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spk_0: the day and thank you for standing by looking to the rbc bearings fiscal two thousand twenty one fourth quarter earnings call at this time ah participants are and listen only mode after the speakers presentation there will be a question and answer session to ask a question during the session you will need to press star than one on your telephone keypad please be advised at a conference may be recorded if you require any further assistance please press star than zero to reach an operator had no idea and the conference over to your house today mr will stack with alpha i are please go ahead
spk_1: good morning and thank you for joining us for our beefy berries fiscal twenty twenty one fourth quarter earnings conference call with me on the call today are doctor michael j hartnett chairman president and chief executive officer daniel a burger on director vice president and chief operating officer and roberts old and vice president and chief financial officer before beginning today's called let me remind you that from the statements made today will be forward looking and are made under the private securities litigation reform act of making ninety five actual results may differ materially from those projected or implied due to a variety of factors we refer you to rbc burned recent violence with as a seat for a more detailed discussion of the risks that could impact the company's future opera your 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 gap the non get financial information that and is included as part of the release and under on the company's website now of from the color a doctor hartman
spk_2: thank you will
spk_3: a good morning and welcome
spk_4: that sales for the fourth quarter of fiscal two thousand twenty one per one hundred and sixty point three million versus a hundred and eighty five point eight million for the same period last year a decrease of thirteen point seven percent but for fourth quarter of two thousand and twenty one sales of industrial products represented forty seven percent of our net sales with aerospace products at fifty three percent
spk_3: gross margin for the quarter was sixty two point five million or thirty nine percent of net sales this compares to seventy six point six million or forty one point two percent for the same period last year
spk_4: operating income was twenty nine point seven million eighteen point six percent of net sales compared to last year's forty three point five million
spk_1: or twenty three point four percent respectively
spk_3: adjusted ebitda least forty five point nine million twenty eight point six percent of net sales compared to fifty six point three million and thirty point three percent of net sales for the same period last year we end of the quarter with two hundred and forty one point three million of cash and securities and sixteen point one million of debt you to date free cash flow was a record one hundred and forty point seven million dollars
spk_4: we to the fourth quarter in saw a substantial strengthening of our industrial sector
spk_3: all markets participated industrial distribution mining machine tool rail
spk_4: semiconductor machinery marine and wind
spk_3: the officer substantial increase quoting and contract activity from the else they sector
spk_4: sales of industrial products were up twelve point nine percent from last year
spk_3: led by oh yeah which was up fifteen point one percent
spk_4: sequential quarter comparisons show industrials were up by sixteen point eight percent led by distribution and twenty one point three percent
spk_3: industrial distribution gave a very strong showing their and period crossed or product lines and geography is it that we could have sold more if we head stuck in many of the mix items we are busy today and him and hurry replenishment and increasing many key stacking positions marine the build out of the pigeon yet and the colombian submarine fleet continue we have completed bucks for build out of the virginia class and are starting of the next ten vote contract
spk_4: this month we are also preparing for the columbia to begin production cycle and calendar year twenty two
spk_5: on semiconductor
spk_3: ah i'm the race to expand semiconductor manufacturing
spk_1: is driving requirements for machinery and components at levels we we haven't experienced before
spk_4: as you know this is driven by a demand for computers and automobiles phones the games self driving cars side g technology etc over the past twenty years we have diligently built our very strong positions with the machine builders and achieved considerable design excellence manufacturing scaled and reputation in these markets we we are now realizing the benefits of all these efforts turning aerospace and defense the fourth quarter fiscal two thousand twenty one net sales were down twenty eight point six percent on a quarter over quarter basis but up sequentially four point five percent boeing is slowly increasing demand for products for those seven thirty seven mac suppliers as they consume their excess inventory positions we are pleased to see the turn around and consumption here and expect each quarter to be better than the last going forward we are planning to support a one hundred and forty two hundred and fifty plane build out this year
spk_3: moving to three hundred and fifty to four hundred
spk_4: seven thirty seven max's next year given a new rules for vaccinated travelers to europe we expect to see and improved outlook for the triple seven and the seven eighty seven shifts and they're build rates by the end of the summer or sooner
