Q2 2022 RBC Bearings Inc Earnings Call
Ladies and gentlemen, your conference call will begin momentarily. Please continue to standby and thank you for your patience.
[music].
Good day, ladies and gentlemen, thank you for standing by and welcome to the RBC bearings second quarter 2022 earnings 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 need to press the spud under one key on your touched on telephone.
Please be advised that today's conference is being recorded.
Operating systems. Please press Star then zero I would now like to turn the conference over to your Speaker host Michael Cummings with Alpha IR. Please go ahead.
Good morning, and thank you for joining us for RBC bearings fiscal 2022 second quarter earnings Conference call with me on the call today are Dr. Michael J, Hartnett, Chairman, President and Chief Executive Officer, Granulate, Bershawn Director, Vice President and Chief operating Officer, and Robert Sullivan Vice.
President and Chief Financial Officer.
Before beginning todays call, let me remind you that.
But some of the statements made today will be forward looking and are made under the private Securities Litigation Reform Act of 995.
<unk> results may differ materially from those projected or implied due to a variety of factors.
We refer 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 condition.
These factors are also described in greater detail in the press release.
And on the company's website and.
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.
Good morning to all.
Welcome to the second quarter.
Fiscal 'twenty two.
Conference call.
We're RBC bearings.
Net sales for the second quarter of fiscal 'twenty, two we're a $169 million versus $146 3 million.
Same period last year.
An increase of about 10%.
For the second quarter sales of industrial products represented 48% of our net sales and aerospace products represented 52%.
Adjusted gross margin for the quarter was $63 4 million or 39, 4% of net sales.
This compares to $58 6 million or 40% for.
For the same period last year.
Operating income was $35 million.
19% of net sales compared to last year.
$9 9 million, 24% of net sales.
Adjusted EBITDA was $45 4 million.
Eight 2% of net sales compared to $43 5 million.
29, 8% of net sales for the same period last year.
And we ended the quarter with a.
$1 $346 million of cash.
Seven $6 million of debt.
Demand from the industrial markets maintained an extremely strong performance.
During the period.
Showed increasing strength as the quarter ended.
With important markets, gaining new strength towards the end of the period.
Our industrial OEM business.
Year to year expansion.
31% over last year.
The industrial aftermarket continued to expand.
A gain of 26, 4% over last year, while OEM expansion hovered around 33, 4% for the period.
We still have demand ranging from excellent to extraordinary in most markets served and we.
Look forward to additional strengthening from some of these markets.
As we see for the balance of the year.
Relative to tax their year to date performance was up 22, 5% over last last year.
And orders continue to outpace sales, we are expecting a good showing here Andrew and their fourth quarter.
Very happy on how markets are performing and their manufacturing plants are keeping up with demand.
Turning to the aerospace and defense markets.
Contracted four 4% for the quarter.
Defense showed a gain of 11% for the period.
Set by OEM, which was off seven 7%.
We are now seeing increases.
Orders Shippable later in the year across all of our locations that service and supply both.
And Airbus as well as their subcontractors.
It appears that we are about to.
Complete we're about complete with the inventory hangover created by the abrupt halt of production on the Max and are seeing a substantial pickup in our order book for commercial aircraft components for both major playing producers.
<unk> beginning in our fourth quarter.
In fact backlog for this sector is up $50 million over last year, which is really a great sign.
Our gross margins under more or less steady state conditions.
It would have we would've expected margins to be a point or more higher.
We are not operating however, under steady state conditions today.
In the second quarter, we added additional cost to the plants supporting commercial aircraft production in order to step up.
Our capacity.
To support the demand, which will which will.
C early next calendar quarter to calendar year.
This created an O.
Over head absorption variance degrading our margins slightly.
But.
It is what it is.
Something that we had to do in order to step up to support.
Support this additional demand that we see.
Coming very quickly.
Secondly, we've been adding staff to absorb the <unk> acquisition in order to support the services supplied by the previous owner ABB.
And lastly, there was a variance on tax.
Considerably impacting the effective rates that Rob will explain later in the call.
