UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~December 26, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 333-124824

RBC BEARINGS INCORPORATED
(Exact name of registrant as specified in its charter)

Delaware		95-4372080
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer
~~incorporation or organization)~~		Identification No.)

One Tribology Center
Oxford, CT		06478
(Address of principal executive offices)		(Zip Code)

	(203) 267-7001
	(Registrant’s telephone number, including area code)

(203) 267-7001
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol		Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share		ROLL		Nasdaq NMS

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 23, 2020,~~January 22, 2021, RBC Bearings Incorporated had ~~25,101,224~~25,139,635 shares of Common Stock outstanding.

TABLE OF CONTENTS

Part I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

RBC Bearings Incorporated

Consolidated Balance Sheets

(dollars in thousands, except share and per share data)

		September 26, 2020			March 28, 2020			December 26, 2020			March 28, 2020
		(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	166,352		$	103,255		$	126,192		$	103,255
Accounts receivable, net of allowance for doubtful accounts of $1,703 at September 26, 2020 and $1,627 at March 28, 2020			108,078			128,995
Marketable securities									75,539			—
Accounts receivable, net of allowance for doubtful accounts of $1,874 at December 26, 2020 and $1,627 at March 28, 2020									106,506			128,995
Inventory			371,546			367,494			372,104			367,494
Prepaid expenses and other current assets			15,038			12,262			12,001			12,262
Total current assets			661,014			612,006			692,342			612,006
Property, plant and equipment, net			214,347			219,846			212,702			219,846
Operating lease assets, net			29,686			28,953			36,880			28,953
Goodwill			277,784			277,776			278,472			277,776
Intangible assets, net of accumulated amortization of $58,408 at September 26, 2020 and $55,732 at March 28, 2020			159,034			162,747
Intangible assets, net of accumulated amortization of $61,054 at December 26, 2020 and $55,732 at March 28, 2020									157,320			162,747
Other assets			26,020			20,584			31,266			20,584
Total assets		$	1,367,885		$	1,321,912		$	1,408,982		$	1,321,912

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	��	$	39,600		$	51,038		$	39,936		$	51,038
Accrued expenses and other current liabilities			36,468			40,580			36,386			40,580
Current operating lease liabilities			5,808			5,708			5,963			5,708
Current portion of long-term debt			6,634			6,429			6,127			6,429
Total current liabilities			88,510			103,755			88,412			103,755
Deferred income taxes			20,700			16,560			19,391			16,560
Long-term debt, less current portion			13,758			16,583			14,366			16,583
Long-term operating lease liabilities			24,160			23,396			31,347			23,396
Other non-current liabilities			48,653			43,619			50,659			43,619
Total liabilities			195,781			203,913			204,175			203,913

Stockholders’ equity:
Preferred stock, $.01 par value; authorized shares: 10,000,000 at September 26, 2020 and March 28, 2020, respectively; none issued or outstanding			—			—
Common stock, $.01 par value; authorized shares: 60,000,000 at September 26, 2020 and March 28, 2020, respectively; issued shares: 25,970,673 and 25,881,415 at September 26, 2020 and March 28, 2020, respectively			260			259
Stockholders' equity:
Preferred stock, $.01 par value; authorized shares: 10,000,000 at December 26, 2020 and March 28, 2020, respectively; none issued or outstanding									—			—
Common stock, $.01 par value; authorized shares: 60,000,000 at December 26, 2020 and March 28, 2020, respectively; issued shares: 26,011,098 and 25,881,415 at December 26, 2020 and March 28, 2020, respectively									260			259
Additional paid-in capital			425,488			412,400			434,346			412,400
Accumulated other comprehensive loss			(4,593	)		(6,898	)		(510	)		(6,898	)
Retained earnings			812,329			769,219			833,898			769,219
Treasury stock, at cost, 870,223 shares and 838,982 shares at September 26, 2020 and March 28, 2020, respectively			(61,380	)		(56,981	)
Total stockholders’ equity			1,172,104			1,117,999
Total liabilities and stockholders’ equity		$	1,367,885		$	1,321,912
Treasury stock, at cost, 881,096 shares and 838,982 shares at December 26, 2020 and March 28, 2020, respectively									(63,187	)		(56,981	)
Total stockholders' equity									1,204,807			1,117,999
Total liabilities and stockholders' equity								$	1,408,982		$	1,321,912

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Operations

(dollars in thousands, except share and per share data)

(Unaudited)

Three Months Ended Six Months Ended
September 26,
2020 September 28,
2019 September 26,
2020 September 28,
2019
Net sales $ 146,335 $ 181,909 $ 302,828 $ 364,599
Cost of sales 89,739 110,795
186,779
222,791
Gross margin
56,596
71,114 116,049 141,808
Operating expenses:
Selling, general and administrative 26,023 30,774 52,852 60,861
Other, net 4,210 3,031 8,020 5,148
Total operating expenses 30,233 33,805 60,872 66,009
Operating income 26,363 37,309 55,177 75,799
Interest expense, net 343 473 768 1,020
Other non-operating expense 211 195 253 364
Income before income taxes 25,809 36,641 54,156 74,415
Provision for income taxes 5,388 5,371 11,046 12,646
Net income $ 20,421 $ 31,270 $ 43,110 $ 61,769
Net income per common share:
Basic $ 0.82 $ 1.27 $ 1.74 $ 2.52
Diluted $ 0.82 $ 1.26 $ 1.73 $ 2.49
Weighted average common shares:
Basic 24,823,658 24,584,369 24,793,245 24,543,038
Diluted 24,957,158 24,905,173 24,944,608 24,856,561

	Three Months Ended					Nine Months Ended
	December 26, 2020			December 28, 2019		December 26, 2020		December 28, 2019
Net sales	$	145,861		$	177,019	$	448,689	$	541,618
Cost of sales		90,273			106,308		277,052		329,099
Gross margin		55,588			70,711		171,637		212,519
Operating expenses:
Selling, general and administrative		25,739			30,719		78,591		91,580
Other, net		3,308			2,526		11,328		7,674
Total operating expenses		29,047			33,245		89,919		99,254
Operating income		26,541			37,466		81,718		113,265
Interest expense, net		327			466		1,095		1,486
Other non-operating expense (income)		(50	)		217		203		581
Income before income taxes		26,264			36,783		80,420		111,198
Provision for income taxes		4,695			6,268		15,741		18,914
Net income	$	21,569		$	30,515	$	64,679	$	92,284
Net income per common share:
Basic	$	0.87		$	1.24	$	2.61	$	3.75
Diluted	$	0.86		$	1.22	$	2.59	$	3.71
Weighted average common shares:
Basic		24,861,792			24,699,461		24,816,451		24,595,179
Diluted		25,060,812			24,981,480		24,985,848		24,898,635