spk_3: we are currently supporting audits of our production capacity is by both boeing and airbus personnel as a land laid plans to build to increase their production rates airbus currently at forty to forty two a three twenty series per month
spk_4: ah is tiger the to their well known goal of sixty ships per month as reported earlier the plan is to build eight hundred total ships a ball designs and twenty twenty two
spk_6: space
spk_3: moving his spacers the claim ah spaces the and new aerospace we are active with many of the daily headline name supplying components as diverse as bearings for rocket engine spends her directional control structures for landing gear actuation devices low friction cryogenic components
spk_4: the pace is always fast and a development f normally uncertain
spk_3: that we like where this has gone and doing whatever week we can said that we're not the bottleneck on the pratt process of from landing a man on mars this can develop into a significant business scale for rpc of the plans of the significant entrepreneurs are realize over the next few years
spk_4: more of this and future calls and finally defense and we certainly have a dream portfolio in terms of platform composition and outlook and expect continues strip strength from the sector for many years
spk_3: regarding our fourth quarter we are expecting sales of the between one hundred and fifty four and one hundred and fifty eight million
spk_4: it's a little bit hard to predict these numbers today and i'm sure that will be talking about that more later in the call so i'll i'll defer to that discussion and are now turn to call over that dan and rob for more detail on the financial performance
spk_1: thank you can like since make it already covered net sales and gross margin out on down as she had as she made for the fourth quarter of fiscal twenty twenty one was twenty seven point four million compared to thirty one point zero million for the same period last year the decreases mainly due to lower personnel costs three points or million put your point five million of other items offset by your point three million of higher share these compensation costs as a percentage and net sales as she had a with seventeen point one percent for the fourth quarter of fiscal twenty twenty one compared to sixteen point seven for the same period last year other operating expense for the fourth quarter of fiscal twenty twenty one was expensive five point three million compared to expensive two point one million for the same period last year for the fourth quarter of fiscal twenty twenty one other operating expenses are comprised mainly of two point five million and animal in amortization of intangible assets one point five million of costs associated with a cyber then one point zero million of restructuring costs related items and your point three million of other items other operating expense for the same period last year consisted mainly a two point six million and amortization intangible assets zero point eight million of restructuring costs and zero point one million of other items offset by one point a one point four million dollar again and the sale of a surplus building operating income was twenty nine point seven million for the fourth quarter of fiscal twenty twenty one compared operating income of forty three point five million for the same period in fiscal twenty twenty on an adjusted basis operating income would have been thirty two point five million for the fourth quarter of fiscal twenty twenty one compared to adjusted operating income of forty three point zero million for the fourth quarter of his
spk_7: go twenty twenty
spk_1: for the fourth quarter of fiscal twenty twenty one the company reported net income of twenty five point zero million compared to net income of thirty three point eight million for the same period last year
spk_4: the just days is net income would have been twenty seven point four million for the fourth quarter of fiscal twenty twenty one compared to adjusted net income of thirty three point line million for the same period last year
spk_1: talented earnings per share were ninety nine cents per share for the fourth quarter of fiscal twenty twenty one compared to a dollar thirty five per share for the same period last year
spk_4: on an adjusted basis looted earnings per share for the fourth quarter of fiscal twenty twenty one with a dollar per share compared to adjusted diluted earnings per share of one thirty three per share for the same period last year
spk_1: during the cash flow the company generated forty one point nine million in cash from operating activities in the fourth quarter of fiscal twenty twenty one compared to forty four point four million for the same period last year and hundred and fifty two point five million in cash from operating activities for the full year fiscal twenty twenty one compared to one hundred and fifty five point six million for the full year last year capital expenditures for three point zero million in the fourth quarter of fiscal twenty twenty one compared to nine point seven million for the same period last year i told my phases capital expenditures were eleven point eight million compared to thirty seven point three million last year free cash flow for the full year which include cash from operating activities less capital expenditures with one hundred and forty point seven million for fiscal twenty twenty one compared to one hundred and eighteen point three million in fiscal twenty twenty total that as of april third twenty twenty one was sixteen point one million in cash and marketable securities on hand was two hundred and forty one point three million have an alley to turn a call back to the operator for the question and answer session
