Financial Data and Key Metrics Changes - First quarter sales were $436 million, a 7.3% increase year over year, driven by strong performance in Aerospace and Defense (A&D) and Industrial segments [4] - Consolidated gross margin for the quarter was 44.8%, down from 45.3% in the same period last year, while adjusted diluted EPS was $2.84, up from $2.54, representing an 11.8% growth year over year [4][16] - Free cash flow reached a record $104.3 million, with a conversion rate of 152%, compared to $88.4 million and 144% last year [4][17] Business Line Data and Key Metrics Changes - A&D sales increased by 10.4% year over year, with commercial aerospace growing by 9.6% and defense by 11.9% [5] - The industrial segment grew by 5.5% year over year, with distribution and aftermarket up by 10% [5] - Industrial gross margins were 46%, while A&D margins were 42.3%, with adjusted industrial gross margins at 47.1% [14][15] Market Data and Key Metrics Changes - The backlog exceeded $1 billion for the first time, with $100 million attributed to industrial products [7] - The U.S. GDP expansion of 3% confirmed a strong industrial economy, with expectations for positive demand influenced by recent tax treatments for capacity investments [6][7] Company Strategy and Development Direction - The company is focused on organic growth through product innovation and market development, with plans to expand capacities to meet customer demands [8][9] - The recent acquisition of VAACO is expected to enhance capabilities in marine and defense sectors, with strong synergies anticipated [10][11] - A well-defined five-year outlook is in place, with strategic planning based on historical sales and customer demand forecasts [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing unprecedented demand in key market areas and a strong balance sheet [12] - The company anticipates continued growth in the defense sector, projecting high single to low double-digit expansion for many quarters [8] - Management noted that the industrial distribution business saw a 10% increase, indicating a positive trend in the industrial economy [45] Other Important Information - The company plans to use generated cash to pay off debt and maintain a focus on deleveraging [17] - Guidance for the second quarter projects revenues between $445 million and $455 million, representing year-over-year growth of 11.8% to 14.4% [18] Q&A Session Summary Question: What parts of the five-year outlook can be shared? - The company is aligning historical sales by account and assessing capacity needs based on customer demand forecasts [23][24] Question: Will more CapEx be needed for capacity expansion? - The company plans to maintain CapEx in the range of 3% to 4% of depreciation, with some real estate consolidation expected [26][28] Question: How will the recent infrastructure bill impact the business? - The bill is expected to positively affect demand from smaller industrial customers, while its impact on A&D is less clear [30] Question: What is the expected revenue contribution from VACCO? - VACCO is anticipated to contribute approximately $10 million to $11 million monthly, with all revenue going into the A&D segment [33][37] Question: What are the trends in commercial aerospace? - Build rates are stabilizing, and the company expects to expand content on existing contracts with OEMs [38][39] Question: Is there confidence in sustainable industrial expansion? - The company sees positive signs in industrial distribution, with expectations for growth driven by recent tax changes [44][70] Question: How is the integration of VACCO progressing? - The integration is expected to enhance margins over 18 to 24 months, similar to past acquisitions [50][51] Question: Will supply chain constraints affect growth? - The company has secured extensive inventories of exotic materials to mitigate supply chain challenges [62][63]

Core Insights - RBC Bearings reported quarterly earnings of $2.84 per share, exceeding the Zacks Consensus Estimate of $2.74 per share, and showing an increase from $2.54 per share a year ago, resulting in an earnings surprise of +3.65% [1] - The company achieved revenues of $436 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.93% and up from $406.3 million year-over-year [2] - RBC Bearings has outperformed the S&P 500, with shares increasing approximately 29.5% since the beginning of the year compared to the S&P 500's gain of 7.8% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $2.71, with expected revenues of $435.46 million, and for the current fiscal year, the EPS estimate is $11.36 on revenues of $1.79 billion [7] - The trend of estimate revisions for RBC Bearings was favorable ahead of the earnings release, contributing to a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Manufacturing - General Industrial industry, to which RBC Bearings belongs, is currently ranked in the top 12% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8]