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(Unaudited)

	Three Months Ended					Six Months Ended				Three Months Ended				Nine Months Ended
	September 26, 2020		September 28, 2019			September 26, 2020		September 28, 2019		December 26, 2020		December 28, 2019		December 26, 2020		December 28, 2019
Net income	$	20,421	$	31,270		$	43,110	$	61,769	$	21,569	$	30,515	$	64,679	$	92,284
Pension and postretirement liability adjustments, net of taxes ⁽¹⁾		259		178			519		356		260		178		779		534
Foreign currency translation adjustments		1,377		(1,869	)		1,786		673		3,823		1,624		5,609		2,297
Total comprehensive income	$	22,057	$	29,579		$	45,415	$	62,798	$	25,652	$	32,317	$	71,067	$	95,115

⁽¹⁾

These adjustments were net of tax expense of $79 and $55 for the three-month periods ended ~~September~~December 26, 2020 and ~~September~~December 28, 2019, respectively and ~~$158~~$237 and ~~$109~~$164 for the ~~six-month~~nine-month periods ended ~~September~~December 26, 2020 and ~~September~~December 28, 2019, respectively.

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of ~~Stockholders’~~Stockholders' Equity

(dollars in thousands)

(Unaudited)

	Common Stock					Additional Paid-in		Accumulated Other Comprehensive			Retained		Treasury Stock						Total Stockholders’			Common Stock					Additional Paid-in		Accumulated Other Comprehensive			Retained		Treasury Stock						Total Stockholders'
	Shares			Amount		Capital		Income/(Loss)			Earnings		Shares			Amount			Equity			Shares			Amount		Capital		Income/(Loss)			Earnings		Shares			Amount			Equity
Balance at March 28, 2020		25,881,415		$	259	$	412,400	$	(6,898	)	$	769,219		(838,982	)	$	(56,981	)	$	1,117,999			25,881,415		$	259	$	412,400	$	(6,898	)	$	769,219		(838,982	)	$	(56,981	)	$	1,117,999
Net income		—			—		—		—			22,689		—			—			22,689			—			—		—		—			22,689		—			—			22,689
Share-based compensation		—			—		5,438		—			—		—			—			5,438			—			—		5,438		—			—		—			—			5,438
Repurchase of common stock		—			—		—		—			—		(31,179	)		(4,391	)		(4,391	)		—			—		—		—			—		(31,179	)		(4,391	)		(4,391	)
Exercise of equity awards		4,200			—		231		—			—		—			—			231			4,200			—		231		—			—		—			—			231
Change in net prior service cost and actuarial losses, net of taxes of $79		—			—		—		260			—		—			—			260			—			—		—		260			—		—			—			260
Issuance of restricted stock, net of forfeitures		56,157			—		—		—			—		—			—			—			56,157			—		—		—			—		—			—			—
Currency translation adjustments		—			—		—		409			—		—			—			409			—			—		—		409			—		—			—			409
Balance at June 27, 2020		25,941,772		$	259	$	418,069	$	(6,229	)	$	791,908		(870,161	)	$	(61,372	)	$	1,142,635			25,941,772		$	259	$	418,069	$	(6,229	)	$	791,908		(870,161	)	$	(61,372	)	$	1,142,635
Net income		—			—		—		—			20,421		—			—			20,421			—			—		—		—			20,421		—			—			20,421
Share-based compensation		—			—		5,231		—			—		—			—			5,231			—			—		5,231		—			—		—			—			5,231
Repurchase of common stock		—			—		—		—			—		(62	)		(8	)		(8	)		—			—		—		—			—		(62	)		(8	)		(8	)
Exercise of equity awards		31,200			1		2,188		—			—		—			—			2,189			31,200			1		2,188		—			—		—			—			2,189
Change in net prior service cost and actuarial losses, net of taxes of $79		—			—		—		259			—		—			—			259			—			—		—		259			—		—			—			259
Issuance of restricted stock, net of forfeitures		(2,299	)		—		—		—			—		—			—			—			(2,299	)		—		—		—			—		—			—			—
Currency translation adjustments		—			—		—		1,377			—		—			—			1,377			—			—		—		1,377			—		—			—			1,377
Balance at September 26, 2020		25,970,673		$	260	$	425,488	$	(4,593	)	$	812,329		(870,223	)	$	(61,380	)	$	1,172,104			25,970,673		$	260	$	425,488	$	(4,593	)	$	812,329		(870,223	)	$	(61,380	)	$	1,172,104
Net income																							—			—		—		—			21,569		—			—			21,569
Share-based compensation																							—			—		5,173		—			—		—			—			5,173
Repurchase of common stock																							—			—		—		—			—		(10,873	)		(1,807	)		(1,807	)
Exercise of equity awards																							40,199			—		3,685		—			—		—			—			3,685
Change in net prior service cost and actuarial losses, net of taxes of $79																							—			—		—		260			—		—			—			260
Issuance of restricted stock, net of forfeitures																							226			—		—		—			—		—			—			—
Currency translation adjustments																							—			—		—		3,823			—		—			—			3,823
Balance at December 26, 2020																							26,011,098		$	260	$	434,346	$	(510	)	$	833,898		(881,096	)	$	(63,187	)	$	1,204,807

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of ~~Stockholders’~~Stockholders' Equity (continued)

(dollars in thousands)

(Unaudited)