Regarding the third quarter.
We expect sales to be.
Somewhere between $245 to $250 million.
We're expecting a very strong fourth quarter with contributions from both the industrial and aerospace markets.
I'll now turn the call over to.
Rob for more detail on our financial performance. Thank.
Thank you Mike since.
Since Mike has already covered net sales and gross margin I'll jump down to SG&A.
G&A for the second quarter of fiscal 2022 was $29 7 million compared to $26 million for the same period last year.
Increase was mainly due to higher personnel costs of $2 4 million $1 million of additional share based compensation and 300000 of other items.
<unk> net sales SG&A was 18, 4% for the second quarter of fiscal 2000 to 2022 compared to 17, 8% for the same period last year.
Other operating expense for the second quarter of fiscal 2022 was expense of $5 7 million compared to expense of $4 2 million for the same period last year.
For the second quarter of fiscal 'twenty to other operating expenses were comprised mainly of $2 8 million in amortization of intangible assets $1 4 million of acquisition related costs, $1 1 million of restructuring costs and related items and 400000 of other items.
Other operating expense for the same period last year consisted mainly of $2 6 million in amortization of intangible assets $1 5 million of restructuring costs and related items and 100000 of other items.
Operating income was $27 1 million for the second quarter compared to operating income of $26 4 million for the same period last year on.
On an adjusted basis operating income would have been $30 5 million for the second quarter of fiscal 'twenty, two compared to adjusted operating income of $29 9 million for the second quarter last year.
Income tax expense for the second quarter of fiscal 2022 was $4 7 million compared to $5 4 million for the same period last year.
The effective income tax rate for the second quarter was 45% compared to 29% for the same period last year.
In the second quarter was impacted significantly by approximately $1 9 million of discrete tax expense, primarily associated with evaluation allowance for capital loss carryforwards.
Further.
As a result of the blackout associated with the acquisition of Dodge benefit associated with stock compensation activity was approximately 100000 during this past quarter compared to 400000 last year and $2 1 million last quarter of fiscal 2022.
For the second quarter of fiscal 2022, the company reported net income of $6 9 million compared to net income of $20 4 million for the same period last year.
On an adjusted basis net income would have been $23 5 million for the second quarter of fiscal 2022 compared to adjusted net income of $23 2 million for the same period last year.
Net income available to common stockholders for the second quarter of fiscal 2022 was $6 4 million compared to $20 4 million for the same period last year on an adjusted basis net income available to common stockholders for the second quarter of fiscal 2022 was $23 million compared to $23 2 million for the same period last year.
Diluted earnings per share was <unk> 25 per share for the second quarter of fiscal 2022 compared to 82 per share for the same period last year.
Just two basis diluted EPS for the first quarter of fiscal 2022 was <unk> 89 per share compared to adjusted diluted EPS of <unk> 93 per share for the <unk>.
Same period last year, excluding the impact of the additional shares issued for the offering of the common and preferred stock adjusted diluted EPS would have been 92 per share compared to <unk> 93 per share for the same period last year.
Turning to cash flow the company generated $42 million in cash from operating activities in the second quarter of fiscal 2022 compared to $26 1 million for the same period last year.
Capital expenditures were $3 5 million in the second quarter of fiscal 'twenty, two compared to $2 1 million for the same period last year looking.
Looking ahead as we integrate <unk> into our business. There are a few things to keep in mind.
In addition to the costs, we continue to incur too in our aerospace plans as we look toward a recovery in that space.
We will experience a certain amount of unusual and duplicate costs with the integration of Dodge for a period of time as.
As detailed in the previously released Dodge financials their margins historically run a bit lower than rbcs, they've also had a bit of an impact associated with inflation and material availability as most folks have in this environment. We are on track to achieve the margins, we anticipated with legacy RBC. However, the impact of integration. These other matters I mentioned.
We will impact consolidated margins a bit and lead to gross margins of roughly 35% to 36, 5% in the coming period, which we expect to improve gradually incrementally from there.
As we spend more time with the business, we will have more information to share in future periods as we talk SG.
