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Edited Transcript of ROLL earnings conference call or presentation 20-May-20 3:00pm GMT

Q4 2020 RBC Bearings Inc Earnings Call

OXFORD Jun 17, 2020 (Thomson StreetEvents) -- Edited Transcript of RBC Bearings Inc earnings conference call or presentation Wednesday, May 20, 2020 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel A. Bergeron

RBC Bearings Incorporated - VP, CFO, COO, Assistant Secretary & Director

* Michael J. Hartnett

RBC Bearings Incorporated - Chairman, President & CEO

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Conference Call Participants

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* Michael Frank Ciarmoli

SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst

* Peter John Skibitski

Alembic Global Advisors - Research Analyst

* Robert Stephen Barger

KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst

* Brooks Hamilton

Alpha IR Group LLC - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. And welcome to the Q4 2020 RBC Bearings Earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brooks Hamilton of Alpha IR Group. Thank you. Please go ahead, sir.

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Brooks Hamilton, Alpha IR Group LLC - Analyst [2]

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Good morning. And thank you for joining us for RBC Bearings' Fiscal 2020 Fourth Quarter Earnings Conference Call. With me on the call today are Dr. Michael J. Hartnett, Chairman, President and Chief Executive Officer; and Daniel A. Bergeron, Vice President, Chief Financial Officer and Chief Operating 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 are 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.

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [3]

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Thank you, Brooks. And good morning.

Net sales for the fourth quarter of fiscal 2020 were $185.8 million versus $182.2 million for the same period last year, a 2% increase. In the fourth quarter fiscal 2020, sales of industrial products represented 36% of our net sales; and aerospace products, 64% of our net sales. Gross margin for the quarter was $76.6 million or 41.2% of net sales. A record reflecting years of work on methods improvement, improvements in capitalization and mix management. This compares to $73.0 million or 40.1% for the same period last year, a 5% increase overall. Operating income was $43 million, a 23.1% of net sales. EBITDA was $56.3 million, a 6.2% increase over last year. The quarter started as the best of times and finished with the plague of government interference in the economy and COVID uncertainty. We were able to execute a normal quarter from an operating perspective by taking extraordinary measures to protect the health and well-being of our employees by adopting strict procedures for environmental management as published by the center for disease control. As a result, we were able to accommodate the needs of our customers, operate our plants in a manner where our employees knew they worked in a zone of safety.

Sales for the industrial products were down 1.9% from last year. The prime variance from last year fell in the natural resources markets of mining and oil. Sales to industrial aftermarket were about the same as last year, down just less than 1% overall.

Aerospace and defense markets continue to perform well for the first 2 months of the period, and demand lessened in March. The fourth quarter organic net sales were up 4.3%. Aerospace sales were driven both -- by both OEM and defense, which accounted for 1/3 of the sales we classified in the aerospace segment. Aero and defense OEM were up 2.1% from an organic basis. Defense OEM was up 7%. Important contributors were helicopters, aero engine, space and missiles.

The uncertainty around today's 737 MAX outlet continued, but now had taken second priority with challenges and industry uncertainty presented by the COVID epidemic. The major airframe producers appear to gain their footing in May, providing strong direction on continued production rates by model to us. We are now reworking our production schedules to integrate those directions into a production and sales plan over the next several quarters.

Regarding our first quarter of fiscal '21, we are expecting sales to be in the range of $150 million to $155 million. We have very substantial amount of order book and the issue often occurs around customer credits and whether or not the customers are on time with their payments, which seems to be in the aerospace sector, somewhat of a problem right now.

I'll now turn the call over to Dan for more detail on our financial performance.

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Daniel A. Bergeron, RBC Bearings Incorporated - VP, CFO, COO, Assistant Secretary & Director [4]

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Thanks, Mike. SG&A for the fourth quarter of fiscal 2020 was $31 million compared to $29.5 million for the same period last year. The increase was mainly due to $0.8 million of additional incentive stock compensation and $0.8 million of additional personnel-related costs, offset by $0.1 million of other savings. As a percentage of net sales, SG&A was 16.7% for the fourth quarter of fiscal 2020 compared to 16.2% for the same period last year. Other operating expense for the fourth quarter of fiscal 2020 was expense of $2.1 million compared to expense of $3.2 million for the same period last year. For the fourth quarter of fiscal 2020, other operating expenses were comprised mainly of $2.6 million of amortization of intangible assets, $0.8 million of restructuring expense; $0.1 million of other items, offset by a $1.4 million gain on the sale of our building in Houston. Other operating expenses for the same period last year consisted mainly of $2.3 million in amortization of intangible assets and $0.9 million of restructuring expense.