	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Retained		Treasury Stock						Total Stockholders’			Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Retained		Treasury Stock						Total Stockholders'
	Shares		Amount		Capital		Income/(Loss)			Earnings		Shares			Amount			Equity			Shares		Amount		Capital		Income/(Loss)			Earnings		Shares			Amount			Equity
Balance at March 30, 2019		25,607,196	$	256	$	378,655	$	(7,467	)	$	641,894		(752,913	)	$	(44,772	)	$	968,566			25,607,196	$	256	$	378,655	$	(7,467	)	$	641,894		(752,913	)	$	(44,772	)	$	968,566
Net income		—		—		—		—			30,499		—			—			30,499			—		—		—		—			30,499		—			—			30,499
Share-based compensation		—		—		4,802		—			—		—			—			4,802			—		—		4,802		—			—		—			—			4,802
Repurchase of common stock		—		—		—		—			—		(69,877	)		(9,514	)		(9,514	)		—		—		—		—			—		(69,877	)		(9,514	)		(9,514	)
Exercise of equity awards		4,356		1		275		—			—		—			—			276			4,356		1		275		—			—		—			—			276
Change in net prior service cost and actuarial losses, net of taxes of $54		—		—		—		178			—		—			—			178			—		—		—		178			—		—			—			178
Issuance of restricted stock, net of forfeitures		86,490		—		—		—			—		—			—			—			86,490		—		—		—			—		—			—			—
Impact from adoption of ASU 2018-02		—		—		—		(1,289	)		1,289		—			—			—			—		—		—		(1,289	)		1,289		—			—			—
Currency translation adjustments		—		—		—		2,542			—		—			—			2,542			—		—		—		2,542			—		—			—			2,542
Balance at June 29, 2019		25,698,042	$	257	$	383,732	$	(6,036	)	$	673,682		(822,790	)	$	(54,286	)	$	997,349			25,698,042	$	257	$	383,732	$	(6,036	)	$	673,682		(822,790	)	$	(54,286	)	$	997,349
Net income		—		—		—		—			31,270		—			—			31,270			—		—		—		—			31,270		—			—			31,270
Share-based compensation		—		—		5,059		—			—		—			—			5,059			—		—		5,059		—			—		—			—			5,059
Repurchase of common stock		—		—		—		—			—		(2,048	)		(334	)		(334	)		—		—		—		—			—		(2,048	)		(334	)		(334	)
Exercise of equity awards		138,898		1		10,184		—			—		—			—			10,185			138,898		1		10,184		—			—		—			—			10,185
Change in net prior service cost and actuarial losses, net of taxes of $55		—		—		—		178			—		—			—			178			—		—		—		178			—		—			—			178
Issuance of restricted stock, net of forfeitures		5,677		—		—		—			—		—			—			—			5,677		—		—		—			—		—			—			—
Currency translation adjustments		—		—		—		(1,869	)		—		—			—			(1,869	)		—		—		—		(1,869	)		—		—			—			(1,869	)
Balance at September 28, 2019		25,842,617	$	258	$	398,975	$	(7,727	)	$	704,952		(824,838	)	$	(54,620	)	$	1,041,838			25,842,617	$	258	$	398,975	$	(7,727	)	$	704,952		(824,838	)	$	(54,620	)	$	1,041,838
Net income																						—		—		—		—			30,515		—			—			30,515
Share-based compensation																						—		—		5,135		—			—		—			—			5,135
Repurchase of common stock																						—		—		—		—			—		(10,249	)		(1,700	)		(1,700	)
Exercise of equity awards																						18,419		1		1,615		—			—		—			—			1,616
Change in net prior service cost and actuarial losses, net of taxes of $55																						—		—		—		178			—		—			—			178
Issuance of restricted stock, net of forfeitures																						2,110		—		—		—			—		—			—			—
Currency translation adjustments																						—		—		—		1,624			—		—			—			1,624
Balance at December 28, 2019																						25,863,146	$	259	$	405,725	$	(5,925	)	$	735,467		(835,087	)	$	(56,320	)	$	1,079,206

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

	Six Months Ended						Nine Months Ended
	September 26, 2020			September 28, 2019			December 26, 2020			December 28, 2019
Cash flows from operating activities:
Net income	$	43,110		$	61,769		$	64,679		$	92,284
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		11,744			10,729			17,129			16,209
Deferred income taxes		4,051			898			2,580			249
Amortization of intangible assets		5,089			4,593			7,683			7,066
Amortization of deferred financing costs		259			207			365			365
Share-based compensation		10,669			9,861			15,842			14,996
Other non-cash charges		3,004			75			3,278			90
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		21,267			2,303			23,285			10,283
Inventory		(4,981	)		(13,125	)		(4,717	)		(20,739	)
Prepaid expenses and other current assets		(2,812	)		(5,617	)		(251	)		(2,049	)
Other non-current assets		(6,885	)		(1,777	)		(11,724	)		(6,426	)
Accounts payable		(11,554	)		678			(11,400	)		22
Accrued expenses and other current liabilities		(4,137	)		(5,760	)		(4,575	)		(4,092	)
Other non-current liabilities		5,655			(216	)		8,412			2,937
Net cash provided by operating activities		74,479			64,618			110,586			111,195

Cash flows from investing activities:
Purchase of property, plant and equipment		(6,008	)		(20,216	)		(8,809	)		(27,562	)
Proceeds from sale of assets		10			300			18			300
Purchase of marketable securities								(75,075	)		-
Acquisition of business		245			(33,842	)		245			(33,842	)
Net cash used in investing activities		(5,753	)		(53,758	)		(83,621	)		(61,104	)

Cash flows from financing activities:
Proceeds received from revolving credit facilities		-			9,435			-			9,435
Proceeds received from term loans		-			15,383			-			15,383
Repayments of revolving credit facilities		-			(30,000	)		(773	)		(45,411	)
Repayments of term loans		(3,287	)		-			(3,287	)		-
Repayments of notes payable		(249	)		(235	)		(379	)		(352	)
Finance fees paid in connection with credit facilities and term loans		-			(276	)		-			(276	)
Exercise of stock options		2,420			10,461			6,105			12,077
Repurchase of common stock		(4,399	)		(9,848	)		(6,206	)		(11,548	)
Net cash used in financing activities		(5,515	)		(5,080	)		(4,540	)		(20,692	)

Effect of exchange rate changes on cash		(114	)		734			512			1,045

Cash and cash equivalents:
Increase during the period		63,097			6,514			22,937			30,444
Cash and cash equivalents, at beginning of period		103,255			29,884			103,255			29,884
Cash and cash equivalents, at end of period	$	166,352		$	36,398		$	126,192		$	60,328

Supplemental disclosures of cash flow information:
Cash paid for:
Income taxes	$	6,559		$	17,147		$	12,880		$	21,569
Interest		516			759			737			1,029

See accompanying notes.