[RBC Bearings Fiscal First Quarter 2026 Results](index=1&type=section&id=RBC%20Bearings%20Incorporated%20Announces%20Fiscal%20First%20Quarter%202026%20Results) [Financial Highlights](index=1&type=section&id=First%20Quarter%20Financial%20Highlights) RBC Bearings reported strong Q1 FY2026 results with net sales up **7.3%** to **$436.0 million**, adjusted diluted EPS growing **11.8%** to **$2.84**, and robust free cash flow of **$104.3 million** | ($ in millions) | GAAP | Adjusted (1) | GAAP | Adjusted (1) | GAAP | Adjusted (1) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | | **Fiscal 2026** | | **Fiscal 2025** | | **Change** | | | Net sales | $436.0 | | $406.3 | | 7.3% | | | Gross margin | $195.2 | $198.1 | $184.0 | $184.0 | 6.1% | 7.7% | | Operating income | $101.1 | $105.3 | $97.5 | $97.5 | 3.7% | 8.0% | | Net income | $68.5 | $89.6 | $61.4 | $80.2 | 11.6% | 11.7% | | Net income attributable to common stockholders | $68.5 | $89.6 | $55.7 | $74.5 | 23.0% | 20.3% | | Diluted EPS | $2.17 | $2.84 | $1.90 | $2.54 | 14.2% | 11.8% | - First quarter net sales increased **7.3%** year-over-year, with the Aerospace/Defense segment growing **10.4%** and the Industrial segment growing **5.5%**[6](index=6&type=chunk) - Free cash flow for the quarter was **$104.3 million**, compared to **$88.4 million** in the prior year, representing a free cash flow conversion of **152.3%**[6](index=6&type=chunk) [Detailed First Quarter Results](index=2&type=section&id=First%20Quarter%20Results) The company achieved **7.3%** sales growth, with gross margin up **6.1%** to **$195.2 million**, operating income increasing **3.7%** to **$101.1 million**, and diluted EPS rising **14.2%** to **$2.17**, alongside a growing backlog of **$1,017.3 million** | Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $436.0M | $406.3M | +7.3% | | Gross Margin | $195.2M | $184.0M | +6.1% | | Operating Income | $101.1M | $97.5M | +3.7% | | Net Income | $68.5M | $61.4M | +11.6% | | Diluted EPS | $2.17 | $1.90 | +14.2% | - SG&A expenses increased to **$73.9 million** (**16.9%** of net sales) from **$67.6 million** (**16.6%** of net sales) in the prior year[8](index=8&type=chunk) - Interest expense decreased to **$12.2 million** from **$17.2 million** year-over-year, primarily due to debt reduction efforts and lower interest rates[11](index=11&type=chunk) - Backlog grew to **$1,017.3 million** as of June 28, 2025, up from **$940.7 million** at the end of the previous quarter and **$825.8 million** a year ago[15](index=15&type=chunk) [Segment Performance](index=1&type=section&id=Segment%20Performance) The Aerospace and Defense segment drove Q1 growth with a **10.4%** increase in net sales to **$164.6 million**, complemented by a **5.5%** rise in Industrial segment sales to **$271.4 million** | Net External Sales ($ in millions) | Q1 FY2026 | Q1 FY2025 | YoY Change | | :--- | :--- | :--- | :--- | | Aerospace and defense segment | $164.6 | $149.1 | +10.4% | | Industrial segment | $271.4 | $257.2 | +5.5% | | **Total net external sales** | **$436.0** | **$406.3** | **+7.3%** | - CEO Dr. Michael J. Hartnett highlighted the solid performance, with A&D and Industrial segment sales up **10.4%** and **5.5%**, respectively, and noted strong gross margin performance driven by the Industrial segment and expansion in Aerospace[5](index=5&type=chunk) [Outlook for Q2 Fiscal 2026](index=2&type=section&id=Outlook%20for%20the%20Second%20Quarter%20Fiscal%202026) RBC Bearings projects continued growth for Q2 FY2026, forecasting net sales between **$445.0 million** and **$455.0 million**, representing an **11.8%** to **14.4%** year-over-year increase | Q2 FY2026 Guidance | Range | | :--- | :--- | | Net Sales | $445.0M - $455.0M | | Gross Margin % | 44.0% - 44.25% | | SG&A as % of Sales | 17.0% - 17.25% | [Non-GAAP Financial Measures and Reconciliations](index=3&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP metrics to clarify core operating performance, with Q1 FY2026 adjusted operating income at **$105.3 million**, adjusted net income at **$89.6 