spk_0: if you'd like to ask a question at this time please pass the star than the number one t on your touchdown telephone to withdraw your question press the pound key again that is star than one to ask a question i first question comes fan pizza didn't he with a lender global advisors
spk_8: ignore him i can and and rob as corner more him or
spk_9: a that we talk about
spk_1: by the press release ah talked about it charge lead to a cyber incidentally you quantify fighter in the release can we talk about back on what happened and if it's fully resolved now
spk_10: yeah so no in the last week of february the company experienced a cyber then he then had no material impact what business no employee customer vendor or company files were extracted from our systems and are mean your piece systems are non impacted a we hired to independent forensic specialists to review the cyber event in the system remediation mean heard about one the half million in costs associated with the remediation and when our ten k comes out today you'd read more about the certain risks and uncertainties as a result of any security incident as described in a ten k and the deception and type of risk factors
spk_8: okay i appreciate the color their problems going around arm can we talk more about semiconductors at some he guy seem to be like you alluded to kind of vogue you know into into a real trend here globally on the maybe i'll for us kind of how big was it for you as a sudden niche and physical twenty one and maybe the level of growth the you think is reasonable and physical twenty two
spk_11: ah
spk_4: yeah won't let us just
spk_8: don't have the numbers on the top of top of my head here and he put down let us and it's research that little bit oh god okay i'll i'll i'll move on to something else might maybe you can talk about em in a it it's you know i think that consensus that i hear and commercial aerospace's that he has you in that we've gone through this or maybe because we've gone through this he now horrible downturn no one is really you now wanting to sell for the most part because of that
spk_3: he acts like taking at the south of the steep discount is that kind of what you guys are seeing in the i'm in a mark and plant marketplace and a be have any other call you could add just given to strike the balance sheet and i know you're your proclivity third eminent
spk_4: yeah well i'd sound the aerospace side we're not seeing too many ah attractive candidates and the it you know for him money i mean the guys that the couldn't make it didn't make it come there's some bankruptcies there that we don't find interesting so no it's it's and we don't we don't really do much with them i'm in i i i think that whole sectors of is on cause a little bit until up things correct on the other hand there is there is some small
spk_8: the assets out there that are attractive and in and yeah we made may have some news on that the in the not too distant future
spk_0: okay fair enough had project car alla get the in the queue with mental thought thanks
spk_1: okay i next question comes from michael charm only with to it's securities
spk_12: a good morning gentlemen ah nice results ah i guess ah i don't have wanted to field this one but i guess looking at the i'm the guidance for the next quarter you know and a huge historically gotten seasonality with the may be a one qb in a bit weaker but for what drives that sequential step down and it sounds like there
spk_4: if there's optimism and and coding strength booking strength across all market so is there is there anything driving that are that sequential weakness between quarter here of them have into the first or yeah i'm well first of all others you know in our in our lineup my that this kind of a are obviously there's a shift in in leadership in terms of you know what's growing what's not growing and but growing as the industrial sector right armed as you know but it's it's there's there's a lot to consider hear the and industrial the man is a lot of it is short term in nature
spk_13: and it will it will be up in our challenges to try to determine how much it will be up right
spk_4: so we tried to reflect we try to reflects our that and the outlook but you know quite frankly we're not you know did we reflect enough on your app and not sure i mean it's you know we haven't we haven't normally when the purchasing managers' index is north of fifty five we can't make it fast enough and we can't keep it in stock okay when it's over when it's over sixty
spk_1: now
spk_13: it's it's a it's in a world that we've never lived in before so it's you know it's sort of for
spk_4: it started off the edge of the of the map and in there so it's hard for us to predict exactly you know what what up with the upside of our sales are gonna be on the industrial side and and in the palm on that it with that is you know we had so much the man and the fourth quarter that a lot of our key inventories for you know key makes items were depleted so in our we're were rushing to
spk_14: to replenish those stocks but then there's elite time there's a lead time there and you know and so we have to add
spk_4: you know materials and labor
spk_15: right now i'm materials are a big constrained know we have are having trouble getting steel