RBC Bearings Incorporated

Notes to Unaudited Interim Consolidated Financial Statements

(dollars in thousands, except share and per share data)

1. Basis of Presentation

The interim consolidated financial statements included herein have been prepared by RBC Bearings Incorporated, a Delaware corporation (collectively with its subsidiaries, the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The interim financial statements included with this report have been prepared on a consistent basis with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2020. We condensed or omitted certain information and footnote disclosures normally included in our annual audited financial statements, which we prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP). As used in this report, the terms “we,” “us,” “our,” “RBC” and the “Company” mean RBC Bearings Incorporated and its subsidiaries, unless the context indicates another meaning.

These statements reflect all adjustments, accruals and estimates, consisting only of items of a normal recurring nature, that are, in the opinion of management, necessary for the fair presentation of the consolidated financial condition and consolidated results of operations for the interim periods presented. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Annual Report on Form 10-K.

The results of operations for the three- and ~~six-month~~nine-month periods ended ~~September~~December 26, 2020 are not necessarily indicative of the operating results for the entire fiscal year ending April 3, 2021. The three- and ~~six-month~~nine-month periods ended ~~September~~December 26, 2020 and ~~September~~December 28, 2019 each include 13 weeks and 2639 weeks, respectively. The amounts shown are in thousands, unless otherwise indicated.

2. Significant Accounting Policies

The ~~Company’s~~Company's significant accounting policies are detailed in “Note 2 - Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended March 28, 2020. Significant changes to our accounting policies as a result of adopting new accounting standards are discussed below.

Recent Accounting Standards Adopted

In September 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ~~new~~ guidance replaces the ~~current~~former incurred loss approach with a new expected credit loss impairment model. The new model applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt instruments, net investments in leases, loan commitments and standby letters of credit. Upon initial recognition of the exposure, the expected credit loss model requires entities to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses considers historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics are grouped together when estimating expected credit losses. ASU 2016-13 does not prescribe a specific method to make the estimate, so its application requires significant judgment. The Company adopted this accounting standard update in the first quarter of fiscal 2021 and it did not have a material impact on the ~~Company’s~~Company's consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The objective of this standard update is to simplify the subsequent measurement of goodwill, eliminating Step 2 from the goodwill impairment test. Under this ASU, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting ~~unit’s~~unit's fair value, assuming the loss recognized does not exceed the total amount of goodwill for the reporting unit. The standard update is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Recent Accounting Standards Yet to Be Adopted

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The objective of this standard update is to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This ASU also attempts to improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This standard update is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the effect that the adoption of this ASU will have on the Company’s consolidated financial statements.

Other new pronouncements issued but not effective until after April 3, 2021 are not expected to have a material impact on our financial position, results of operations or liquidity.

3. Revenue from Contracts with Customers

Disaggregation of Revenue

The Company operates inunder four business segments with similar economic characteristics, including nature of the products and production processes, distribution patterns and classes of customers. Revenue is disaggregated within these business segments by our two principal end markets: aerospace and industrial. Comparative information of the Company’s overall revenues for the three- and ~~six-month~~nine-month periods ended ~~September~~December 26, 2020 and ~~September~~December 28, 2019 are as follows:

Principal End Markets

	Three Months Ended												Three Months Ended
	September 26, 2020						September 28, 2019						December 26, 2020						December 28, 2019
	Aerospace		Industrial		Total		Aerospace		Industrial		Total		Aerospace		Industrial		Total		Aerospace		Industrial		Total
Plain	$	51,040	$	20,013	$	71,053	$	70,287	$	19,720	$	90,007	$	48,676	$	20,645	$	69,321	$	67,753	$	19,123	$	86,876
Roller		10,674		10,905		21,579		17,643		14,942		32,585		10,122		12,286		22,408		17,332		14,497		31,829
Ball		7,311		13,788		21,099		5,086		12,338		17,424		6,964		13,711		20,675		6,103		12,372		18,475
Engineered Products		18,116		14,488		32,604		24,368		17,525		41,893		15,895		17,562		33,457		24,958		14,881		39,839
	$	87,141	$	59,194	$	146,335	$	117,384	$	64,525	$	181,909	$	81,657	$	64,204	$	145,861	$	116,146	$	60,873	$	177,019

	Six Months Ended												Nine Months Ended
	September 26, 2020						September 28, 2019						December 26, 2020						December 28, 2019
	Aerospace		Industrial		Total		Aerospace		Industrial		Total		Aerospace		Industrial		Total		Aerospace		Industrial		Total
Plain	$	110,392	$	39,536	$	149,928	$	137,593	$	39,903	$	177,496	$	159,068	$	60,181	$	219,249	$	205,346	$	59,026	$	264,372
Roller		23,904		20,575		44,479		36,956		32,488		69,444		34,026		32,861		66,887		54,288		46,985		101,273
Ball		14,333		25,606		39,939		10,516		24,618		35,134		21,297		39,317		60,614		16,619		36,990		53,609
Engineered Products		37,494		30,988		68,482		48,638		33,887		82,525		53,389		48,550		101,939		73,596		48,768		122,364
	$	186,123	$	116,705	$	302,828	$	233,703	$	130,896	$	364,599	$	267,780	$	180,909	$	448,689	$	349,849	$	191,769	$	541,618

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of orders meeting the definition of a contract under Accounting Standards Codification (ASC) 606 for which work has not been performed or has been partially performed and excludes unexercised contract options. The duration of many of our contracts, as defined by ASC 606, is less than one year. The Company has elected to apply the practical expedient that allows companies to exclude remaining performance obligations with an original expected duration of one year or less. Performance obligations having a duration of more than one year are concentrated in contracts for certain products and services provided to the U.S. government or its contractors. The aggregate amount of the transaction price allocated to remaining performance obligations for such contracts with a duration of more than one year was approximately ~~$259,351~~$255,459 at ~~September~~December 26, 2020. The Company expects to recognize revenue on approximately 59% and ~~88%~~87% of the remaining performance obligations over the next 12 and 24 months, respectively, with the remainder recognized thereafter.