million**, and adjusted EBITDA at **$141.5 million** [Explanation of Non-GAAP Measures](index=3&type=section&id=Explanation%20of%20Non-GAAP%20Measures) Management uses non-GAAP measures like Adjusted Gross Margin, Operating Income, Net Income, EPS, and EBITDA to provide investors with a clearer view of ongoing business performance by excluding unusual or non-cash items - Non-GAAP measures are presented to provide useful information to investors regarding the Company's results of operations by allowing them to better evaluate **ongoing business performance**[18](index=18&type=chunk) - Adjusted operating income excludes acquisition expenses, restructuring charges, and other non-operational or non-recurring items to better assess **core financial performance**[20](index=20&type=chunk) - Adjusted EBITDA is used to show **unleveraged, pre-tax operating results** and aids investors in understanding compliance with **debt covenants** and **financial strength**[22](index=22&type=chunk) [GAAP to Non-GAAP Reconciliations](index=6&type=section&id=GAAP%20to%20Non-GAAP%20Reconciliations) Q1 FY2026 GAAP figures were reconciled to non-GAAP, with reported gross margin of **$195.2 million** adjusted to **$198.1 million**, operating income of **$101.1 million** adjusted to **$105.3 million**, and net income of **$68.5 million** adjusted to **$89.6 million**, yielding an adjusted EBITDA of **$141.5 million** Reconciliation of Reported Operating Income to Adjusted Operating Income | ($ in millions) | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Reported operating income | $101.1 | $97.5 | | Transaction and related costs | $0.1 | - | | Restructuring and consolidation | $4.1 | - | | **Adjusted operating income** | **$105.3** | **$97.5** | Reconciliation of Reported Net Income to Adjusted Net Income | ($ in millions) | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Reported net income | $68.5 | $61.4 | | Adjustments (Transaction costs, Restructuring, M&A amortization, etc.) | $21.4 | $23.5 | | Tax impact of adjustments | ($6.7) | ($4.7) | | **Adjusted net income** | **$89.6** | **$80.2** | Reconciliation of Reported Net Income to Adjusted EBITDA | ($ in millions) | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Reported net income | $68.5 | $61.4 | | Interest expense, net | $12.2 | $17.2 | | Provision for income taxes | $19.2 | $18.5 | | Depreciation and amortization | $29.6 | $30.0 | | Other adjustments | $12.0 | $6.9 | | **Adjusted EBITDA** | **$141.5** | **$134.0** | [Financial Statements](index=5&type=section&id=Financial%20Statements) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For Q1 FY2026, RBC Bearings reported net sales of **$436.0 million**, operating income of **$101.1 million**, and net income attributable to common stockholders of **$68.5 million**, or **$2.17** per diluted share | ($ in millions, except per share data) | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | | :--- | :--- | :--- | | Net sales | $436.0 | $406.3 | | Gross margin | $195.2 | $184.0 | | Operating income | $101.1 | $97.5 | | Net income | $68.5 | $61.4 | | Net income attributable to common stockholders | $68.5 | $55.7 | | Diluted EPS | $2.17 | $1.90 | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of June 28, 2025, total assets reached **$4.79 billion**, with cash increasing to **$132.9 million**, total liabilities at **$1.67 billion**, and total stockholders' equity growing to **$3.12 billion** | ($ in millions) | June 28, 2025 | March 29, 2025 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $132.9 | $36.8 | | Total current assets | $1,135.2 | $1,027.3 | | Goodwill | $1,876.2 | $1,872.2 | | **Total assets** | **$4,789.7** | **$4,685.2** | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $341.3 | $315.3 | | Long-term debt, less current portion | $913.8 | $918.4 | | **Total liabilities** | **$1,673.3** | **$1,653.8** | | **Total stockholders' equity** | **$3,116.4** | **$3,031.4** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For Q1 FY2026, the company generated **$120.0 million** in net cash from operating activities, leading to a **$96.1 million** increase in the cash balance after accounting for investing and financing activities | ($ in millions) | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $120.0 | $97.4 | | Net cash used in investing activities | ($15.7) | ($9.0) | | Net cash used in financing activities | ($7.9) | ($74.7) | | **Increase / (decrease) in cash** | **$96.1** | **$13.3** | | Cash, at end of period | $132.9 | $76.8 |