SG&A as a percentage of sales sales should improve with the expanded scale and move closer to the 17% 18% point in the next quarter with further improvement as we received the benefit of a full quarter of Dodge.
Keep in mind, it's only been about 12 days since we closed and we look forward to sharing more information with you when we talk next.
I'd now like to turn the call back to the operator for the question and answer session.
Thank you, ladies and gentlemen to ask a question you wanted to parse the start and the one key on your Touchtone telephone to withdraw your question press the pound key.
Please standby, while we compile the Q&A roster.
No questions. My first question coming from the line of Pete Kubicki with Alembic Global Your line is open.
Hey, good morning, guys.
Excuse the voice.
So I guess.
Rob touched on supply chain and maybe inflation at Dodge.
The rest of RBC, just isn't really seeing much in the way of supply chain problems, because we've seen it really across the defense industry.
You guys are having the same problems that the rest of the industry is having.
Correct.
I would say that for RBC.
Supply chain situation.
Perfect.
We have.
We're scrambling to.
Take care of business here.
Sure.
By and large we're being successful it's really not having.
Any material impact on us to date.
We have to do we have to do unusual things, but we do them and move on.
Okay Fair enough fair enough and then Mike just given I mean first half of the year here industrial has been pretty pretty torrid.
Any change to the individual markets in industrial that you're seeing the demand from.
Yes, well of course there is.
There is new new demand coming from the oil and gas market, which was pretty much dormant for the last 24 months I'll tell you it's not dormant now.
And.
So so.
You could oil over age $80 $80 a barrel and.
Things start happening and believe me they are happening. So we see a lot of a lot of new demand coming in from oil and gas.
On standard products that we supplied over the years to that to those markets.
And we're also seeing.
Unusual to me.
And coming from.
Semiconductor.
It's.
I would say at the semiconductor space is definitely supply constrained.
And that's really really benefiting us right now so.
We're scrambling.
<unk> new customers.
And that whole region. So I think those are the two that come right to.
To the top.
Okay. Okay, it's hard to find an area of weakness in industrial.
Yes. It is.
Yeah.
Okay.
And then maybe Rob can you give us a sense of the other line.
It includes amortization.
You started to include well I guess you did not include really the.
The intangibles amortization from Dodge and <unk>, but what should we expect that line to be kind of each quarter.
Once.
It starts to be included.
Yes, yes.
That's a great question Pete I think once you start to factor in Dodge.
Looking at total amortization per quarter of somewhere in the $17 million to $18 million, including RBC legacy.
Obviously, we're still going through some of the purchase price allocation, so I could change a bit but that's that's what we're looking today.
Okay got it okay.
Add that back roughly in the cash flow I guess.
Okay. Okay.
Thanks, a lot more but I'll get back in queue. Thanks, guys.
And our next question coming from the line of Steve Barger with Keybanc. Your line is open.
Hey, good morning, guys good morning.
Right.
Can we go back to the 35% to 36% gross margin for <unk> I think you said theres some duplicate cost with the integration some inflation. Some availability can you kind of put that into buckets for us and tell us how much of that is unusual versus operational and then.
Thank you said it will take a few quarters to catch up any any.
Prospects are expectations for when that happens.
Yes, as I mentioned, it we really diving into the weeds with these guys right and they have had a bit more constraints on material availability, which will impact there.
The ability to hit some of their higher margin parts and in the next quarter.
So that's probably taking a point or two away from them on their end and then the duplicate cost is just like any integration. When you put two businesses together right you throw additional hedge adding additional resources.
So those will last probably through the rest of the fiscal year as we stand itself and then from there the margins will start to incrementally grow it will take some time, but.
We're big believers in our ability to do so.
Sure.
Just one comment on that Steve is that.
Dodge Dodge was a carve out from ABB. So it wasn't standalone within ABB. So theres a lot of shared services. So over the next six to nine months, we have some transition service agreements to get through.
And thats going to cause a little bit duplication and cost rate, we'll be paying ABB for use in their system. This has we are setting up new systems, and that's running about 1 million.
Six a month.
