Oxford, CT - RBC Bearings Incorporated, 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 fourth quarter of fiscal year 2013.
Fourth Quarter Highlights:
- Gross margin expansion to 39.5%
- Operating income of 22.0%, adjusted for consolidation and restructuring of large bearing facilities
- Adjusted diluted EPS of $0.69
| Fiscal 2013 | Fiscal 2012 | Change | ||||||||||||||||
| ($ in millions) | GAAP | Adjusted (1) | GAAP | Adjusted (1) | GAAP | Adjusted (1) | ||||||||||||
| Net sales | $103.0 | $111.3 | -7.5% | |||||||||||||||
| Gross margin | $40.7 | $41.2 | -1.2% | |||||||||||||||
| Gross margin % | 39.5% | 37.0% | ||||||||||||||||
| Operating income | $15.8 | $22.7 | $24.1 | $24.1 | -34.5% | -5.8% | ||||||||||||
| Operating income % | 15.3% | 22.0% | 21.6% | 21.6% | ||||||||||||||
| Net income | $10.6 | $15.9 | $15.5 | $15.5 | -31.9% | 2.6% | ||||||||||||
| Diluted EPS | $0.46 | $0.69 | $0.69 | $0.69 | -33.3% | 0.0% | ||||||||||||
| (1) Results exclude items in reconciliation below. | ||||||||||||||||||
Full Year Highlights:
- Gross margin improvement of 2.5% from 35.4% to 37.9%
- Adjusted operating income improvement to 21.1% from 19.5%
- Adjusted diluted EPS up 9.0%, from $2.23 to $2.43
| Fiscal 2013 | Fiscal 2012 | Change | ||||||||||||||||
| ($ in millions) | GAAP | Adjusted (1) | GAAP | Adjusted (1) | GAAP | Adjusted (1) | ||||||||||||
| Net sales | $403.1 | $397.5 | 1.4% | |||||||||||||||
| Gross margin | $152.9 | $140.6 | 8.8% | |||||||||||||||
| Gross margin % | 37.9% | 35.4% | ||||||||||||||||
| Operating income | $78.1 | $85.0 | $77.6 | $77.6 | 0.6% | 9.5% | ||||||||||||
| Operating income % | 19.4% | 21.1% | 19.5% | 19.5% | ||||||||||||||
| Net income | $56.3 | $55.5 | $50.0 | $50.0 | 12.7% | 11.1% | ||||||||||||
| Diluted EPS | $2.47 | $2.43 | $2.23 | $2.23 | 10.8% | 9.0% | ||||||||||||
| (1) Results exclude items in reconciliation below. | ||||||||||||||||||
“Our fourth quarter results continued to benefit from our focus on efficiency gains and margin expansion. Additionally, we expect further gross margin improvements going forward as we begin to realize the benefits of the consolidation and restructuring actions we took over the quarter,” said Dr. Michael J. Hartnett, Chairman and Chief Executive Officer. “We are pleased with our fiscal 2013 results in which we delivered significant margin expansion and earnings growth, with sales growth reflective of strong aerospace demand largely offset by normalized industrial demand.”
Fourth Quarter Results
Net sales for the fourth quarter of fiscal 2013 were $103.0 million, a decrease of 7.5% from $111.3 million in the fourth quarter of fiscal 2012. The decrease in net sales was attributable to an 18.9% decline in industrial sales driven by slowing OEM activity in mining, semiconductor and military vehicles, partially offset by a 4.9% increase in aerospace and defense driven by commercial aircraft build rates and the aerospace aftermarket. Gross margin for the fourth quarter was $40.7 million compared to $41.2 million for the same period last year. Gross margin as a percentage of net sales was 39.5% in the fourth quarter of fiscal 2013 compared to 37.0% for the same period last year.
SG&A for the fourth quarter of fiscal 2013 was $17.3 million, an increase of $0.8 million over the same period last year. As a percentage of net sales, SG&A was 16.8% for the fourth quarter of fiscal 2013 compared to 14.8% for the same period last year.