spk_16: we are having trouble getting some of our on some of the product that we him import palm through the through the
spk_17: through the ports
spk_18: and the and were competing with with our government on labor
spk_4: you know sell gap
spk_3: only cow
spk_4: yeah anyway we're we're we're working or working through that and them you know woodwork we're keeping you s and fedex business head dizzy because our in our air shipping parts hit get our customers expense
spk_19: from asia
spk_4: i'm that thing that we use for some of our components so it's a it's an interesting time you know i think on the else by side
spk_11: it's primary factor here is his belt the boeing ram and
spk_20: you know what the
spk_3: abrupt cease and seven thirty seven max production in march of twenty
spk_4: there was just a lot of component tree that was you know left in the system so they are working through that overhang i'll and act i expect quarter to quarter it'll be better farm and i expect by the end of the year
spk_3: the calendar year
spk_4: you know will probably be through it and i think next year this time our capacity is gonna be taxed with the man and ah so right now we're trying to think through how do we had a weak position ourselves ah mix wise so that you know that our capacity and demand curve intersect
spk_1: in the right place in the right time and so that's really the calculus the other end so now there's there's lots of lumps in the pudding right now and the logistic side and it's not just for us i think it's just for the old us
spk_4: as we try to you know walks with these issues so i expect this is just the normal exit of an of a pandemic i hope to never experience that again i think i think we can all are an agreement on that so it sounds like i mean aerospace though you think i mean and based on on what you're building towards i mean it will probably continue gradual ah sequential improvements in and like you said industrials going to be the big swing factor on what what about on the pricing side and in are you do you talk about you know some some expedited shipping are you able to pass off and pass through a lot of these price increases and how's that that impact and you know forty or current contract are there any a markets that might be more exposed or less exposed to pass through you know i know arrows usually have a full pass through that anything on the pricing side that's and a raised in yellow flag that your sam well you know it's the devils in the details here you know i mean you can these expenses an expedited freight next but i materials and all that sort of thing
spk_12: and just damn you know pass through the night and in surprise you so you know we have we have filters up to make sure that we have early warning indications of any excursions that we need to deal with right away and the and so we deal with them right away that either we have in our contracts a path
spk_0: screw on material costs are we explain to our customers and or in it there is these extraordinary
spk_21: expenses to them and service your account and and we sometimes have we sometimes share those expenses we sometimes pass them along one hundred percent and sometimes we don't in the it depends it's very
spk_22: did situational a dependent on
spk_4: that were confident we can manage through it got it got it thanks for a collar guys will jump back mckeever
spk_22: as a reminder that is star than one if you'd like to ask a question of those time
spk_4: i next question comes friends departure barter with keeping capital markets aguilar i guess i'm like mike
spk_21: he talked about how strong industrial as to thinking about arrow it's got a negative fifteen percent card from last year's one q do you expect positive year over year growth as quarter an arrow
spk_4: ah
spk_22: the question expand probably going to be flatmate it might be a slightly
spk_4: but it's not it's definitely not going to be a binder
spk_23: right
spk_4: the up and last quarter you'd said there were some limited visibility around arrow order trends that cleared up or just what is what what are you seeing from here from from up and terms water rates it it's it's definitely improved yeah it it's it's substantially improved ah and i guess shifting back to industrial i know it's hard to call the year by in i would you guess the industrial business has double digit growth in f y twenty two just given how strongly the the year starting in and the trends that you're saying yeah absolutely no question about it yep
spk_24: and and i understand you don't have semiconductor mix handy but what is the message you're getting from the equipment manufacturers in terms of demand trans or or just how are you looking at it in terms of visibility
spk_0: power right now the message that we're getting his
spk_8: yeah you can you can for a key customers we can ship everything we can make and as quickly as we can make it
spk_25: hum is are pretty sophisticated products and result there's a lot of fun
spk_3: there's a lot of process steps and special features so yeah there's there's a gm
spk_4: there's a speed limit on how how quickly you can get the get this it was these but damn the situation is said it is very good right thanks
spk_8: i next question comes from pizza can escape with olympic level advisors yeah i mean to follow on to the i can a cat back type of issues you can't fix came down quite a bit this year
spk_4: i want to ask how much the expect to spend and fiscal twenty two and he was there a case to make that you needed to build out your your semiconductor facilities
