Good morning, ladies and gentlemen, and welcome to the Q1 2022 RBC Bearings 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 touch-tone telephone. As a reminder, this conference call is being recorded. I will now like to turn the conference over to your host, Mr. Will Stack, with Investor Relations.
Good morning, and thank you for joining us for RBC Bearings' fiscal 2022 first 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 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 conditions. 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, Will, and good morning and welcome to all. It seems like we're having these calls weekly now, and it's just a pleasure to speak to everyone every week. Net sales for the first quarter of fiscal 2022 were $156.2 million versus $156.5 million for the same period last year, a decrease of 0.2%. We had some delays in shipments in one of our divisions as a result of Source Inspection, which is beyond our control, so that's where we are. For the first fiscal quarter of 2022, sales of industrial products represented 48% of net sales, with aerospace products at 52%. Gross margin for the quarter was $63.8 million or 40.8% of net sales. This compares to $59.5 million or 38% for the same period last year. Adjusted operating income was $31.3 million, 20% of net sales compared to last year's 19.1%.
Adjusted EBITDA was $45.3 million, 29% of net sales compared to $43.8 million, and 28% of net sales for the same period last year. We ended the quarter with $296 million in cash and securities and $10.8 million of debt. The quarter was one where the industrial markets continued to show increasing strength. Our industrial OEM businesses, non-marine, demonstrated a quarter-over-quarter bounce of 42% over last year. Demand was strong in virtually all components of the market except oil and gas, but the latter appears to be making a comeback now in the July quarter. Performance in the industrial aftermarket was almost as impressive with a 32.6% expansion over last year.
We saw demand ranging from excellent to extraordinary in most markets served, and we are looking forward to a strong second quarter from the industrial businesses and expect a continuing but some moderation in demand through the balance of the year. Our strong industrial markets were construction and mining, industrial distribution, semiconductor machinery, machine tool, wind, and train. Turning to aerospace and defense, this sector was off 18.3% for the quarter. Sequentially, when normalized for production days, it was about flat with the preceding period. Aircraft OEM was down almost 22.5%. This can be almost entirely attributed to the slow ramp of the 737 MAX programs through 2021 and into calendar year 2022, a problem that should resolve itself in the quarters ahead as Boeing steps through their monthly production rates from today's 17 per month to January of 2023 of 42 per month.
We are now seeing increases in orders shippable later in the year across all of our plants that service and supply both Boeing and Airbus. Today, we are combing through over 20,000 line items, bearings and assemblies we supply to the industry to ensure we have materials, logistics, and staff in place to seamlessly support the next two years of build rate increases. Regarding our second quarter, we are expecting sales to be between $158 million-$162 million, and I will now turn the call over to Dan and Rob for more detail on the financial performance.
Thank you, Mike. Since Mike has already covered net sales and gross margin, I will jump down to SG&A. SG&A for the first quarter of fiscal 2022 was $29.8 million compared to $26.8 million for the same period last year. The increase was mainly due to higher personnel costs of $2.4 million and $0.6 million of other items. As percentage of net sales, SG&A was 19.1% for the first quarter of fiscal 2022 compared to 17.1% for the same period last year. Other operating expense for the first quarter of fiscal 2022 was $3.2 million compared to expense of $3.8 million for the same period last year. For the first quarter of fiscal 2022, other operating expenses were comprised mainly of $2.6 million of amortization of intangible assets and $0.6 million of restructuring costs and other items.
Other operating expense for the same period last year consisted mainly of $2.5 million in amortization of intangible assets, $1.1 million of restructuring costs, and $0.2 million of other items. Operating income was $30.7 million for the first quarter of fiscal 2022 compared to operating income of $28.8 million for the same period in fiscal 2021. On an adjusted basis, operating income would have been $31.3 million for the first quarter of fiscal 2022 compared to adjusted operating income of $29.9 million for the first quarter of 2021. For the first quarter of 2022, the company reported net income of $26.0 million compared to net income of $22.7 million for the same period last year. On an adjusted basis, net income would have been $26.3 million for the first quarter of fiscal 2022 compared to adjusted net income of $23.6 million for the same period last year.
Diluted earnings per share was $1.03 per share for the first quarter of fiscal 2022 compared to $0.91 per share for the same period last year. On an adjusted basis, diluted earnings per share for the first quarter of fiscal 2022 was $1.04 compared to $0.95 per share for the same period last year. Turning to cash flow in one of our strongest quarters to date, the company generated $53.3 million in cash from operating activities in the first quarter of fiscal 2022 compared to $48.4 million for the same period last year. Capital expenditures were $3.4 million in the first quarter of fiscal 2022 compared to $3.9 million for the same period last year. Total debt as of July 3, 2021, was $10.8 million, and cash and marketable securities on hand was $296.1 million.
I would now like to turn the call back to the operator for the question-and-answer session.
