, our debt leverage, the integration of our recent Dodge acquisition, 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, 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
|
|
|||||||
|
Consolidated Statements of Operations |
|||||||
|
(dollars in thousands, except share and per share data) |
|||||||
|
(Unaudited) |
|||||||
|
Three Months Ended |
|||||||
|
|
|
||||||
|
2022 |
2021 |
||||||
| Net sales |
$ |
354,080 |
|
$ |
156,205 |
|
|
| Cost of sales |
|
212,928 |
|
|
92,432 |
|
|
| Gross margin |
|
141,152 |
|
|
63,773 |
|
|
| Operating expenses: | |||||||
| Selling, general and administrative |
|
55,828 |
|
|
31,212 |
|
|
| Other, net |
|
20,854 |
|
|
3,248 |
|
|
| Total operating expenses |
|
76,682 |
|
|
34,460 |
|
|
| Operating income |
|
64,470 |
|
|
29,313 |
|
|
| Interest expense, net |
|
15,799 |
|
|
319 |
|
|
| Other non-operating (income)/expense |
|
767 |
|
|
(465 |
) |
|
| Income before income taxes |
|
47,904 |
|
|
29,459 |
|
|
| Provision for income taxes |
|
10,466 |
|
|
5,421 |
|
|
| Net income |
|
37,438 |
|
|
24,038 |
|
|
| Preferred stock dividends |
|
5,750 |
|
|
- |
|
|
| Net income available to common stockholders |
$ |
31,688 |
|
$ |
24,038 |
|
|
| Net income per share available to common stockholders: | |||||||
| Basic |
$ |
1.11 |
|
$ |
0.96 |
|
|
| Diluted |
$ |
1.09 |
|
$ |
0.95 |
|
|
| Weighted average common shares: | |||||||
| Basic |
|
28,670,488 |
|
|
25,021,063 |
|
|
| Diluted |
|
28,944,955 |
|
|
25,392,047 |
|
|
|
Three Months Ended |
|||||||
| Reconciliation of Reported Operating Income to |
|
|
|||||
| Adjusted Operating Income: |
2022 |
2021 |
|||||
| Reported operating income |
$ |
64,470 |
|
$ |
29,313 |
|
|
| Transaction and related costs |
|
82 |
|
|
- |
|
|
| Transition services |
|
3,705 |
|
|
- |
|
|
| Restructuring and consolidation |
|
- |
|
|
557 |
|
|
| Adjusted operating income |
$ |
68,257 |
|
$ |
29,870 |
|
|
| Reconciliation of Reported Net Income Available to |
Three Months Ended |
||||||
| Common Stockholders to Adjusted Net Income Available |
|
|
|||||
| to Common Stockholders: |
2022 |
2021 |
|||||
| Reported net income |
$ |
37,438 |
|
$ |
24,038 |
|
|
| Transaction and related costs |
|
82 |
|
|
- |
|
|
| Transition services |
|
3,705 |
|
|
- |
|
|
| Restructuring and consolidation |
|
- |
|
|
557 |
|
|
| Foreign exchange translation loss/(gain) |
|
(163 |
) |
|
13 |
|
|
| Tax impact of adjustments and other tax matters |
|
(826 |
) |
|
(309 |
) |
|
| Adjusted net income |
$ |
40,236 |
|
$ |
24,299 |
|
|
| Preferred stock dividends |
|
5,750 |
|
|
- |
|
|
| Adjusted net income available to common stockholders |
$ |
34,486 |
|
$ |
24,299 |
|
|
| Adjusted net income per common share: | |||||||
| Basic |
$ |
1.20 |
|
$ |
0.97 |
|
|
| Diluted |
$ |
1.19 |
|
$ |
0.96 |
|
|
| Weighted average common shares: | |||||||
| Basic |
|
28,670,488 |
|
|
25,021,063 |
|
|
| Diluted |
|
28,944,955 |
|
|
25,392,047 |
|
|
|
Three Months Ended |
|||||||
| Reconciliation of Reported Operating Income to EBITDA to |
|
|
|||||
| Adjusted EBITDA: |
2022 |
2021 |
|||||
| Reported operating income |
$ |
64,470 |
|
$ |
29,313 |
|
|
| Depreciation and amortization |
|
28,642 |
|
|
8,212 |
|
|
| Stock compensation expense |
|
3,819 |
|
|
7,182 |
|
|
| EBITDA |
$ |
96,931 |
|
# |
$ |
44,707 |
|
| Transaction and related costs |
|
82 |
|
|
- |
|
|
| Transition services |
|
3,705 |
|
|
- |
|
|
| Restructuring and consolidation |
|
- |
|
|
557 |
|
|
| Adjusted EBITDA |
$ |
100,718 |
|
$ |
45,264 |
|
|
|
Three Months Ended |
|||||||
| Reconciliation of Adjusted Net Income Available to |
|
|
|||||
| Common Stockholders to New Adjusted Net Income |
2022 |
2021 |
|||||
| Available to Common Stockholders: | |||||||
| Adjusted net income available to common stockholders |
$ |
34,486 |
|
$ |
24,299 |
|
|
| M&A related amortization |
|
16,411 |
|
|
2,081 |
|
|
| Stock compensation expense |
|
3,819 |
|
|
7,182 |
|
|
| Amortization of deferred finance fees |
|
2,298 |
|
|
106 |
|
|
| Tax impact of adjustments |
|
(5,212 |
) |
|
(2,644 |
) |
|
| New adjusted net income available to common stockholders |
$ |
51,802 |
|
$ |
31,024 |
|
|
| New adjusted net income per common share: | |||||||
| Basic |
$ |
1.81 |
|
$ |
1.24 |
|
|
| Diluted |
$ |
1.79 |
|
$ |
1.22 |
|
|
| Weighted average common shares: | |||||||
| Basic |
|
28,670,488 |
|
|
25,021,063 |
|
|
| Diluted |
|
28,944,955 |
|
|
25,392,047 |
|
|
|
Three Months Ended |
|||||||
|
|
|
||||||
| Selected Financial Data: |
2022 |
2021 |
|||||
| Cash provided by operating activities |
$ |
59,035 |
|
$ |
53,293 |
|
|
| Capital expenditures |
$ |
7,857 |
|
$ |
3,367 |
|
|
| Total debt |
$ |
1,565,330 |
|
$ |
10,754 |
|
|
| Cash and marketable securities |
$ |
119,587 |
|
$ |
296,091 |
|
|
| Total debt minus cash and marketable securities |
$ |
1,445,743 |
|
$ |
(285,337 |
) |
|
| Repurchase of common stock |
$ |
5,984 |
|
$ |
6,264 |
|
|
| Backlog |
$ |
635,741 |
|
$ |
420,218 |
|
|
|
Three Months Ended |
|||||||
|
|
|
||||||
| Segment Data, Net External Sales: |
2022 |
2021 |
|||||
| Industrial segment |
$ |
254,681 |
|
$ |
65,840 |
|
|
| Aerospace and defense segment |
|
99,399 |
|
|
90,365 |
|
|
|
$ |
354,080 |
|
$ |
156,205 |
|
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20220804005426/en/
203-267-5014
Rsullivan@rbcbearings.com
617-461-1101
investors@rbcbearings.com
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