spk_3: or that you now too early to know too risky to was as is from your bottom that
spk_4: i i think i think it looks to me like the catholics this year is gonna be a little bit on the light side simply because i'm the year before the pandemic of his little on the heavy side as we rebuilding our capacity to support you know palm various programs or that capacities built out now and
spk_10: so it needs to be it needs to be put to work and in it's mostly in the aerospace side so as as down his thumb conditions improve
spk_4: i'm
spk_26: them that their capacity of that utilize so i i think overall i don't i don't expect this year and last year to be materially different
spk_4: okay okay i'll settle thin at ten to fifteen million times arrange occur
spk_27: i'm and then my thinking about margins that you now he sustain i'm at a pretty nice family i came in two points in this in this crazy year of fiscal twenty one
spk_4: how fast you guys thinking they come back as you know i think you've taught reminded me a half a point adjusted operating margin improvement each year or with a sharp brick increasing volume they think maybe a full point or more and fiscal twenty two what with for i would think about that well yeah it's it's gonna be hard to arm again it's in know it's there's a lot of moving parts here or it we should do very well i mean we're going to have increased volume over reduce costs structure that that alone is can be very helpful ah
spk_13: and you know we gotta keep an eye on on the inflationary pressures because some
spk_8: those are going to be real and in we have to make adjustments and pricing or surcharges or how it however we want manage those accordingly so that's that's all and are we have wheelhouse to manage and and so on we we just we just need to be on top of that game
spk_4: so on
spk_1: for her i expected the gross margin level to the to the margins to do very well
spk_8: now at the operating income level i think we're gonna have to frontload some as dna expense to palm to you know satisfy the requirements of a of a larger business each quarter as the year progresses so on that that's
spk_10: you know that's just the way that works and are so expected we expected probably lose a couple margin points and the eye on the even line as as we we get ahead of the requirements for engineers sales people business management people customer service people as we place week
spk_28: bring all that back again
spk_10: okay so you've been first half of the year maybe maybe lose some margin points but you can do better in the second half a year or time of the full year
spk_8: yeah i think new on that the grub bra probably knows as those numbers tells me that think for the fold full year and we may be downloaded the
spk_29: the be up what percentage point on as june and that kind of the i think we're going to see some pick up a nest egg and of that habit the air as their the come comparisons from sales take off or the see that promote a construct your as we bring that folks on say the second half your you should see some other operating margin unproven
spk_30: i've got i've got a couple sat i'm in that his last you for me on the defend side
spk_31: on submarines
spk_8: it it sounds like maybe right now and columbia there's not a ton of activity and the columbia right now you mention ah i think the year after may be counted twenty two was when the production starts for you guys sorry i think it may be fiscal twenty two you'll have maybe a little bit about your kind of a bath tub on on submarine revenue or a it is overall i can
spk_32: but he you know within the sub just so strong that is kind of continued up into the right
spk_4: yeah we've got a disadvantage eight again this year we we finish data now up by and a quarter up forty percent a marine and i think of going into next year we will be starting to ships some or least working on hardware for the columbia and this fiscal year and sir we're expecting another ten percent growth rate for hours on the marine side
spk_33: apparently and it
spk_3: yeah we ended the here around forty million sub
spk_4: okay of got in his any and are you guys have lot of content on the f thirty five on and anything as we go out two or three years i think that production profile starts a flat in a bit thought i just want to get a sense gonna your coffin overall on the defend side are you seeing any aftermarket stream from the at thirty five five and all i'm an honest when or maybe how you could twenty offset set that in the mid term when when production mindset of latin yeah no we're not we're not seeing it yet when okay
spk_8: okay okay fair enough
spk_0: okay i'm so just overall you make it your confidence on the defend side is just kind of new business when that sort of a thing
spk_1: yeah others yeah there's there's a lot there's a lot going on and the for the defense or there's there's sir
spk_34: beyond me up thirty five that you know we
spk_4: that weekend we can talk about in in in out in the and then there's frankly there's some that we shouldn't talk about and ah but but i you know where we're we're happy with with the these you know this we're the of our positions and and where the whole thing is going on and and and yeah we're serve integrated well integrated with them with the right with the right then they'd contractors
spk_3: i'm on and all of these programs yeah he had some and we have we have an important positions
spk_35: and expanding positions and all these programs
spk_4: yeah okay that's great i think i'm grandma got