At this time, if you have a question, please press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from Pete Skibitski with Alembic Global Advisors.
Hey, good morning, guys. Long time, no talk.
Hey, Pete.
Yeah, nice quarter. I wanted to start out, Mike, I think you talked about delays in shipments from, I think, one unit because of source inspections. Can you guys maybe quantify how much revenue was impacted by that event, and maybe was it aerospace sales or industrial sales?
Yeah, it was industrial sales, and it's about $2 million.
Okay, okay. Got it. And then on the aerospace, I thought aerospace was interesting because it wasn't you had had four quarters of down aerospace sales, so this should have been an easier comp quarter. I thought maybe, Mike, you mentioned something about fewer days in the quarter or something. Did I hear that right, or am I completely wrong on that?
Yeah, well, there's more days in our fourth quarter than there is in our first quarter, so when you normalize the two, it's about even.
Okay. In the first quarter, was the same number of days in the first quarter of fiscal 2021 or no?
Yeah, yeah, no, it's about the same. Yeah.
Okay, okay. So are you seeing kind of some recovery in demand for some of the other platforms? It's just mainly the MAX that was the headwind this quarter?
Yeah, it's mainly the MAX. I mean, the other platforms are almost incidental to what's going on here. The MAX is really kind of a big deal because when we look, I have to quote industry analysts' numbers because I'm kind of an insider on the aircraft stuff, and I can't quote the exact numbers. But when I look at what the industry expects Boeing to build this year, it's somewhere between 150-160 MAXs through the calendar year, and I think that number is a good number. And next year, it's 300-340, sort of that's the range. And the year after, it's 500.
And so there's been sort of a liquidation of Boeing's inventory because if you look at our first quarter last year, we still had full order books, and we still had full plants, and we were shipping orders to subcontractors and to Boeing that we had on the books. And so that inventory now is clearing the system as well as everybody else's inventory, including Boeing's. So we're seeing this pickup in demand to support the builds next year of sort of in our fourth quarter, some in our third quarter. Frankly, I think we should be if life worked perfectly, and it never does, we should be starting our products a year ahead of their build rate simply because it takes six months to make it simple to make the bearing, and of the six months, probably right now, it's 20 weeks to get this deal.
So we don't have a lot of time to make the bearing, and sometimes the bearing has to get a frequent flyer to get all the outside processing that has to be done. That's the exception to the rule, but still, it's the rule. So yeah, I mean, we should, I think the industry is a little bit delayed right now in turning on the volumes that they need to produce the planes that are expected to be produced. So that calculus falls on us to make sure that we understand what we're obligated to supply and when we're likely to supply it. And so we're going through those planning routines now to make sure that we have the product that the aircraft builders need when they need it.
And if you look at the step-up, I mean, those 30 planes to us or 300 planes next year, 300-340 next year, that's probably worth $45 million to us over the course of 12 months in revenue. So it's a big number for our plants to absorb, and so we're a little we want to get way ahead of the game in terms of getting everybody into position to be able to support that. And then you look further at the skyline chart, and there's another 200-plane step-up to 2023, and so there's going to be a lot of demand headed our way, and the last thing we want is not to be able to execute it efficiently and service the customer on time.
I appreciate all the color. I guess last one for me, just looking at your defense revenue the last three quarters, defense ex-Marine, and I know you have a lot of you're on the F-35 and stuff, but we've seen defense down for a few quarters, and I know a lot of other suppliers have had some F-35 inventory that have had to kind of flush out as Lockheed has kind of slowed things a bit there on an interim basis. So is that what's going on for you guys? Maybe just some interim F-35 headwinds, or do you think you're and maybe you expect it to step back up later this year or next year, or do you just sense that defense is kind of getting some headwinds there just because of the overall budget flattening?
Well, I see Dan's looking at the tables, so I'll.
Well, I think on aerospace OEM defense, I mean, it's Q1 to Q1 last year were only down 3.6%, right? But it's just not big numbers on total sales. It's $20.6 million compared to $21.4 million on the aerospace OEM defense. So it's a little lumpy with the F-35 and the new lot sizes lot coming through and some of the work that we're doing on the military helicopters, but some of that's being offset by the constraint on our missile programs and that we're working on with Lockheed and others.
Okay. Thanks very much, guys.
Your next question comes from Michael Ciarmoli with Truist Securities.
Hey, good morning, guys. Thanks for taking the questions here. Nice results. Maybe just sticking on Aero what Pete was asking, was there any? I mean, the step-down, I guess, on a sequential basis for the Aero OEM was pretty significant. It seems like a 14% step-down maybe. You mentioned the working days. Any other changes on some of the wide-body platforms? I mean, I know you've got a lot of content on the 787, or any way to parse that out? Was it more engine? Was it more airframe content? And yeah, because it seemed like that definitely snuck up on you if there were supposed to be kind of sequential improvements and growth. I mean, it just seemed like a big move down.