Company Overview - RBC Bearings (RBC) is expected to report a year-over-year increase in earnings, with a projected EPS of $2.74, reflecting a +7.9% change, and revenues of $431.98 million, up 6.3% from the previous year [3][12] - The consensus EPS estimate has been revised 0.1% lower over the last 30 days, indicating a slight bearish sentiment among analysts [4][12] Earnings Expectations - The upcoming earnings report is anticipated to be released on August 1, and the stock may react positively if the actual results exceed expectations, while a miss could lead to a decline [2][12] - The Earnings ESP for RBC Bearings is -0.64%, suggesting that the Most Accurate Estimate is lower than the Zacks Consensus Estimate, complicating predictions for an earnings beat [12] Historical Performance - In the last reported quarter, RBC Bearings exceeded the consensus EPS estimate of $2.68 by delivering earnings of $2.83, resulting in a surprise of +5.60% [13] - Over the past four quarters, the company has beaten consensus EPS estimates three times, indicating a generally favorable performance history [14] Industry Context - Flowserve (FLS), another player in the Zacks Manufacturing - General Industrial industry, is expected to report an EPS of $0.78 for the same quarter, reflecting a +6.9% year-over-year change, with revenues projected at $1.21 billion, up 4.8% [18][19] - Flowserve's consensus EPS estimate has been revised 0.3% upward in the last 30 days, but it also has a negative Earnings ESP of -1.5%, indicating challenges in predicting an earnings beat [19][20]

Core Insights - ESCO Technologies Inc. has completed the divestiture of VACCO Industries to RBC Bearings Incorporated for net proceeds of approximately $275 million, reflecting customary working capital adjustments since the announcement on May 20, 2025 [1] Company Overview - ESCO Technologies is a global provider of highly engineered products and solutions, serving diverse end-markets including aviation, Navy, space, and industrial sectors [2] - The company manufactures filtration and fluid control products, advanced composites, and power management solutions, and is an industry leader in RF test and measurement products and systems [2] - ESCO has a global presence with offices and manufacturing facilities worldwide, headquartered in St. Louis, Missouri [2]

Acquisition Details - RBC Bearings Incorporated has signed a definitive agreement to acquire VACCO Industries for approximately $310 million in cash, which will be funded through borrowings and cash on hand [1] - VACCO Industries, based in South El Monte, CA, specializes in producing valves, filters, regulators, and other precision components for the space and naval defense sectors, generating revenues of about $118 million in the trailing 12 months ending March 31, 2025 [2] Strategic Rationale - The acquisition aligns with RBC Bearings' strategy to enhance its business and product portfolio, incorporating VACCO's expertise in engineered valves and regulators to expand customer offerings in defense, space, and commercial markets [3] Transaction Timeline - The transaction is expected to be completed in the summer, subject to customary closing conditions [4] Financial Performance - RBC Bearings has a market capitalization of $11.8 billion and currently holds a Zacks Rank 4 (Sell), facing challenges with rising operating costs, including a 3.8% year-over-year increase in cost of sales and a 12% rise in selling, general, and administrative expenses in Q1 2025 [5] - Despite these challenges, strength in the Aerospace/Defense segment and recovery in the Industrial unit are positive indicators [5] Stock Performance - RBC's shares have increased by 4.4% over the past three months, contrasting with a 0.8% decline in the industry [6] - The Zacks Consensus Estimate for RBC's current-year earnings has decreased by 0.9% over the last 60 days [6]

