RBC Bearings Incorporated

Good day, and thank you for standing by. Welcome to the RBC Barron Fiscal 2022 Third Quarter Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will only press star 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 host today, Mike Cummings. with Alpha IR. Please go ahead.

Good morning, and thank you for joining us for RBC Barron's fiscal 2022 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 a 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. With that, I'll turn the call over to Dr. Hartnett.

Okay, thank you, Mike, and good morning to all and welcome. This is our first quarterly report after completing the acquisition of Dodge Industrial Products Division from ASEA Brown, Bavaria, Switzerland, on November 1, 2022. Two months of Dodge operational performance are included in this report, but three months of financial drag was experienced as we worked through the acquisition mechanics through October and acquired the company November 1st. We are pleased and excited to welcome the Dodge businesses and teams into RBC Behring's family and look forward to and can fully visualize a long, fruitful, and mutually beneficial relationship for our investors, employees, customers, and suppliers. The Dodge businesses materially strengthen our industrial offering and positions us very favorably relative to large and important base of customers with an exciting new platform of products, and I'll talk more about this later. In summary, RBC bearing net sales for the third quarter of fiscal 2022 were $267 million versus $145.9 million for the same period last year, an increase of 83%. Dodge sales were $110 million over the two-month period. For the third fiscal quarter of 2021, sales of industrial products represented 65% of our net sales, with aerospace products representing 35%. Adjusted gross margin for the quarter was $100.3 million, or 37.6% of net sales. This compares to $56.4 million or 38.7% for the same period last year. Adjusted operating income was $44.8 million, 16.8% of net sales compared to last year's $27.9 million and 19.1% of net sales. EBITDA was $71.4 million or 26.7% of net sales compared to $41 million and 28.1%, a 72.8% increase. As others have reported, and we concur, the industrial demand today is through the roof. While industrial sectors we serve are performing, demand for industrial products in many cases exceeds our capacity, mostly as a result of supply chain constraints, particularly at the Dodge businesses. We have worked through these constraints with vigor over the past nine months and see improvements ahead, but it's a problem that will linger and continue to bite our ankles, at least for the first half of fiscal 2023. A sample of important sectors we serve with their strengths are mining, sand and gravel, taconite, both surface and subsurface. Steel shortages today drive substantial demand here for our products. Construction is strong. Aggregate has a very strong outlook. Currently, in 18 months, we expect the increase in order flow from the infrastructure bill for highways and bridges, which has been the typical lead-lag equation in that sector. Food and beverage, proteins, beef, cattle, turkey, chicken, canning continues to grow with increased demand for our new product offerings. Oil and gas is very strong, and I'm sure everyone knows the story here when you fill up your tank. In warehousing, it's a great rush to build fulfillment centers to support the last mile strategies underway by Amazon, Tractor Supply, Home Depot, Walmart, Target, etc. Our products are well integrated into these new businesses. Semiconductor machinery, very strong. Billions for new plants have been announced by Intel, Samsung, Taiwan Semiconductor, and many others. Industrial distribution is a result of All the demand for the previous sectors mentioned continues to be strong, and that sector is consolidating. To summarize, we are making as much as we can in every site where we have industrial production. Turning now to aerospace and defense, our third quarter fiscal 22 net sales were up by 3.5%. led by aircraft OEM, which is up by 10.5%. Weak defense sales held down the expansion. These can be lumpy quarter to quarter depending upon build schedules and milestone achievements in our plants, but we expect these to normalize by the end of the year. Also, postponement of the 787 production dampens the OEM rate, capping it at the 10.5% previously mentioned. Our backlog for this sector is up over $80 million, and we are planning for a major volume expansion beginning next year as Boeing and Airbus expand build rates for their single-aisle planes and Dreamliner production resumes. Important airframes in our lineup are the 737 MAX, 787, 777X, the 777, the A320, and the A350. We're visited often by the major plane builders to make sure that we have enough capacity in our plants to service the demand that is ahead in the succeeding quarters. Regarding our fourth quarter, we're expecting sales of between $340 and $350 million in And I'll now turn the call over to Dan and Rob for more details on the financial performance.