Operating income was $43.5 million for the fourth quarter of fiscal 2020 compared to operating income of $40.3 million for the same period in fiscal 2019. On an adjusted basis, operating income would have been $43 million for the fourth quarter of fiscal 2020 compared to adjusted operating income of $41.2 million for the fourth quarter of fiscal 2019. For the fourth quarter of fiscal 2020, the company reported net income of $33.8 million compared to net income of $31.4 million for the same period last year. On an adjusted basis, net income would have been $33.1 million for the fourth quarter of 2020 compared to an adjusted net income of $32.9 million for the same period last year.

Diluted earnings per share was $1.35 per share for the fourth quarter of fiscal 2020 compared to $1.27 per share for the same period last year. On an adjusted basis, diluted earnings per share for the fourth quarter of fiscal 2020 was $1.33 per share compared to an adjusted diluted EPS of $1.33 per share for the same period last year.

Turning to cash flow. The company generated $44.4 million in cash from operating activities in the fourth quarter of fiscal 2020 compared to $29.5 million for the same period last year and $55.6 million -- $155.6 million in cash from operating activities for the full year fiscal 2020 compared to $108.5 million for the same period last year.

Capital expenditures were $9.7 million in the fourth quarter of fiscal 2020 compared to $12.1 million for the same period last year. On a 12-month basis, CapEx was $37.3 million compared to $41.3 million for the same 12-month period last year. In the fourth quarter of fiscal 2020, the company paid down $0.5 million of debt; and for the 12-month period, we paid down $46.3 million of debt. Total debt as of March 28, 2020 was $23 million, and cash on hand was $103.3 million.

I would now like to turn the call back to the operator for a Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Michael -- Steve Barger with KeyBanc Capital Markets.

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Robert Stephen Barger, KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst [2]

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Steve Barger here. Can you hear me?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [3]

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Yes, Steve.

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Robert Stephen Barger, KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst [4]

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Can we talk about the bridge to your 1Q '21 guide by end market? Maybe just how much are you expecting aero down versus industrial?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [5]

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I think they're probably -- we haven't actually broken it out that way, Steve, but I would guess they're down about the same.

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Robert Stephen Barger, KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst [6]

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So you're guiding the entire quarter down high -- mid- to high-teen. You think that is an appropriate way to model it for both sides of the business?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [7]

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Yes, I think so. We have -- it's a little difficult to sort that through right now in terms of the industrial products given the short-cycle nature of those products. So -- but on the other hand, we have all sorts of additional programs that are phasing in that are a little bit -- some of which are a little bit unique and we haven't seen before sort of offsetting some of the softness we see in the short-cycle business. So we're thinking that's probably down less than 15%, but we're using kind of a 15% number as our guidance.

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Robert Stephen Barger, KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst [8]

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Okay. And so just singling that for a minute, I think you said in your prepared comments the aftermarket was down 1% overall. What did that look like in the back half of March? And how did April and the first part of May trend from an industrial distribution or the products that go through distribution on the industrial side?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [9]

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The quarter was much stronger than I ever anticipated. Of course, you get to the end of March, and you hear all of the horror stories about the country closing down, and you wonder exactly what that is going to mean to demand. And we saw really good demand through most of the quarter. Now that demand is -- it seems to be tailing off in this last 6 weeks here, but it's still decent, and it's certainly within our guidance.

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Robert Stephen Barger, KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst [10]

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And you said there's some unique programs that are coming in. Can you give a little more commentary around that?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [11]

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Yes. Well, we're seeing -- our marine program is, for some reason, is really showing some good strength. That's going to be up substantially this year. It's probably going to be up as much as 20% this year for us. Ground defense is showing strength. The whole defense sector, whether it's -- whether we classify it as industrial or aerospace, is really strong. We have a new program, which -- in offshore wind, which we've booked, which will -- which is brand new to us. And I'm not sure that we had any shipments in the fourth quarter of 2020. We might have had a minimal amount of that product in that fourth quarter. But that program phases in, in a nice way for the next few years. And we've picked up some good submarine business in Europe that was a little bit of a surprise. And our semiconductor manufacturing business is strong. So the -- some of these elements are cycling in at exactly the right time for us.