Core Viewpoint - ESCO Technologies Inc. has entered into a definitive agreement to sell VACCO Industries to RBC Bearings Incorporated for expected gross cash proceeds of $310 million, aligning with its long-term strategy to focus on high-growth end-markets [1][2][3] Group 1: Transaction Details - The transaction is subject to customary regulatory approvals and is expected to yield a sizable book gain, with net proceeds planned for debt reduction related to a previous acquisition [2] - VACCO Industries has been part of ESCO since its formation in 1990 and is recognized as a key supplier of mission-critical solutions [3] Group 2: Strategic Implications - The divestiture supports ESCO's strategy to concentrate on core high-growth markets, enhancing its portfolio focus [3] - The CEO of ESCO expressed confidence in the future of VACCO under RBC Bearings, indicating a positive outlook for the company post-transaction [3] Group 3: Company Overview - ESCO Technologies is a global provider of engineered products and solutions across diverse end-markets, including aviation, Navy, space, and industrial sectors [4] - The company specializes in manufacturing filtration and fluid control products, advanced composites, and power management solutions, and is a leader in RF test and measurement products [4]

Core Insights - RBC Bearings Incorporated reported adjusted earnings of $2.83 per share for Q4 fiscal 2025, exceeding the Zacks Consensus Estimate of $2.68, and reflecting a 14.6% increase from $2.47 per share in the previous year, driven by higher revenues [1] - The company's revenues for the quarter were $437.7 million, a 5.8% year-over-year increase, but fell short of the Zacks Consensus Estimate of $441 million [1] Revenue Details - RBC's backlog at the end of the reported quarter was $940.7 million, up from $896.5 million at the end of Q3 fiscal 2025 [2] - Industrial segment revenues were $280.4 million, accounting for 64.1% of total revenues, representing a 3.4% year-over-year increase, but below the consensus estimate of $283 million [3] - Aerospace/Defense segment revenues totaled $157.3 million, or 35.9% of total revenues, marking a 10.5% year-over-year increase, also missing the consensus estimate of $159 million [4] Margin Profile - Cost of sales increased by 3.8% year over year to $244.3 million, while gross profit rose by 8.4% to $193.4 million, resulting in a gross margin expansion of 110 basis points to 44.2% [5] - Selling, general and administrative expenses (SG&A) were $72.1 million, up 12% year over year, with adjusted EBITDA increasing by 7.4% to $139.8 million, leading to an adjusted EBITDA margin of 31.9%, up 50 basis points [5] - Adjusted operating income rose by 5.4% year over year to $101.6 million, with the adjusted margin decreasing by 10 basis points to 23.2% [6] Balance Sheet and Cash Flow - At the end of Q4 fiscal 2025, RBC had cash and cash equivalents of $36.8 million, down from $63.5 million at the end of fiscal 2024, while long-term debt decreased to $918.4 million from $1.19 billion [7] - The company generated net cash of $293.6 million from operating activities in fiscal 2025, a 6.9% year-over-year increase, with capital expenditure rising by 50% to $49.8 million [7] Share Repurchase - In fiscal 2025, RBC Bearings repurchased shares worth $9.5 million, a decrease of 14% year over year [8] Outlook - For Q1 fiscal 2026, management expects net sales to be between $424 million and $434 million, indicating a year-over-year increase of 4.4% to 6.8% from $406.3 million [9] - Gross margin is anticipated to be in the range of 44.25% to 44.75%, with SG&A as a percentage of net sales projected between 16.75% and 17.25% [9]

Financial Performance - For the fiscal year ended March 29, 2025, net sales were $1,043.5 million for the Industrial segment, representing 64% of total sales, and $592.8 million for the Aerospace/Defense segment, representing 36% of total sales[26]. - Net sales increased by 4.9% year over year, driven by a 14.1% increase in Aerospace and Defense segment sales and a 0.2% increase in Industrial segment sales[153]. - Net income attributable to common stockholders rose by $46.9 million, or 25.0%, to $233.8 million in fiscal 2025[165]. - Gross margin improved to 44.4% of sales in fiscal 2025, up from 43.0% in fiscal 2024, reflecting product mix and cost efficiencies[166]. - SG&A expenses increased by $25.8 million, or 10.2%, to $279.3 million in fiscal 2025, primarily due to personnel and IT costs[167]. - Interest expense decreased by $18.9 million, or 23.9%, to $59.8 million in fiscal 2025, attributed to debt reduction efforts[169]. - The effective income tax rate for fiscal 2025 was 21.1%, up from 19.8% in fiscal 2024, influenced by various discrete items[173]. - The company generated $293.6 million from operating activities in fiscal 2025, an increase of $18.9 million compared to $274.7 million in fiscal 2024[205]. Market Segments - The Industrial market includes diverse sectors such as construction, mining, and food and beverage, with major customers including Caterpillar and Halliburton[19][20]. - The