Okay. So that it's going to be $1 six a month duplicate, but as work Poland setting up new systems, bringing in new people, we're still going to have these transition service agreements that were trying to get out of in the next six to nine months.
To get.
Dodge standard fully off on their own two feet.
Understood Thanks for that clarification.
For the $245 to $255 million unexpected revenue for next quarter, how much of that is coming from Dodge.
The ranges does it we have a range in for Dodge, we are arranging for for RBC, but for Dod who use an incentive point of around $100 million.
And just okay. So yes.
Yes quarter their third quarter Act, just like Rpc's third quarter right. They have.
Just the amount of code that same amount of production days. If Christmas you have the holidays. So you know for US that's always our worst quarter from a gross margin and top line sales because you just don't have enough production days and then in the fourth quarter you pick up those production days back so it makes their fourth quarter.
So much stronger than they are right, they're gone right, obviously talked fiscal and year end into our 445, so they're going to be right on our production days.
Olander going forward effective November one.
Right, but if I just use that $100 million number that suggests that RBC legacy it'll be about $150 million, which is about $10 million down sequentially from what you just put up in <unk>. If I look back at the last few years within a few million bucks role.
<unk> is pretty much.
No.
In line with <unk>.
So it feels like that's a little bit of a bigger sequential decline is there.
How can you square that with the commentary just around robust end markets, yes, so for Q3.
I would say this the centerpoint for RBC is around 153 million.
$1 million compared to last year.
$145 million $146 million.
So, it's mainly going to be heavy again on industrial and a little softer on the aerospace even though we're getting a lot of activity, especially in backlog on aerospace.
<unk> start coming through in Q4, Q1, and Q2 of net okay.
So even though aerospace has a really easy comp I think it's negative 30% for last year, well should we expect that aerospace is up double digits in <unk> year over year.
We'll have to get back to you because I just don't have that in front of me, Steve I don't have them both broken out.
Okay.
I think I think aerospace is probably going to see the same quarter.
Q3 that they saw in Q2.
Is that going to be materially different in terms of sales for the simple reason that it.
The lead time associated with.
Producing producing these parts, we just can't get a made and shipped in that quarter. So they're great.
We're going to be making them, if theyre going to be shipping them in the fourth quarter.
So it's.
Whats what's planned for the third quarter is pretty much.
Ordered.
Six to nine months ago, and Thats, just whats coming through now.
And so that's just the way that that whole clockwork.
Proceeds.
Understood I'll get back in line. Thanks.
And as a reminder, ladies and gentlemen to ask a question. Please press star one.
Our next question coming from the line of Mike Michael Joe Moye with twist. Your line is open.
Hey, good morning, guys. Thanks for taking my questions here.
Maybe just to stay with aerospace where Steve was going is there something different about your aerospace sales I mean, just looking at.
All of the peer companies selling into the OE market, we've seen pretty significant sequential growth. This reporting season from all of them.
I guess the revenues at the OE side flattish and then maybe even more surprising the aftermarket distribution down.
Which really runs contrary to the trends that we're seeing from the broader suppliers out. There. So is there any anything else you guys can point to I mean, we obviously know the wide bodies have been down baked in we.
I don't know if you can give any color on.
Where you are on Max production, we saw Boeing step up that rate, but it seems like you guys just aren't seeing yet.
Yes.
We're seeing it we're seeing it in the backlog.
We're seeing it in the order book and we're seeing we're seeing the schedule scale fill in and Theyre pretty much drilling.
In the fourth quarter.
Our.
One of our plant managers.
Recently, we made the statement.
I hope, we can make all the stuff.
So yes, we are definitely seeing it there we're not we're not seeing it so much from the industrial from the aircraft's aftermarket because.
For the most part we don't do.
We don't do repairs.
I mean, we make parts for Oems, we are a little bit of a repair shop, but it's very small.
But we make we make parts for the Oems.
And our.
Our aftermarket.
Aftermarket distributors are pretty much bearing specialists.
<unk>.
They are.
In a.
They're just they're just there.
They are just starting to come alive now.
Yeah.