Contract Balances

The timing of revenue recognition, invoicing and cash collections affects accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities) on the consolidated balance sheets.

Contract Assets (Unbilled Receivables) - Pursuant to the over-time revenue recognition model, revenue may be recognized prior to the customer being invoiced. An unbilled receivable is recorded to reflect revenue that is recognized when (1) the cost-to-cost method is applied and (2) such revenue exceeds the amount invoiced to the customer. Current contract assets are included within prepaid expenses and other current assets on the consolidated balance sheets. Noncurrent contract assets are included within other assets on the consolidated balance sheets.

Contract Liabilities (Deferred Revenue) - The Company may receive a customer advance or deposit, or have an unconditional right to receive a customer advance, prior to revenue being recognized. Since the performance obligations related to such advances may not have been satisfied, a contract liability is established. Advance payments are not considered a significant financing component as the timing of the transfer of the related goods or services is at the discretion of the customer. Current contract liabilities are included within accrued expenses and other current liabilities on the consolidated balance sheets. Noncurrent contract liabilities are included within other non-current liabilities on the consolidated balance sheets.

~~These assets and liabilities are reported on the consolidated balance sheets at the end of each reporting period.~~ As of ~~September~~December 26, 2020 and March 28, 2020, accounts receivable with customers, net, were ~~$108,078~~$106,506 and $128,995, respectively. ~~The tables below represent a roll-forward of contract~~Contract assets and contract liabilities ~~for the six-month period ended September 26, 2020:~~were as follows:

Contract Assets - Current ⁽¹⁾

Balance at March 28, 2020 $ 2,604
Additional revenue recognized in excess of billings 3,732
Less: amounts billed to customers (1,732 )
Balance at September 26, 2020 $ 4,604

	December 26, 2020		March 28, 2020
Contract Assets – Current	$	2,094	$	2,604
Contract Assets – Noncurrent		2,128		—
Contract Liabilities – Current		8,813		11,116
Contract Liabilities – Noncurrent		3,527		2,427

⁽¹⁾

~~Included within prepaid expenses and other current assets on the consolidated balance sheets.~~

During the three- and nine-month periods ended December 26, 2020, we recognized $2,291 and $10,056 of our current contract liabilities that existed at March 28, 2020 as revenue. During the three- and nine- month periods ended December 26, 2020, we recognized $769 of our noncurrent contract liabilities that existed at March 28, 2020 as revenue.

Contract Liabilities – Current ⁽²⁾

Balance at March 28, 2020 $ 11,116
Payments received prior to revenue being recognized 6,611
Revenue recognized (9,326 )
Reclassification (to)/from noncurrent (498 )
Balance at September 26, 2020 $ 7,903

⁽²⁾

Included within accrued expenses and other current liabilities on the consolidated balance sheets. During the first six months of fiscal 2021, the Company recognized revenues of $7,765 that were included within contract liabilites at March 28, 2020.

Contract Liabilities – Noncurrent ⁽³⁾

Balance at March 28, 2020 $ 2,427
Payments received prior to revenue being recognized 395
Reclassification (to)/from current 498
Balance at September 26, 2020 $ 3,320

⁽³⁾

~~Included within other non-current liabilities on the consolidated balance sheets.~~

~~As of September 26, 2020, the Company did not have any contract assets classified as noncurrent on the consolidated balance sheet.~~

4. Accumulated Other Comprehensive Income (Loss)

The components of comprehensive income (loss) that relate to the Company are net income, foreign currency translation adjustments, and pension plan and postretirement benefits.

The following summarizes the activity within each component of accumulated other comprehensive income (loss), net of taxes:

	Currency Translation			Pension and Postretirement Liability			Total			Currency Translation			Pension and Postretirement Liability			Total
Balance at March 28, 2020	$	(582	)	$	(6,316	)	$	(6,898	)	$	(582	)	$	(6,316	)	$	(6,898	)
Other comprehensive income before reclassifications		1,786			—			1,786			5,609			—			5,609
Amounts reclassified from accumulated other comprehensive income		—			519			519			—			779			779
Net current period other comprehensive income		1,786			519			2,305			5,609			779			6,388
Balance at September 26, 2020	$	1,204		$	(5,797	)	$	(4,593	)
Balance at December 26, 2020										$	5,027		$	(5,537	)	$	(510	)

5. Net Income Per Common Share

Basic net income per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding.

Diluted net income per common share is computed by dividing net income by the sum of the weighted-average number of common shares and dilutive common share equivalents then outstanding using the treasury stock method. Common share equivalents consist of the incremental common shares issuable upon the vesting or exercise of stock awards.

The table below reflects the calculation of weighted-average shares outstanding for each period presented as well as the computation of basic and diluted net income per common share:

Three Months Ended Six Months Ended
September 26,
2020 September 28,
2019 September 26,
2020 September 28,
2019

Net income $ 20,421 $ 31,270 $ 43,110 $ 61,769

Denominator for basic net income per common share — weighted-average shares outstanding 24,823,658 24,584,369 24,793,245 24,543,038
Effect of dilution due to employee stock awards 133,500 320,804 151,363 313,523
Denominator for diluted net income per common share — weighted-average shares outstanding 24,957,158 24,905,173 24,944,608 24,856,561

Basic net income per common share $ 0.82 $ 1.27 $ 1.74 $ 2.52

Diluted net income per common share $ 0.82 $ 1.26 $ 1.73 $ 2.49

	Three Months Ended				Nine Months Ended
	December 26, 2020		December 28, 2019		December 26, 2020		December 28, 2019

Net income	$	21,569	$	30,515	$	64,679	$	92,284

Denominator for basic net income per common share — weighted-average shares outstanding		24,861,792		24,699,461		24,816,451		24,595,179
Effect of dilution due to employee stock awards		199,020		282,019		169,397		303,456
Denominator for diluted net income per common share — weighted-average shares outstanding		25,060,812		24,981,480		24,985,848		24,898,635

Basic net income per common share	$	0.87	$	1.24	$	2.61	$	3.75

Diluted net income per common share	$	0.86	$	1.22	$	2.59	$	3.71

At ~~September~~December 26, 2020, ~~502,861~~443,294 employee stock options and ~~115,185~~1,000 restricted shares have been excluded from the calculation of diluted earnings per share. At ~~September~~December 28, 2019, ~~209,040~~217,470 employee stock options and no restricted shares have been excluded from the calculation of diluted earnings per share. The inclusion of these employee stock options and restricted shares would be anti-dilutive.