Aerospace/Defense market is driven by new aircraft build rates and military modernization programs, with key customers including the U.S. Department of Defense and Boeing[21][24]. - Aerospace and Defense segment sales rose by 14.1% year over year, with commercial aerospace increasing by 13.3% and defense sales up by 15.9%[154]. - Industrial segment sales increased by 0.2% year over year, led by a 1.4% rise in distribution and aftermarket sales, while OEM sales decreased by 2.1%[155]. Customer and Sales Strategy - The company aims for growth and margin improvement through new product introductions and expansion of aftermarket sales[20]. - The company focuses on expanding its sales force with industry-experienced personnel to support its geographic and market expansion strategy[44]. - Approximately 44% of the company's net sales during fiscal 2025 were generated from its top ten customers, indicating a significant reliance on a limited customer base[79]. - The company aims to increase aftermarket sales to enhance revenue continuity and predictability[151]. Operations and Facilities - The company operates 54 facilities across 11 countries, with 38 dedicated to manufacturing, enhancing its geographic reach and customer base[14]. - The company employs 5,334 people globally, with 3,754 at U.S. facilities and 1,580 at international locations, emphasizing a robust workforce[56]. - The company owns or leases 38 manufacturing facilities across five countries, with 26 located in the U.S.[126]. Financial Position and Debt - The company incurred $1,800.0 million in total debt to finance the Dodge acquisition, with total debt standing at $920.1 million as of March 29, 2025[114]. - The company had $413.0 million outstanding under the Term Loan and $5.0 million under the Revolving Credit Facility as of March 29, 2025[193]. - The Term Loan matures in November 2026, with required future principal payments of $413.0 million for fiscal 2027[189]. - The company issued $500.0 million aggregate principal amount of 4.375% Senior Notes due 2029, with net proceeds of approximately $492.0 million used for acquisitions[194]. Risks and Challenges - The company faces competitive pressures in the bearings and engineered components industries, which could limit its ability to increase prices and negatively impact revenues and profitability[78]. - Fluctuating supply and costs of raw materials, particularly steel, pose risks to the company's revenues and profitability due to potential price increases and supply disruptions[84]. - The company is subject to various government regulations, and failure to comply could materially reduce revenues and profitability[89]. - The company relies on its IT systems for operations, and any cyber events or IT security threats could disrupt operations and negatively impact financial performance[94]. - The company has collective bargaining agreements covering approximately 7% of its U.S.-based hourly employees, and labor disputes could materially affect operations[96]. Growth and Acquisitions - The company has completed 29 acquisitions since 1992, broadening its end markets, products, customer base, and geographic reach[152]. - The company’s growth strategy includes acquisitions, but there is no assurance that it will successfully identify or complete acquisitions on favorable terms[99]. Backlog and Future Outlook - The company's backlog as of March 29, 2025, was $940.7 million, an increase from $821.5 million as of March 30, 2024, indicating strong demand for products[55]. - The company forecasts net sales of approximately $424.0 million to $434.0 million for the first quarter of fiscal 2026, representing a growth rate of 4.4% to 6.8% compared to the first quarter of fiscal 2025[157]. - The backlog as of March 29, 2025, was $940.7 million, up from $821.5 million as of March 30, 2024, indicating continued growth in commercial aerospace and marine defense markets[157]. Compliance and Internal Controls - The company identified a material weakness in internal control over financial reporting, necessitating a restatement of financial statements for fiscal years 2022, 2021, and 2020[76]. - The company’s ability to comply with financial covenants could be affected by changes in operating performance and economic conditions, potentially leading to defaults[116]. Cybersecurity and Risk Management - The company maintains a cybersecurity risk management program based on the NIST Cybersecurity framework to assess and manage cybersecurity risks[122].