spk_36: i next question comes from michael term only with to a securities
spk_1: a guy thanks for taking a follow up on maybe just on on aerospace specifically in the yard the after market and distribution you know what are you guys the in there we continue to hear you know optimism from suppliers that as we see more are more cycles you know we're gonna start to see that that airline ah spending kid
spk_4: game but yeah our are you seeing any sort of restocking yeah maybe any color that you could provide from from product at the distributor channel and are are you see and more pull through their i would think that that's going to recover and snap back much quicker than the yard though he production side but any any color on that yeah well if you don't weep the the aerospace this distribution channel has been on i'd say interesting to spend a lot of changes in on management and have changes and ownership ah i'm in so
spk_36: he know he leaves and i think that's sort of interrupted their their momentum in previous years
spk_1: but i you know that that that is up coalescing again and and we're seeing sort of awesome
spk_4: hum we're seeing a year ahead that looks looks like a little be up substantially double digits in aerospace distribution
spk_37: okay okay is it is it anything
spk_4: is it more to engine shop is is it you know someone a component accessory repair that we should be looking out for me where where the bulk of your your kind of products going into is it more on the airframe side i guess engine size well it's it's some it's all the a bother you know i think i think now that the i'm
spk_17: now that the the panic is over in a crisis is over relative to air travel and all at all that sort of thing those distributors head then i'm
spk_4: really on them frozen in terms of letter rates in in try to maintain their cash flows and so and so forth
spk_38: well there's this renewed confidence and air travel
spk_0: and the distributor can only be the distributor if they have items to distribute
spk_39: and or in so they are building that their inventories as we speak and and so that son that's we're seeing that is a is a pick up in our business and know that old
spk_1: i don't have that he probably stronger each quarter this year thought it got a lesson from it did you mentioned ah some positive comments about why bodies and you know maybe ah see and yeah i guess better demand and build rates by the end of the summer a it seems and you know it seems like they're they're still a lot of uncertainty there but you know and i did you called out that
spk_4: triple seven good broad they are you seeing any leading indicators are on the widebody the eight seventy three fifty you know your other significant platforms now we're not seeing any and a loser any direct indication that that things are better there are ya the fact that europe is opening up and desperately needs you know americans to travel there and spend their dollars is a his in important aspect of that and the fact that americans want to go to europe and spend their dollars this is an important aspect of that so i think i think that air travel for those ships is going to the
spk_40: is going to rebound more quickly than ever anybody expected
spk_4: luca
spk_10: got it i guess or next question comes from joseph pecan a year with bfs
spk_4: are you guys are you one morning
spk_40: he had mentioned an inflationary pressures across the business obviously specifically higher steal costs but also some labor cost pressures just curious about how far are b c as along in terms of automating it's factories
spk_0: yeah
spk_1: in terms of a robotic cetera or offset the mullahs labour pressures
spk_12: well i mean we're we're pretty advanced in terms of five half of factory automation i'm not a lot of are a lot of our products because of the nature of fully service
spk_4: are the lot sizes are small so it requires a little bit different automation concept than than the not and and so this is taken as years to to determine year the right
spk_10: strategies and or in the improvement in manufacturing technology for robots and machine tools and the integration between robots and machine tools and how that are works has gotten so much better
spk_41: and in the courses in mechanical engineering at the university's that have focused on improving their credentials for engineers in control engineering has been hit his then valuable to us and so are you in over the past
spk_0: a half dozen years we've been able to to take all that and make you know large improvements in games in our plants
spk_4: great thank you and then just my second question was just done the restructuring and and salvation ah cost in the quarter i think he had again on sale of a surplus building just any commentary maybe around down for the opportunities to consolidate the manufacturing base or maybe factory town a quarter and how trended verses our feet and any thanks
spk_3: the a they dig the game was on last year that's where the a daughter we saw them texas last year and a comparison purpose some the negative restructure we and fourth quarter was just finalize indeed the moves that we are and on the west coast but some of our small plants and we talked about and she and huge rate out that we combine to plans together and we combined one plant from my a to building scenario to a one dublin scenario answer i now there's no major consolidation planned
spk_0: on the wall is looking at ways to become a little more efficient with our will stay in our manufacturing facilities
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