RBC Bearings(US:RBC)2025-10-31 18:41Financial Performance - Net sales for the three-month period ended September 27, 2025, increased by 14.4% to $455.3 million compared to $397.9 million in the same period last fiscal year [129]. - For the six-month period ended September 27, 2025, total net sales increased by 10.8% to $891.3 million compared to $804.2 million in the same period last fiscal year [131]. - The company expects net sales for the third quarter of fiscal 2026 to be approximately $454.0 to $462.0 million, representing a growth rate of 15.1% to 17.1% compared to the prior year [126]. Segment Performance - The Aerospace/Defense segment saw a significant increase of 38.8% in net sales, including approximately $24.7 million from VACCO, while the Industrial segment increased by 0.7% [124]. - Total net sales in the Aerospace/Defense segment for Q2 fiscal 2026 were $198.8 million, a 38.8% increase from $143.2 million in Q2 fiscal 2025 [151]. - The commercial aerospace markets saw a 21.6% increase in sales, with OEM sales reaching $96.5 million in Q2 fiscal 2026 [151]. - Defense markets experienced a 73.3% increase in sales, with OEM sales of $62.5 million in Q2 fiscal 2026 [151]. Income and Profitability - Net income attributable to common stockholders for the second quarter of fiscal 2026 was $60.0 million, a 23.7% increase from $48.5 million in the same period last fiscal year [130]. - Gross margin for Q2 fiscal 2026 was 44.1% of net sales, up from 43.7% in Q2 fiscal 2025, with a gross margin increase of $26.8 million [134]. - Gross margin for the first six months of fiscal 2026 was impacted by $3.3 million in restructuring costs related to inventory rationalization efforts [159]. Expenses and Costs - SG&A expenses for Q2 fiscal 2026 were $77.4 million, or 17.0% of net sales, compared to $69.5 million, or 17.5% of net sales in Q2 fiscal 2025, reflecting an increase of $7.9 million [136]. - Other operating expenses for Q2 fiscal 2026 totaled $25.4 million, a 39.6% increase from $18.2 million in Q2 fiscal 2025, including $20.7 million of amortization of intangible assets [139]. - Interest expense, net, decreased to $13.4 million in Q2 fiscal 2026 from $15.6 million in Q2 fiscal 2025, a reduction of 14.1% due to debt reduction efforts [141]. Cash Flow and Financing - The Company generated $208.4 million from operating activities in the first six months of fiscal 2026, an increase of $68.0 million compared to $140.4 million in the same period of fiscal 2025 [188]. - Cash used in investing activities increased to $307.4 million in the first six months of fiscal 2026, primarily due to a $275.0 million acquisition of VACCO [190]. - Cash provided by financing activities was $154.0 million in the first six months of fiscal 2026, compared to cash used of $89.0 million in the same period of fiscal 2025, driven by $200.0 million in proceeds from the Revolving Credit Facility [191]. Debt and Leverage - As of September 27, 2025, the company had cash of $91.2 million, with $368.0 million outstanding under the Term Loan and $200.0 million used from the Revolving Credit Facility for the VACCO acquisition [166][174]. - The company has a maximum Total Net Leverage Ratio of 4.50:1.00 under its Credit Agreement, which may be increased by 0.50:1.00 for 12 months after a material acquisition [171]. - Approximately 57% of the Company's debt bears interest at a fixed rate as of September 27, 2025, after accounting for the interest rate swap agreement [198]. Acquisitions and Growth Strategy - The company has completed 30 acquisitions since 1992, including VACCO, which broadened its end markets and customer base [123]. - The company plans to increase aftermarket sales of replacement parts to enhance revenue continuity and profitability [128]. - The company anticipates continued growth in its commercial aerospace business, which experienced a 21.6% increase in net sales for the three-month period ended September 27, 2025 [125]. Currency and Interest Rate Management - The Company entered into a Cross Currency Swap on August 12, 2024, with a notional amount of CHF 69.4 million ($80.0 million USD) to hedge against foreign exchange rate fluctuations [186]. - The Interest Rate Swap, effective December 30, 2022, has a notional amount of $600.0 million with a fixed rate of 4.455% and a maturity of three years [183]. - Approximately 11% of the Company's net sales were impacted by foreign currency fluctuations for both the three-month and six-month periods ended September 27, 2025 [199].