Yeah, no, it's all about order rates by Boeing and its subs, and I think right now they're trying to sell the planes they built and liquidate what's in the middle. But I would say that their priority to do that maybe is more extreme than it should be, and it could affect their ability to build planes in the future if they don't turn on the supply chain.
Okay. No, that's helpful. What about anything on the aftermarket side? I know it's kind of a tale of domestic narrow bodies. You guys were, again, I think, sequentially flat there. I mean, are you seeing any noticeable changes on the aftermarket distribution side of Aero?
Well, the aftermarket distribution side of business has been usually, at this stage in the cycle, the distributors would be sort of loading up their inventories knowing that build rate increases were going to be substantial, and the buyers would be pressed with service levels. That would be normal at this stage in the cycle. What's not normal now is so many of the aftermarket distributors are owned by have new owners and new management teams, and they don't have the experience of this cycle. So what they should be doing with their capital right now, they don't appear to be doing it. So the aftermarket, in terms of distribution, what does it look like? Dan's got the charts.
Yeah, for Q1 and FY22, it was around $12.2 million, but compared to Q4, which was a longer quarter, it was $12.3 million. So it's kind of just probably ended up doing a little better than Q4 because it was more production days in Q4.
Okay, okay. What about last one? Oh, go ahead. Sorry.
Yeah, but the repair side of the aftermarket has been a pleasant surprise for us. It's been strong, and it's producing well.
Got it. Last one, you kind of brought up inventories there, but just to shift it maybe to industrial, I think last quarter, you noted that there was so much demand. You had kind of depleted inventory, rushing to replenish. You called out the $2 million headwind, but did you kind of see that same pace of demand persist? I mean, obviously, you had, if I add back the $2 million too, you had sequential uptick there in industrial, but were you able to catch up on inventory to meet demand, or did you lose out on some revenue this quarter?
No, we're making it as fast as we can deliver it. We do have some supply chain challenges getting raw material which we're working.
Okay, okay. Perfect. Thanks, guys. I'll jump back in the queue.
Again, for any questions, please press star one on your telephone keypad. Your next question comes from Ken Newman with KeyBanc.
Hey, good morning, guys.
Good morning.
I wanted to step back to the Aero side a little bit. It was good color in terms of the forward outlook for Aero. Obviously, with the build rates kind of coming up into the second half, I'm curious, how do you weigh that against some of the slower ramps in the large or wide-body platforms as we think about the step-up in the second half for Aero revenue versus the first half? I guess, to simplify it, could that revenue for Aero be up double digits, like 10%, or is the ramp via the build rate going to slow that a little bit?
No, it can be up double digits in the second half. It needs to be up double digits in the second half to support the Boeing build rate. That's how we see it. Let's hope the cards get played that way.
Right. So I guess with that in mind, obviously, you put up really strong gross margins in the quarter. I'm curious how sustainable a 40%+ gross margin could be for the remainder of the year as I kind of think about potential inventory builds and just the expected step-up in Aero growth for the second half?
I think it'll be a lumpy journey quarters, but I think by the end of the year, we should be close or a little north of that 41%.
Is a lot of that just absorption on higher volumes? Any way to kind of parse out how much of that is better pricing or any color on price costs, either for the quarter or just your forward outlook?
Yeah, well, each division that we have keeps a ledger on what price increases we've seen on materials and suppliers and what price increases we've instituted into the market to offset the price increases from materials and suppliers. We always like to be a little bit ahead.
And also, we put significant investment in bringing all these outside services inside for the aerospace business in 2021, and we still haven't seen the full benefit of that investment because of COVID, right? Because the build rates dropped off. So we should see when the aerospace business picks up and the volume picks up, we should see some nice improvement driven by this investment that we made over that 24-month period.
Right. So this will be my last one here. Just trying to put a finer point on price cost here. I guess, obviously, the industrial aftermarket sales were up, as you were mentioning to Mike earlier. I'm guessing the pricing increases for those products within that channel are pretty instantaneous. Can you help us kind of put a finer point on just how much price was a contributor to the sales growth in aftermarket for industrial versus just purely volumes?
Yeah, I'd say on the industrial side, especially industrial distribution in our first quarter, it was in price. And on industrial OEM, in some cases, it is. Other cases, it's the ability to pass through raw material inflation that comes through in the way of surcharges. So every segment's a little different. Every customer's a little different, and every channel's a little different. And there's just a lot of good efficiency happening in the industrial side of our business. When your business is up 30%-40%, you're really absorbing your assets nicely.
Understood. Thanks for the color.
Yep.
Again, that is star one for any questions. At this time, there are no further questions. I will now hand the call back to Dr. Hartnett for closing remarks.
Okay, well, thanks for participating in the call today, and we'll be certainly talking to you again by early November and discussing our third quarter or our second quarter, which we're anticipating another strong quarter. I think.