RBC Bearings Incorporated

Good morning, ladies and gentlemen, and welcome to the RBC Barings Fiscal 2021 Third 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 hand the conference over to your host, Michael Cummings with Alpha IR.

Good morning, and thank you for joining us for RBC Barron's fiscal 2021 third quarter earnings conference call. With me on the call today are Dr. Michael J. Hartnett, Chairman, President, and Chief Executive Officer, Daniel A. Bergeron, Director, Vice President and Chief Operating Officer, and Robert Sullivan, Vice President and Chief Financial 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 Barron's 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, Mike, and good morning. Net sales for the third quarter of fiscal 2021 were $145.9 million versus $177.0 million for the same period last year, a decrease of 17.6 percent. For the third quarter of 2021, sales of industrial products represented 44 percent of our net sales and aerospace products 56 percent. Gross margin for the quarter was 55.6 million or 38.1 percent of net sales. This compares to 70.7 million or 39.9 percent for the same period last year. Adjusted operating income was $27.9 million, or 19.1% of net sales, compared to last year, $37.8 million and 21.4%. Adjusted EBITDA was $41 million, 28.1% of net sales, compared to 50.9 million, 28.7% of net sales for the same period last year. We ended the quarter with over $200 million in cash in marketable securities and roughly $20 million in debt. And year-to-date free cash flow was a record $102 million. We entered the second quarter with better visibility to customer requirements than past periods and saw an encouraging increase for product from industrial OEMs as well as stabilization of demand from the aircraft sector. We continue to work through an environment complicated by enhanced safety procedures to manage the COVID menace, and this environment has almost become normal practice for us today. Sales of industrial products were up 5.5% from last year and sequentially up 8.5%. Prime drivers in the industrial sector are the following markets, wind power, where the Green Revolution is generating a need for ever larger wind machines, some as large as 220 meters in diameter, requiring advanced blade designs and machine mechanics, leading to higher efficiencies. Number two is marine, the build-out of the Virginia submarine fleet with extended weaponry in the funding of the Columbia ballistic missile submarine. is driving substantial need for hydraulic hardware and engineering support. Three is semiconductor. A greater use of computer chips in automobiles, phones, games, self-driving cars, and 5G technology has created shortage in this industry. And producers are expanding capital budgets like never before to protect their market positions. And finally train mass movement of people in Asia is a priority as China continues to an, an extremely ambitious goal of connecting her cities with high speed rail. We are working in all these markets today with proven products and solutions, as well as new design proposals for pro or problem solving in acquiring new customers. Turning now to aerospace and defense, the third quarter of fiscal 2021, Sales were down 29.7%. The abrupt suspension of the 737 MAX production in March resulted in excess inventory of aircraft hardware throughout the system. This is reflected in this exaggerated decline and will likely be with us for another quarter. We work with customers during the second and into the third quarter to reschedule product deliveries. Most of that, if not all, is behind us today. We are encouraged by the release of the MAX for commercial use, and our plans are now to support the Boeing build rate of between 150 and 160 MAX ships in calendar 2021, moving to over 300 in calendar 2022. And we are very heartened to see a 10% expansion announced by Airbus in 2021. followed by a 20% expansion in 2022 for the A320 ship. Their plan to build almost 800 total ships in 2022 is inspiring to all of us. During the period, we consolidated plan operations in two locations to streamline our cost structure and drive efficiencies of execution. We expect a little bit more of this in the future. Regarding our fourth quarter, We are expecting sales to be between $155 and $160 million. I'll now turn the call over to Rob for more detail on our financial performance.