Financial Data and Key Metrics Changes - Fourth quarter sales reached $438 million, a 5.8% increase year-over-year, driven by strong performance in the Aerospace and Defense (A&D) segment and industrial businesses [4][5] - Consolidated gross margin for the quarter was 44.2%, up from 43.1% in the same period last year [4] - Adjusted diluted EPS was $2.83, representing a 14.6% increase from $2.47 a year ago [4][15] - Total A&D sales grew by 10.6% year-over-year, with commercial aerospace up 11.6% and defense up 8.2% [5][6] - For the full year, A&D sales grew by 14%, with commercial aerospace up 13.3% and defense up 15.9% [6] Business Line Data and Key Metrics Changes - The industrial segment grew by 3.3% year-over-year, with distribution and aftermarket up 2.5% and OEM up 5.1% [5][7] - Industrial gross margins were reported at 45.7%, while A&D margins were at 41.5% [14][36] - The Dodge business experienced double-digit OEM sales growth for the full year, reflecting successful organic growth initiatives [8][10] Market Data and Key Metrics Changes - The commercial aerospace market is expected to grow by at least 15%, driven by production growth at Boeing and Airbus [9][10] - The defense sector is anticipated to grow in the mid- to high single digits, supported by a proposed $1 trillion defense budget [10][11] - Industrial markets are more challenging to predict due to factors like interest rates and tariffs, but MRO demand remains steady [10] Company Strategy and Development Direction - The company is focused on leveraging core strengths in engineering, manufacturing, and product development to drive both organic and inorganic growth [18] - There is a strong emphasis on continuous improvement in operating efficiency and high levels of free cash flow conversion [18] - The company plans to reinvest some margin expansion into future growth through investments in SG&A [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for fiscal 2026, expecting strong growth across all channels [11][12] - The company is well-positioned to pursue additional accretive M&A, with a focus on maintaining a healthy balance sheet [11][18] - Management acknowledged challenges in the industrial economy but highlighted strong performance relative to peers [7][10] Other Important Information - The company allocated $275 million to debt repayment in fiscal 2025, reducing trailing net leverage to 1.7 turns [11][16] - Free cash flow for the quarter was $55 million, with a conversion rate of 76% [15][16] - The company expects CapEx to be in the range of 3% to 3.5% of sales for the upcoming year [17][54] Q&A Session Summary Question: Commercial aerospace production rates and revenue potential - Management expects Boeing to reach 38 planes per month soon, with potential for upper 40s production rates by early 2026, which could significantly increase revenue [26][27] Question: Industrial growth initiatives and sustainability - Management highlighted improvements in service levels and new product introductions as key drivers of growth, with a healthy outlook for sustaining leadership in growth [30][32] Question: Gross margins by segment and expansion potential - Industrial gross margins were 45.7% and A&D was 41.5%, with management indicating potential for further expansion in A&D margins [36][38] Question: Tariff impacts and supply chain considerations - Management remains neutral on short-term tariff impacts but sees potential long-term benefits from increased tariffs [42][44] Question: Capacity and growth flexibility - Management noted that some plants are overloaded with demand, and they are actively adding labor and machinery to meet growth needs [51][52] Question: M&A pipeline and strategic focus - Management is actively exploring M&A opportunities, focusing on candidates that align with their operational strengths and customer relationships [75][82]