6. Cash and Cash Equivalents and Marketable Securities

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

~~Short-term investments, if any, are~~At December 26, 2020, the Company held $75,539 of short-term marketable securities comprised of ~~equity securities and~~mutual funds as part of the Company’s investment strategy. These investments are measured at fair value by using quoted prices in active markets and are classified as Level 1 of the valuation hierarchy. These mutual funds can be liquidated at the Company’s discretion. They are held for investment and are not considered debt securities. Preservation of principal is the primary goal of our cash and investment policy. Pursuant to our established investment guidelines, we strive to achieve high levels of credit quality, liquidity and diversification. Our investment guidelines do not permit us to invest in puts, calls, strips, short sales, straddles, options, commodities, precious metals, futures or investments on margin.

7. Inventory

Inventories are stated at the lower of cost or net realizable value, using the first-in, first-out method, and are summarized below:

	September 26, 2020		March 28, 2020		December 26, 2020		March 28, 2020
Raw materials	$	52,807	$	51,362	$	56,289	$	51,362
Work in process		89,310		97,286		89,121		97,286
Finished goods		229,429		218,846		226,694		218,846
	$	371,546	$	367,494	$	372,104	$	367,494

8. Debt

The balances payable under all borrowing facilities are as follows:

	September 26, 2020			March 28, 2020			December 26, 2020			March 28, 2020
Revolver and term loan facilities	$	15,818		$	18,593		$	15,695		$	18,593
Debt issuance costs		(1,430	)		(1,687	)		(1,328	)		(1,687	)
Other		6,004			6,106			6,126			6,106
Total debt		20,392			23,012			20,493			23,012
Less: current portion		6,634			6,429			6,127			6,429
Long-term debt	$	13,758		$	16,583		$	14,366		$	16,583

The current portion of long-term debt as of ~~September~~December 26, 2020 includes the current portion of the foreign term loan, foreign revolving facility and the Schaublin mortgage, all of which are discussed below in further detail.

Domestic Credit Facility

The Company’s credit agreement with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer, and the other lenders party thereto (the “Credit Agreement”) provides the Company with a $250,000 revolving credit facility (the “Revolver”), which expires on January 31, 2024. Debt issuance costs associated with the Credit Agreement totaled $852 and will be amortized through January 31, 2024 along with the unamortized debt issuance costs remaining from the Company’s prior credit agreement. As of December 26, 2020, $1,220 in unamortized debt issuance costs remain.

Amounts outstanding under the Revolver generally bear interest at (a) a base rate determined by reference to the higher of (1) Wells Fargo’s prime lending rate, (2) the federal funds effective rate plus 1/2 of 1% and (3) the one-month LIBOR rate plus 1%, or (b) LIBOR plus a specified margin, depending on the type of borrowing being made. The applicable margin is based on the ~~Company’s~~Company's consolidated ratio of total net debt to consolidated EBITDA at each measurement date. Currently, the ~~Company’s~~Company's margin is 0.00% for base rate loans and 0.75% for LIBOR loans.

The Credit Agreement requires the Company to comply with various covenants including, among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.50 to 1. The Credit Agreement allows the Company to, among other things, make distributions to shareholders, repurchase its stock, incur other debt or liens, or acquire or dispose of assets provided that the Company complies with certain requirements and limitations of the Credit Agreement. As of ~~September~~December 26, 2020, the Company was in compliance with all such covenants.

The Company’s domestic subsidiaries have guaranteed the Company’s obligations under the Credit Agreement, and the Company’s obligations and the domestic subsidiaries’ guarantee are secured by a pledge of substantially all of the domestic assets of the Company and its domestic subsidiaries.

Approximately $3,700 of the Revolver is being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs. ~~As of September 26, 2020, $1,319 in unamortized debt issuance costs remain.~~ The Company has the ability to borrow up to an additional $246,300 under the Revolver as of ~~September~~December 26, 2020.

Foreign Term Loan and Revolving Credit Facility

On August 15, 2019, one of our foreign subsidiaries, Schaublin SA (“Schaublin”), entered into two separate credit agreements (the “Foreign Credit Agreements”) with Credit Suisse (Switzerland) Ltd. to finance the acquisition of Swiss Tool and provide future working capital. The Foreign Credit Agreements provided Schaublin with a CHF 15,000 (approximately $15,383) term loan (the “Foreign Term Loan”), which expires on July 31, 2024 and a CHF 15,000 (approximately $15,383) revolving credit facility (the “Foreign Revolver”), which continues in effect until terminated by either Schaublin or Credit Suisse. Debt issuance costs associated with the Foreign Credit Agreements totaled CHF 270 (approximately $277) and will be amortized throughout the life of the Foreign Credit Agreements. As of December 26, 2020, approximately $108 in unamortized debt issuance costs remain.

Amounts outstanding under the Foreign Term Loan and the Foreign Revolver generally bear interest at LIBOR plus a specified margin. The applicable margin is based on Schaublin’s ratio of total net debt to consolidated EBITDA at each measurement date. Currently, Schaublin’s margin is 1.00%.

The Foreign Credit Agreements require Schaublin to comply with various covenants, which are tested annually on March 31. These covenants include, among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.00 to 1 as of March 31, 2020 and not greater than 2.50 to 1 as of March 31, 2021 and thereafter. Schaublin is also required to maintain an economic equity of CHF 20,000 at all times. The Foreign Credit Agreements allow Schaublin to, among other things, incur other debt or liens and acquire or dispose of assets provided that Schaublin complies with certain requirements and limitations of the Foreign Credit Agreements. As of March 31, 2020, Schaublin was in compliance with all such covenants.

Schaublin’s parent company, Schaublin Holding, has guaranteed Schaublin’s obligations under the Foreign Credit Agreements. Schaublin Holding’s guaranty and the Foreign Credit Agreements are secured by a pledge of the capital stock of Schaublin. In addition, the Foreign Term Loan is secured with pledges of the capital stock of the top company and the three operating companies in the Swiss Tool ~~System~~ group of companies.