Maybe they were lagging indicators, but theyre just theyre just starting to come back.
Into the into that.
Picture of significant.
Business with us.
Right right now.
So that's just the way our markets work.
Okay. I mean can you parse out the backlog maybe I mean are you seeing orders I mean, presumably nothing wide body related.
Do you have a good directional signal as to what were the rates on the Max are going to go I mean or is the the order flow more skew towards the $3 20 in the $2 <unk>, where it seems like Airbus has better line of sight there.
No.
It's definitely the $3 20.
We're seeing it there we're bringing on new production programs to support the 320.
That we Havent had before so we're happy to see that.
We're very much engaged with the.
With the leap engine and so Thats I.
I think 60% of the 320 uses the leap engine.
So.
We're happy to happy to see that and then on the mix side, Yes, it's all about the Max at Boeing and we see the pickup in rates.
And the way for the most part the way our business works.
We think of as you think of it this way.
If Boeing is going to produce.
40 planes a month.
FY 'twenty, three and I'm, just picking a number out of the year I mean, I don't have anything.
Anything other than using that as an example, but it's in that Zip.
Both.
We really have we really have to start the bearing a year ahead of time.
And that sounds that sounds crazy.
But when you when you look at it.
The lead times.
Our two.
26% to 30 weeks.
So we have to we have to really make sure that.
Get the steel on order probably takes three months to so let's say six months to get the materials three.
Three months to produce the bearing.
And then we get the bearing to the subcontractor, we assumed that he needs immediate three months ahead of time to.
Integrated into his system, maybe it's less we used three months.
Rule of thumb.
So we've already used a year.
Yes.
The subcontract correct or it gets it to Boeing we assume Boeing needs three months to make it into an airplane.
So.
Maybe im wrong by three months somewhere, but I am not wrong by more than that.
Got it.
Helpful. Maybe just one more and I'll get out of the way here I think Peter asked about supply chain and you kind of just mentioned ordering steel.
Your inputs I mean can you can you give any more specifics on where lead times are and then.
We've seen a number of the metal suppliers, putting through surcharges price increases what are you seeing on your pricing environment are you able to pass through the pricing should we expect that to be a potential.
Potential tailwind to margins as you reprice or how should we think about that.
That's.
Interesting.
Question, It probably takes an hour to answer.
Just because of the.
We have to.
Drastically different businesses here, one on the RPC side and one on the Dod side.
And so.
On the Dod side.
The industry the industry has is announced.
Price increase to those industrial distributors.
Sort of the mid single digit kind of kind of level.
Which should take care of a lot of business in that regard.
And on the RPC side.
We normally have.
Contracts, where theres a pass through raw.
Raw materials.
<unk> PPI index.
And so.
Sure.
That's.
Typically how we try to manage this thing and.
So.
It takes it takes more vigilant than it used to take when there was no.
None of this inflation going on to make sure that.
That youre invoicing at the right rate so.
It's just.
It's just where the world is in.
November of 2021.
Got it got it I'll jump back in the queue. Thanks, guys.
We have a follow up question from Pete Dubinsky with Alembic Global Your line is now open.
Okay. Thanks, guys, Hey, guys is there a cost that you have in mind to conduct the Dodge integration a lot of times. When we've seen these companies have kind of an upfront cost before the savings kind of roll through later on down the line. So I'm. Just wondering if you guys have a cost and by then I guess you would adjust that out the adjusted results.
And.
Do you have kind of a completed plan at this point or if it's still a work in process.
Well I think Dan alluded to the transition services agreement over the $1 6 million, there, which is going to cover a lot of the.
The blocking and tackling as we build those businesses together outside of that there is some assistance from some outside vendors and certain processes.
<unk>.
And we will continue.
Continue to track those but it won't be.
We don't have anything significant to tell you about today.
By the end by the end of next quarter.
Two months Dodge under our belt, so we'll be in a lot better position to tell you which of those costs are weaker and which are just going to be transition are onetime costs that are impacting the business that will go away over.
A period of six to nine months.
That's fair enough fair enough guys look forward to it.
And then.
