RBC Bearings Incorporated

Ladies and gentlemen, thank you for standing by, and welcome to the third quarter 2020 RBC Bearings Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker today, Brooks Hamilton with Alpha IR. Please go ahead.

Brooks Hamilton Good morning, and thank you for joining us for RBC Bearings Fiscal 2020 Third 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 to 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 conditions. 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, Bruce, and good morning. Net sales for the third quarter fiscal 2020 were $177 million. versus 171.5 million for the same period last year, a 3.2% increase. Organic growth for the quarter was 3.6%. For the third fiscal quarter of 2020, sales of industrial products represented 34% of our net sales and aerospace products at 66%. Adjusted gross margin for the quarter was 70.9 million or 40.1% of net sales. This compares to $68.1 million, or 39.7% for the same period last year, a 4.1% increase. Adjusted operating income was $37.8 million, 21.4% of net sales. EBITDA was $50.9 million, a 6.3% increase over last year. The quarter certainly had its challenges and noise as accommodations made to support Boeing's schedule changes driven by MAX rescheduling began to challenge our logistics and suppliers, causing other products to be accelerated in the schedule to replace the delayed MAX products. As you can see, we were able to accommodate many of these changes and came in at the bottom end of our revenue guidance for the period. We did miss some sales on products as a result of last-minute technical delays, which is typical in a quarter short on production days and long on holidays. Sales of industrial products were down 7.5 percent from last year. The prime variance here fell in our marine products area, where the completion of very complex assemblies missed schedule. Without this delay, sales of industrial products would have been flat with last year. Sales to the industrial aftermarket expanded by 13.2%. The organic sales component of this was 0.9%. The weak markets in our classic industrial OEM lineup continue to be mining and oil and gas. The strong markets were general distribution, semiconductor capital goods, ground defense, and international terrain. Aerospace and defense markets continued to perform well. The third quarter organic net sales were up 13%. Aerospace sales were driven by both OEM and defense. Aero and defense OEM were up 14.7% on an organic basis. Important contributing markets here were airframe, aero engine, space, and missiles. We also see some benefit as a few of these products previously made in Turkey are now being made by RBC Bearings. The fog around today's 737 MAX outlook creates a certain amount of challenge on setting production rates and sales outlook for the fourth quarter and beyond. As you know, our trailing content per ship has been approximately $120,000. This will climb towards $160,000 per ship over the next year plus as new contracts mature. This matter, its impact on sales and production rates has our greatest attention as we move into our new fiscal year in April. We've received broad monthly guidance from Boeing on a monthly max rate and are standing by for a flow down of specific production schedules from our customers. Regarding our fourth quarter, we're expecting sales to be 187 to 191 million, which results in our organic growth rate of approximately 1.9 to 3.5% over last year. We have baked into this projection $4 million of revenues we expect to shift into next year as a result of the max production reschedules. We think this is a fair estimate to the impact on Q4. I will now turn the call over to Dan for more details on the financial performance.