As of ~~September~~December 26, 2020, there was approximately ~~$2,906~~$2,243 outstanding under the Foreign Revolver and approximately ~~$12,912~~$13,452 outstanding under the Foreign Term Loan. These borrowings have been classified as Level 2 of the valuation hierarchy. ~~As of September 26, 2020, approximately $111 in unamortized debt issuance costs remain.~~ Schaublin has the ability to borrow up to an additional ~~$13,235~~$14,575 under the Foreign Revolver as of ~~September~~December 26, 2020.

Schaublin’s required future annual principal payments are approximately ~~$6,134~~$5,606 for the next ~~twelve~~12 months and approximately ~~$3,228~~$3,363 for each ~~year for~~of the ~~next~~following three years.

Other Notes Payable

~~On October 1,~~In 2012 Schaublin purchased the land and building that it ~~occupied and had been leasing~~occupies for approximately $14,910. Schaublin obtained a 20-year fixed-rate mortgage of approximately $9,857 at an interest rate of 2.9%. The balance of the purchase price of approximately $5,053 was paid from cash on hand. The balance on this mortgage as of ~~September~~December 26, 2020 was approximately ~~$6,004~~$6,126 and has been classified as Level 2 of the valuation hierarchy.

The Company’s required future annual principal payments are approximately ~~$500~~$521 each year for the next five years and ~~$3,504~~$3,521 thereafter.

9.Income Taxes

The Company files income tax returns in numerous U.S. and foreign jurisdictions, with returns subject to examination for varying periods, but generally back to and including the year ending April 2, 2005. The Company is no longer subject to U.S. federal tax examination by the Internal Revenue Service for years ending before April 1, 2017.

The effective income tax rates for the three-month periods ended ~~September~~December 26, 2020 and ~~September~~December 28, 2019 were ~~20.9%~~17.9% and ~~14.7%~~17.0%, respectively. In addition to discrete items, the effective income tax rates for these periods ~~are~~were different from the U.S. statutory rates due to the foreign-derived intangible income provision and U.S. credit for increasing research activities, which ~~decrease~~decreased the rate, and state income taxes, which ~~increase~~increased the rate.

The effective income tax rate for the three-month period ended ~~September~~December 26, 2020 of ~~20.9% includes $364~~17.9% included $1,003 of tax benefits associated with share-based compensation. The effective income tax rate without discrete items for the three-month period ended ~~September~~December 26, 2020 would have been ~~22.0%~~21.4%. The effective income tax rate for the three-month period ended ~~September~~December 28, 2019 of ~~14.7% includes $2,529~~17.0% included $857 of tax benefits associated with share-based compensation. The third quarter provision for fiscal 2020 was also impacted by $567 of tax benefit associated with the decrease in the Company’s unrecognized tax positions related to the statute of limitations expiration. The effective income tax rate without discrete items for the three-month period ended ~~September~~December 28, 2019 would have been ~~21.3%~~20.9%. The Company believes it is reasonably possible that some of its unrecognized tax positions may be effectively settled within the next ~~twelve~~12 months due to the closing of audits and the statute of limitations expiring in varying jurisdictions. The decrease in the Company’s unrecognized tax positions, pertaining primarily to federal and state credits and state tax, is estimated to be approximately $1,524.

Income tax expense for the ~~six-month~~nine-month period ended ~~September~~December 26, 2020 was ~~$11,046~~$15,741 compared to ~~$12,646~~$18,914 for the ~~six-month~~nine-month period ended ~~September~~December 28, 2019. Our effective income tax rate for the ~~six-month~~nine-month period ended ~~September~~December 26, 2020 was ~~20.4%~~19.6% compared to 17.0% for the ~~six-month~~nine-month period ended ~~September~~December 28, 2019. The effective income tax rate for the ~~six-month~~nine-month period ended ~~September~~December 26, 2020 of ~~20.4% includes $679~~19.6% included $1,682 of tax benefits associated with share-based compensation. The effective income tax rate without these benefits and other items for the ~~six-month~~nine-month period ended ~~September~~December 26, 2020 would have been ~~21.6%~~21.5%. The effective income tax rate for the ~~six-month~~nine-month period ended ~~September~~December 28, 2019 of 17.0% included ~~$3,039~~$3,896 of tax benefits associated with share-based compensation and $477 of tax benefits associated with the decrease in the Company’s unrecognized tax positions related to statute of limitations expiration and $241 of tax ~~benefits~~benefit associated with other permanent adjustments from filing the Company’s fiscal 2018 foreign tax returns. The effective income tax rate without these benefits and other items for the ~~six-month~~nine-month period ended ~~September~~December 28, 2019 would have been ~~21.3%~~21.2%.

10. Reportable Segments

The Company operates through operating segments for which separate financial information is available, and for which operating results are evaluated regularly by the ~~Company’s~~Company's chief operating decision maker in determining resource allocation and assessing performance. Those operating segments are aggregated as reportable segments as they have similar economic characteristics, including nature of the products and production processes, distribution patterns and classes of customers.

The Company has 4 reportable business segments, Plain Bearings, Roller Bearings, Ball Bearings and Engineered Products, which are described below.

Plain Bearings.Plain bearings are produced with either self-lubricating or metal-to-metal designs and consists of several sub-classes, including rod end bearings, spherical plain bearings and journal bearings. Unlike ball bearings, which are used in high-speed rotational applications, plain bearings are primarily used to rectify inevitable misalignments in various mechanical components.

Roller Bearings.Roller bearings are anti-friction bearings that use rollers instead of balls. The Company manufactures four basic types of roller bearings: heavy-duty needle roller bearings with inner rings, tapered roller bearings, track rollers and aircraft roller bearings.

Ball Bearings.The Company manufactures four basic types of ball bearings: high precision aerospace, airframe control, thin section and commercial ball bearings, which are used in high-speed rotational applications.

Engineered Products. Engineered Products consists of highly engineered hydraulics, fasteners, collets and precision components used in aerospace, marine and industrial applications.

Segment performance is evaluated based on segment net sales and gross margin. Items not allocated to segment operating income include corporate administrative expenses and certain other amounts.