Just on the accounting.
Rob you.
Talked about this briefly previously but.
But I think it was about $5 million in preferred dividends each quarter.
The stock where it is are we we over the Max price right now and they'll start to convert can you just clarify that sure. Yes. So it's a 22, 5%.
Step up from the 185 that you have to track the dividend should be about $5 8 million a quarter just based on the liquidation value of the original securities of 100, and the number of shares issued.
5%. So then each quarter Youll do the if converted calculation to assess which is more diluted and report on that.
This quarter it affected the dividends more dilutive and if you.
I would expect next quarter it should be the same thing the dividend should be the method for calculating EPS.
Okay. Okay.
And what rate did you guys end up getting on the term loan.
It's LIBOR plus a specified margin and the.
Margin currently is 175%.
Okay.
It is running <unk>.
Exactly yes.
Okay, Okay great.
Last one for me I mean, another great core free cash flow.
The working capital management, it looks like it's been really strong.
Working capital kind of reversed the back half of the year or.
How do we think about that kind of.
Headwind in the back half.
Kevin I mean free cash conversion was.
Exceedingly high in the first half of the year.
I think there'll be a weaker Q3 and a stronger Q4, because we are definitely investing in working with and in raw material and a little bit of labor and.
And that will get used.
It used up in this quarter.
Manufacturer finished goods that we hope are shipping in Q4 and early in Q4, so that we start seeing some of the impacts of those collections by the end of Q4.
Okay, Okay, great. Thanks, guys.
Our next question coming from the line of Steve Barger with Keybanc. Your line is open.
Hey, Thanks is that 17% to 18% SG&A rate good for <unk> as well or will there be some leverage on that given the bigger topline yes, no. That's a great question, Steve I'm glad you asked it.
Keep in mind, we only have two months of Dodge. So we haven't realized the full benefit of the scope of Dodge coming in and diluting the SG&A percentage. So I expect it will improve in the fourth quarter.
Okay.
100 basis points or what any way to just think about that for modeling I think thats, probably right I think closer to the 16% to 17 it should fall in there got.
Got you and I know, it's really early days, but cross selling I think was a nice part of this as you integrate the bigger Dodge Salesforce any timeline on the cross selling opportunity realistically, how long does it take to get them aligned to the broader product set.
Well I would say right now we're trying to hold them back.
Sure.
Everybody everybody wants to sell everybody else's product right now.
It's it's the wild west so we have been saying listen let us let us decide how to organize this so that.
Because compensation programs or if everything is different between the two companies.
Right.
So all of that's got to be sort of sorted through before we can but it's.
When you look at where we're going to pick up.
35 men selling force in Canada, and we have two guys in Canada, and we just hired one so.
Making it too.
So now we have.
37, so we've got 37.
Salespeople in Canada, and customer service people and management people in Canada.
<unk> are.
A pretty sizable amount of revenue.
And they are in places that.
I don't even know how to pronounce the name of some of these towns.
So.
And Canada is just one country of.
45.
It's the biggest but it's one company country of four or five.
<unk>.
That are represented like that.
Selling our product to those.
Those other areas is going to be very productive.
As a matter of fact.
The Canadians are coming here as far as I know Thanksgiving week. So that we can have a little paolo on how to organize this.
Good.
And I guess to that point, you know the backlogs at $4 57, a nice increase year over year.
And thats at the quarter and what is that now including Dodge.
Well Thats Dodge doesn't have much of a backlog and they never they never will.
When they are running right.
When would they consider right.
Their backlog is like $10 million.
I think just more book and ship.
They're a book and ship company and it's it's really astounding the way they can.
Manage manage their their mix to be able to support.
Our broad industrial customer base with a very broad mix.
And do it so efficiently every day.
I think right now their backlog is if I had to if I had to projected to be somewhere between $35 million to $50 million.
Okay.
And just last question, Mike you've always been really good at working our Paredo list and trying to find the biggest areas of waste and in an organization any initial thoughts on what you go after first where the big pockets of opportunity are and again I know, it's 12 days in but.
You always have good insights on that.