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Robert Stephen Barger, KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst [12]

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That's good color. And I know you don't want to get too far ahead, but can we talk about the back half of your fiscal year? There's tough comps in aero in 3Q and 4Q. So just given what you know today about OE markets, aftermarket and the backlog, how should we think about revenue cadence as the year progresses? Back half lower than the front half? Back half better? Just kind of what are your high-level thoughts.

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [13]

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We're thinking the back half is going to be stronger than the first half, for certain, and to the -- there's a lot that has to happen in the world. And I think people kind of understand where the aircraft cycle is and what has to be done in that whole world. But the fact that Boeing raised that $25 billion has given them tremendous confidence in their build rates. And so they're giving us very strong direction with regard to what they want for product from us. We're encouraged by that. We're reworking on manufacturing schedules accordingly. If you look at -- if you look at Boeing's Investor web page, which I did this morning because I don't want to disclose anything that I shouldn't, so I'm staying pretty close to their web page. They're planning on a 31 per month ship build of 737 MAX-es. They're very confident that they'll achieve certification by August, and we're confident with them. And so that gives us a lot of direction with regard to how we should be running our plants and whatever revenues are going to look like. So I think that back half of the year is going to be good.

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Robert Stephen Barger, KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst [14]

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And you would make those same comments for the industrial side of the business as well?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [15]

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Well, the industrial side of the business, as long as I've been involved with this business, which, unfortunately, is 30 years now. Every time we've had a recession, the industrial side of the business has led us out in that short-cycle industrial business has been the leader. And I don't expect this is going to be any change at all as these states open up and all these plants come back online and all these -- all of the maintenance that has to be done and has been deferred has to be cared for. We're -- we expect to see a good, strong industrial short-cycle business.

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Robert Stephen Barger, KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst [16]

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Got it. One more, and I'll jump back in line. I read that Delta reported they're retiring their 18 777s early. Just thinking about that, how does that impact your planning around the 777X?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [17]

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Well, I look at the 777X, and Boeing's plan is to build 5 777 series, with 1.5 being the X, per month going forward, beginning every month that their plants are open. They have 350 planes on backlog. So somebody likes the ship. I can't say I know exactly why. But somebody likes the ship. And they've got -- at their rate, they've got 5 years of backlog. So I can't say I know -- I'm completely knowledgeable about the marketing aspects of the 777.

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Operator [18]

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(Operator Instructions) Your next question comes from the line of Michael Ciarmoli with SunTrust.

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Michael Frank Ciarmoli, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [19]

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Maybe if we could just stay on kind of that second half '21 forecast. I guess I'm just a little bit confused as we're seeing material rate reductions across commercial aerospace, including nearly all the Airbus platforms, it seems like most of the peers out there are calling for OE revenues to be down anywhere from 30% to 50%. And if I just run back of the envelope on your shipset content of rates, where they were and where they're going, it would seem to imply about $100 million revenue headwind when you think about where the A320 is going down to. Even if the 737 gets back to 31, it's still coming off 42. The 787 gets cut, the A350. So -- and that's not even accounting for any destocking in the supply chain. Can you just maybe reconcile how you're really confident in a stronger second half?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [20]

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Yes. I think we're seeing a stronger second half than first half. We're not seeing a stronger second half comps relative to last year. Let's make sure that's clear, right?

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Michael Frank Ciarmoli, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [21]

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Okay. Okay. Okay.

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [22]

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So we're saying the first half is going to be what it is, maybe more reflective of the first quarter than it was than anything else. And the second half will be a better second half. We expect a nice bounce in the industrial business. We expect the marine business to continue to strengthen. Right now, we're capacity-constrained in some of our marine and helicopter businesses. Definitely, capacities are constrained.

Now Boeing hasn't built a 737 ship in January, February, March, April or May, so they haven't produced anything in those -- during those periods. So the fact that they're going to build volume to 31 ships per month effective January is -- means that some hardware is going to have to flow. And so we're encouraged by that. And right now, that hardware for the 737 MAX is not flowing. So in the first and second quarter, we're not expecting to flow much of that hardware at all.

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Michael Frank Ciarmoli, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [23]

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Okay. And what about -- do you guys have any visibility as to what's been in the supply chain? Not so much on the MAX, but certainly on the A320, the 787, the A350. I mean, it would seem like there's going to be some potential destocking that might exacerbate the rate reductions on those platforms. Do you guys have visibility there?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [24]

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All we can do there is make our best guess. We don't have great visibility. We're planning on running the plants at a destocking level for the next 2 quarters. And that's just the way it is.

