RBC Bearings Incorporated

Good day, ladies and gentlemen, and welcome to the RBC Bearings Fiscal 2020 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Chris Donovan with Alpha IR. Sir, please go ahead.

Good morning and thank you for joining us for RBC Bearings Fiscal 2020 Second 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.

Thank you, and good morning. Net sales for the second quarter of fiscal 2020 were $181.9 million versus $172.9 million for the same period last year, a 5.2% increase. Organic growth for the quarter was 6.8%. For the second fiscal quarter of 2020, sales of industrial products represented 35.5% of our net sales with aerospace products at 64.5%. Gross margin for the quarter was 71.1 million or 39.1% of net sales. This compares to 67.8 million or 39.2% for the same period last year. A 4.9% increase. Operating income was $37.3 million versus $35.9 million last year, a 4% increase. EDA was $51.2 million versus a 7.7% increase over last year. We are pleased with the performance this quarter and continue to be encouraged with the strong outlook of our aircraft businesses and are seeing green shoots in the as early as the fourth quarter in some of our industrial markets. Sales of industrial products over the period were down 5%. Last year, the expansion was 7%, so we were up against some difficult comps. Industrial OEM was down 4%, and distribution in the aftermarket was down an organic 7.2% on a year-over-year basis. Aerospace and defense markets paint the opposite picture. The second quarter organic net sales were up 14.4%. Aerospace and industrial markets today are night and day. Aerospace sales were driven by OEM and aftermarket. Aero and defense OEM were up 15.1% on an organic basis. Supply chain constraints, internal and external, continue to ease as we bring new capacity and approvals online. Some plants continue to be production constrained. and we'll continue to add capacity in these areas. This sector will likely continue to perform at the double-digit growth level for the next several quarters as we introduce additional manufacturing capacity and convert new contracts to revenues. At this point in our year, as we enter our third quarter, most of our aerospace businesses are booked well into 2021. When the 737 MAX receives its FAA certifications, we hope in calendar Q4, and production is accelerated, we expect our aircraft products growth rate to steepen further. Today we are beginning to see the impact of the MAX in the Q3 outlook as we are beginning to feel the effects of the reduced production rate for that plane in plants where production is not constrained. We continue to add both capacity and new processes in support of our customers' requirements and should be well positioned in this regard for FY21 and beyond. With regard to our second quarter, we're expecting sales between $177 and $179 million, which results in an organic growth rate of approximately 4% over last year. I'll now turn the call over to Dan for more details on the financial performance.