Other operating expenses for the fourth quarter of fiscal 2013 totaled $7.6 million, an increase of $7.0 million, compared to $0.6 million for the same period last year. For the fourth quarter of fiscal 2013 other operating expenses consisted of $6.7 million related to the consolidation and restructuring of large bearing facilities, amortization of intangibles of $0.4 million, and $0.5 million in costs associated with asset disposals and other items. For the same period last year, other operating expenses consisted mainly of $0.4 million of amortization of intangibles and other items of $0.2 million.
Operating income for the fourth quarter of fiscal 2013 was $15.8 million compared to operating income of $24.1 million for the same period last year. As a percentage of net sales, operating income was 15.3% compared to 21.6% for the same period last year. Operating income excluding costs associated with the consolidation and restructuring of large bearing facilities and disposal of fixed assets, would have been $22.7 million compared to operating income of $24.1 million for the same period last year. As a percentage of net sales, operating income, excluding these charges, would have been 22.0% compared to 21.6% for the same period last year.
Interest expense, net for the fourth quarter of fiscal 2013 was $0.2 million compared to $0.1 million for the same period last year.
Income tax expense for the fourth quarter of fiscal 2013 was $5.0 million compared to $8.4 million for the same period last year. Our effective income tax rate for the fourth quarter of fiscal 2013 was 32.0% compared to 35.0% for the same period last year.
Net income for the fourth quarter of fiscal 2013 was $10.6 million compared to $15.5 million for the same period last year. Excluding the after tax impact of the large bearing consolidation and restructuring, loss on disposal of fixed assets, and a discrete tax benefit, net income would have been $15.9 million for the fourth quarter of fiscal 2013 compared to $15.5 million for the same period last year.
Diluted EPS for the fourth quarter of fiscal 2013 was $0.46 per share compared to $0.69 per share for the same period last year. Excluding the after tax impact of the large bearing consolidation and restructuring, loss on disposal of fixed assets, and a discrete tax benefit, diluted EPS for the fourth quarter of fiscal 2013 would have been $0.69 per share compared to $0.69 per share for the same period last year.
Restructuring and Consolidation of Large Bearing Manufacturing Facilities
In the fourth quarter of fiscal 2013, we reached a decision to consolidate and restructure our large bearing manufacturing facilities and capacity. This decision was based on our intent to better align manufacturing abilities and product development. The consolidation of the Texas facility into the South Carolina operation will strengthen and bring critical engineering and manufacturing mass to the large bearing product line. The consolidation and restructuring includes (1) consolidation of the machinery and equipment from Texas into South Carolina resulting in a certain portion being impaired and sold and the remaining portion used to service the large bearing product offering; (2) the sale or lease of the Texas building; and (3) a reduction in workforce in Texas due to the realignment. The majority of the expense associated with the consolidation and restructuring occurred in fiscal 2013 with continued efforts to sell the equipment and sell or lease the building to be completed in fiscal 2014. As a result, we recorded a pre-tax charge of $6.7 million in fiscal 2013 associated with this consolidation and restructuring. This charge included $0.4 million in employee related costs, $0.1 million in moving and relocation costs, and $6.2 million impairment to fair value of certain equipment used in the manufacturing of large bearings. We estimate the potential for additional period costs of approximately $1.2 million over fiscal 2014 and 2015 associated with the consolidation and relocation of the equipment and the ongoing costs associated with the building until it is sold or leased. The aggregate of the $6.7 million in fiscal 2013 and the potential $1.2 million over fiscal 2014 and 2015 is an expected amount of $7.9 million anticipated to be incurred due to the consolidation and restructuring.
Acquisition of Western Precision Aero
On March 1, 2013, the Company acquired Western Precision Aero LLC, a manufacturer of precision components and gears for the aerospace and industrial markets for $2.6 million. WPA’s sales for calendar year 2012 were approximately $5.0 million. WPA is included in the Plain Bearings segment.