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Michael Frank Ciarmoli, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [25]

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Okay. And then what about on the aerospace aftermarket side? It seems like that's really been under much more pressure just given that the airlines are sort of at 80%, 90% reduced capacity. Do you have any visibility as to what happens to that piece of the business, the distribution side?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [26]

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I think that's going to be soft for a considerable period. I mean, these carriers have to be flying their ships in order to generate the MRO requirements, and they're just not. So we're not expecting any great things from that sector until they start selling seats on these planes.

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Michael Frank Ciarmoli, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [27]

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Okay. And then clarification, you said, I think in your remarks, on the aerospace side, you said the order book looked good, but payments haven't really been coming in. Can you sort of just elaborate on that, and what you're seeing from, I guess, your customers regarding -- maybe just more detail around that comment?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [28]

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Sure. Yes, we have plenty of order book. And the question is, who's it for and how is he paying his bill? And so some of these people that are in the subcontracting supply chain are struggling financially. And so you don't want to get them too far removed from reality in terms of what they owe you. And so you have to sort of lighten up on what you're willing to ship them until they clear their account. And so that's just added a level of complexity that we don't normally have to deal with, but we're in a very good, very sound position to deal with things like that.

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Michael Frank Ciarmoli, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [29]

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Okay. Okay. And then just the last one, and I'll jump back in the queue. You guys, over the past, I guess, 12 to 24 months, brought on a lot of capacity, capabilities, qualification, plating, segmentation, treating. Is that -- as the volumes in aerospace go down as you were trying to alleviate a lot of those bottlenecks, how does that impact your margin profile? And I mean, gross margins were phenomenal in the quarter. But do you see that extra capacity being a drag on a go-forward basis?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [30]

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Short answer is no. I can give you a long answer unless you're not satisfied with no.

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Michael Frank Ciarmoli, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [31]

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I mean, yes. I would love to know how you're absorbing all that overhead. Yes. If you have any additional color, that would be great.

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [32]

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Yes. Well, at RBC, by and large, we're a variable cost business. So we bring in materials, and we add value to them, and we ship them to the customer. And we ship them to the customer in accordance to designs that we're uniquely qualified to execute. And so if the volume goes down -- our major expenses are materials and outside processing. And that's typically half of our manufacturing cost. And the other half is burden labor, and the labor is burdened with overhead. And the largest component of that overhead are factory salaries and benefits. And as you adjust your population in the plant, you adjust your cost structure, and you ease up on your material input, and as long as you have plenty of top line to work with, everything will balance out for you again. And so that's basically how we run the business, and we actually budget and visit the budgets for every plant every month to make sure that we're executing in accordance with good principles there. So we don't -- the fact that we've added capacity in terms of floor space, a lot of the plants we own, and capital equipment, well, those were paid for out of our cash flow, so there's no debt associated with those. And the depreciation as a percentage of our sales is still something like 3% or 4%. It's small. So that aspect of the overhead is a little tiny factor that actually doesn't really impact our ability to achieve our margin levels very much at all. So basically, what we have to do is we have to figure out what -- at what rate do we want to run a plant? How much product do we want to make? How much cost input do we want to achieve to make that product? And given the fact that mix is known. We've been executing this mixt for years and years. There's not much -- there's not many secrets left in terms of what our margins are going to be.

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Michael Frank Ciarmoli, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [33]

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Got it. No. That's helpful.

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [34]

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Yes. You might leave a little bit more cost in the plant and charge it against margin if you think you're into a short-term situation where there's going to be growth in the second half of the year, and you don't want to have to go back and reassemble the band. So on the other hand, if you don't see that happening for you, then what you have to do is clear.

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Operator [35]

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Your next question comes from the line of Pete Skibitski with Alembic Global.

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Peter John Skibitski, Alembic Global Advisors - Research Analyst [36]

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I'll echo Mike's comments on the great gross margin. So Mike, you've given first quarter revenue guidance and basically said that the second half will be better than the first half. So should we all expect, basically, that the second quarter revenue will be kind of the trough quarter for the year?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [37]

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We haven't -- we're still working our second quarter projections right now. And we're not expecting much and we're not expecting a big surge in the second quarter. This whole thing has been an exercise and dead reckoning. You know what dead reckoning?

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Peter John Skibitski, Alembic Global Advisors - Research Analyst [38]

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Generally speaking, yes.

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [39]

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Yes. Well, that's when you get on a sale boat and you're sailing along in the fog, you don't know where the hell you are, but you know where you started from. And so you keep taking a compass heading, and every 15 minutes, you check your depth and you would just make an assumption on where you are on the map. And after doing that for 3 or 4 hours, you don't know where the hell you are. So that's dead reckoning.