Oh.
I'm still I'm still.
Big Company, and I am still walking the plants and talking to the folks and looking at the reports.
And making my assessment of where the where the low hanging fruit is in.
I'm just I'm just not there yet.
But.
I'm going to move.
Move my office, so that it's 50% in Greenville, So that I can get a lot closer to the Dutch business and understand what.
What we can do it.
To improve it.
Got it and actually one last one.
Tax rate for <unk>, and <unk>, where should that run.
Yes, so we're still assessing the impact of Dodge there they have a footprint a little bit more and more states than RBC, so that all kind of an impact.
Our full year rate excluding.
<unk>.
Discrete items of that 24 ish percent is probably a good bellwether 'twenty four 'twenty five.
Okay, and I remember that excludes any impact from stock comp.
We will still be in a blackout for the coming quarter.
But eventually that will come off and so you'll start to see those things come through.
Got it thanks.
Our next question coming from the line up Michael CMO with <unk> Securities. Your line is open.
Hey, guys. Thanks for taking the follow ups, Mike maybe on supply chain I think.
When.
You made the Dodge announcements, you've talked about $200 million.
Supply chain that has the potential to be sourced internally.
From RBC.
Current environment, assuming Dodge is seeing stretch lead time seeing.
Their suppliers increased prices does this environment help you accelerate the realization of that $200 million in supply chain savings.
I hope it does.
I think.
I think it's.
Right now I think it's going to be a little difficult to get.
Get their attention on that even though they worked for me.
Because they are so busy.
Jason there chasing their suppliers.
There's nobody nobody left to work on.
My synergy projects.
No.
But yes it is.
It looks like it's going to be it's going to be manageable and we will find a way to we'll find a way to shoehorn that in.
Okay, Okay and then.
Something that hasn't come up.
Thanks.
Can you.
<unk> talked a lot about commercial aerospace and the trends there.
You've got exposure to the F 35, and those rates are coming down it looks like the <unk>.
Defense sector is seeing the range of either legacy program cuts supply chain tightness has your outlook changed for defense at all or any programs that you are seeing that.
Earned into headwinds or Conversely, anything seen a pick up there.
Well.
I would say.
<unk>.
Our major OEM programs in the defense sector.
We're definitely on.
Right.
Great platforms.
If you look at the marine.
Side of the business.
Where is it.
Still the number one defense priority so.
Far as I know is making right yep submarines right. So I mean.
We're strong there and.
Sort of getting stronger.
And we're up considerably on the submarine business and we should we should even be up more than we are today and we're a little bit constrained by production activities Jim Murray.
Nick.
Second quarter top line, and our margins a bit in the quarter, but yes.
Hey, it is what it is.
I mean.
Guys are up substantially from last year.
So that program is solid we have.
The F 35, yes.
Yes.
Maybe backing off a little bit, but I don't I don't think were going to Miss it we have a lot of the platforms.
Of course the return.
Important long term and we have.
Important.
Weapons systems.
That forms that.
Yes.
It really form a good backbone for.
What we're doing.
And what we supply in those.
Those.
According to the people that we speak to.
These things are.
There are always discussing multiyear contracts with us going out several years so.
On that side of it.
That side of the house it looks it looks fine.
Sure.
On the spares side of the house, where they're just replacing parts for equipment that they are using in the field.
That's down a bit and.
And I think it's down a bit.
My theory on that is that we're not working hard enough.
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In that sector.
Inside of RBC.
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Our business because they still spend a lot of money, replacing carts and.
And we are.
We're tooling up our government.
Parts of organization too.
To strengthen it.
To get a little bit deeper into that.
The spare side.
Got it helpful. Alright, thanks, guys.
And I'm showing no further questions at this time I would now like to turn the call back over to Jessa Gardner for any closing remarks, okay well.
Well that completes our conference call for the for the second quarter of fiscal 'twenty, two and I appreciate everybody participating.
And all the good questions and.
Thanks for your interest in RBC bearings, and we will.
I'm sure we'll speak more in February and good day.
Yes.
Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.
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Okay.
Good morning.
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