So I'd say, after the result of this COVID-19, you almost -- we almost have to run this company under a dead reckoning proposition and take each quarter as it comes and execute it to the best of our ability. And we pretty much rebudgeted our entire year and we understand exactly where the year's -- what the year is looking like. We're not ready to talk about that today. And we've rebudgeted every quarter. And now, we're reassessing our mathematics around each one of those assumptions and taking the necessary actions in order to make it all come out right. So I don't think the second quarter is -- I think the second quarter is going to look more like the first quarter than it's going to look like the fourth quarter.

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Peter John Skibitski, Alembic Global Advisors - Research Analyst [40]

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Okay. Okay. Okay. Yes. I just wasn't sure if the headwinds in commercial and the rate reductions in commercial were going to maybe -- I was thinking maybe they wouldn't impact the first quarter much, and we'd see it more -- more of those headwinds in the second quarter. I guess that was my line of thinking. Okay.

And then just on margins, you spoke about that. But if we went back to the last cycle, I don't have the adjusted margins back that far, but the GAAP margins came down 6 or 7 points during the last cycle. And I would think the rate reductions are steeper this time around on the commercial side. So are you saying you think margins can stay flat this year even in a down environment? Or maybe you're expecting some modest degradation? How are you thinking about that?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [41]

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Yes. I'd say modest degradation. I don't know what happened in the last cycle, and I don't really want to think about it.

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Peter John Skibitski, Alembic Global Advisors - Research Analyst [42]

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Fair enough.

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [43]

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You're right. It's -- this is a completely different cycle than the last cycle. And it's -- a lot of it is dependent upon what the government is going to do next, and you never know what the hell they're going to do. So I think we're restructuring things so that the margins aren't going to be the record level that they were in the fourth quarter. They can get back there over time, and we're just going to give it a little time and see how this world develops. And I think the margins will be reasonable. And I think our cost structure is under control. I think our understanding of what our revenues look like is definitely under control. And I don't think anybody's going to be disappointed in the result.

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Peter John Skibitski, Alembic Global Advisors - Research Analyst [44]

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Yes. You expect to be free cash flow-positive, I guess then, net-net?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [45]

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Oh, yes.

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Daniel A. Bergeron, RBC Bearings Incorporated - VP, CFO, COO, Assistant Secretary & Director [46]

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Definitely.

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [47]

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Definitely

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Peter John Skibitski, Alembic Global Advisors - Research Analyst [48]

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Yes. Okay. Last question for me. I don't know how much you can say about this, but on the last call, you mentioned some gains on some missile programs that one of your divisions secured. I think it was related to this different relationship between the U.S. and Turkey, kind of a fallout from that. Can you maybe talk about the size of that opportunity, the business that you gained? And maybe which unit came through?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [49]

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Yes. Well, actually, it's probably in the $8 million to $10 million per year range. And it's doing a nice -- it's doing nicely to fill in some of the loss in the -- in one of our commercial aerospace divisions.

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Peter John Skibitski, Alembic Global Advisors - Research Analyst [50]

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Okay. Yes. And that's all incremental for fiscal '21, basically.

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [51]

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Well, it's substituting -- rather than making parts that we plan to make for one of the ships, we'll be making this other material.

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Operator [52]

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Your next question is a follow-up question from the line of Michael Ciarmoli with SunTrust.

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Michael Frank Ciarmoli, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [53]

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Just wanted to get any thoughts. I mean, obviously, valuations have come in a bit here. Have you given any more thought to capital deployment, M&A? Certainly, the balance sheet looks pretty solid, but how are you thinking about capital deployment and, maybe more specifically, M&A?

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [54]

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Well, I mean, we continue to look for the right partner and right acquisition candidate that would fit what we do. And some of them fit nicely. I think given the whole situation that the world is in right now, I think our appetite to do something large has lessened until we understand what the prospects for these businesses are. But there are some small intermediate-sized businesses that looked like good candidates.

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Operator [55]

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There are no further questions at this time. I would turn the call back over to management for any closing remarks.

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Michael J. Hartnett, RBC Bearings Incorporated - Chairman, President & CEO [56]

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Well, I think that concludes our fourth quarter and fiscal 2020 conference call. We appreciate everybody participating today. And we'll talk to you again in July. Good day.

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Operator [57]

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Ladies and gentlemen, this concludes today's conference call. Thank you for your participating, you may now disconnect.