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	September 26, 2020			September 28, 2019			September 26, 2020			September 28, 2019			December 26, 2020			December 28, 2019			December 26, 2020			December 28, 2019
Net External Sales
Plain	$	71,053		$	90,007		$	149,928		$	177,496		$	69,321		$	86,876		$	219,249		$	264,372
Roller		21,579			32,585			44,479			69,444			22,408			31,829			66,887			101,273
Ball		21,099			17,424			39,939			35,134			20,675			18,475			60,614			53,609
Engineered Products		32,604			41,893			68,482			82,525			33,457			39,839			101,939			122,364
	$	146,335		$	181,909		$	302,828		$	364,599		$	145,861		$	177,019		$	448,689		$	541,618
Gross Margin
Plain	$	29,750		$	35,700		$	61,827		$	69,814		$	27,841		$	35,016		$	89,668		$	104,830
Roller		6,236			13,396			14,643			27,920			7,626			14,048			22,269			41,968
Ball		9,129			7,503			17,056			15,302			9,183			8,184			26,239			23,486
Engineered Products		11,481			14,515			22,523			28,772			10,938			13,463			33,461			42,235
	$	56,596		$	71,114		$	116,049		$	141,808		$	55,588		$	70,711		$	171,637		$	212,519
Selling, General & Administrative Expenses
Plain	$	5,276		$	6,534		$	10,547		$	13,048		$	5,443		$	6,726		$	15,990		$	19,774
Roller		1,162			1,647			2,401			3,261			1,125			1,632			3,526			4,893
Ball		1,289			1,574			2,635			3,207			1,293			1,598			3,928			4,805
Engineered Products		3,838			4,434			7,650			8,737			3,771			4,410			11,421			13,147
Corporate		14,458			16,585			29,619			32,608			14,107			16,353			43,726			48,961
	$	26,023		$	30,774		$	52,852		$	60,861		$	25,739		$	30,719		$	78,591		$	91,580
Operating Income
Plain	$	23,472		$	28,255		$	48,873		$	55,080		$	20,830		$	27,503		$	69,703		$	82,583
Roller		4,481			11,734			11,580			24,304			6,339			12,427			17,919			36,731
Ball		7,803			5,907			14,354			12,044			7,835			6,579			22,189			18,623
Engineered Products		6,112			8,423			12,093			17,425			6,341			8,274			18,434			25,699
Corporate		(15,505	)		(17,010	)		(31,723	)		(33,054	)		(14,804	)		(17,317	)		(46,527	)		(50,371	)
	$	26,363		$	37,309		$	55,177		$	75,799		$	26,541		$	37,466		$	81,718		$	113,265
Intersegment Sales
Plain	$	1,212		$	1,509		$	2,774		$	3,356		$	1,500		$	1,638		$	4,274		$	4,994
Roller		2,171			4,023			5,549			7,224			1,633			3,498			7,182			10,722
Ball		464			916			1,131			1,585			777			585			1,908			2,170
Engineered Products		6,832			10,751			17,481			21,573			7,182			11,449			24,663			33,022
	$	10,679		$	17,199		$	26,935		$	33,738		$	11,092		$	17,170		$	38,027		$	50,908

All intersegment sales are eliminated in consolidation.

11. Acquisition

On August 15, 2019, the Company, through its Schaublin SA subsidiary, acquired all of the outstanding shares of Swiss Tool for a purchase price of approximately $33,597 (CHF 32,768). We have finalized the purchase price allocation with no material adjustments subsequent to March 28, 2020.

12. Restructuring and Consolidation

InDuring the ~~second~~third quarter of fiscal 2021, the Company ~~made the decision~~continued its efforts to consolidate ~~two~~certain manufacturing facilities to increase efficiencies of ~~its manufacturing facilities.~~our operations. This resulted in ~~$2,579~~$1,692 of ~~non-cash~~ restructuring charges ~~comprised of $1,994~~incurred during the third quarter, including $835 of inventory rationalization costs included within cost of sales, ~~and $585~~all of which were attributable to the Plain segment. The restrucuturing charges also included $355 of fixed asset disposals included within other operating ~~expenses. These~~costs, a $138 lease impairment charge, and $364 of other items. $255 of these restructuring charges ~~are~~within other operating expenses were included within the ~~Roller~~Engineered Products segment and the rest were included within the Plain segment. The Company secured right of use assets obtained in exchange for new operating lease liabilities of $7,662 as part of this restructuring. The Company anticipates additional costs associated with these consolidation efforts of $500 to $1,000 to be incurred in the fourth quarter of fiscal 2021 and the first quarter of fiscal 2022.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement as to Forward-Looking Information

The information in this discussion contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts, included in this quarterly report on Form 10-Q regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management are “forward-looking statements” as the term is defined in the Private Securities Litigation Reform Act of 1995.

The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation: (a) the bearing and engineered products industries are highly competitive, and this competition could reduce our profitability or limit our ability to grow; (b) ~~The~~the loss of a major customer, or a material adverse change in a major customer’s business, could result in a material reduction in our revenues, cash flows and profitability; (c) our results have been and are likely to continue to be impacted by the COVID-19 pandemic; (d) weakness in any of the industries in which our customers operate, as well as the cyclical nature of our ~~customers’~~customers' businesses generally, could materially reduce our revenues, cash flows and profitability; (e) future reductions or changes in U.S. government spending could negatively affect our business; (f) fluctuating supply and costs of subcomponents, raw materials and energy resources, or the imposition of import tariffs, could materially reduce our revenues, cash flows and profitability; (g) our results could be impacted by governmental trade policies and tariffs relating to our supplies imported from foreign vendors or our finished goods exported to other countries; (h) our products are subject to certain approvals and government regulations and the loss of such approvals, or our failure to comply with such regulations, could materially reduce our revenues, cash flows and profitability; (i) the retirement of commercial aircraft could reduce our revenues, cash flows and profitability; (j) work stoppages and other labor problems could materially reduce our ability to operate our business; (k) unexpected equipment failures, catastrophic events or capacity constraints could increase our costs and reduce our sales due to production curtailments or shutdowns; (l) we may not be able to continue to make the acquisitions necessary for us to realize our growth strategy; (m) businesses that we have acquired or that we may acquire in the future may have liabilities ~~which~~that are not known to us; (n) goodwill and indefinite-lived intangibles comprise a significant portion of our total assets, and if we determine that goodwill and indefinite-lived intangibles have become impaired in the future, our results of operations and financial condition in such years may be materially and adversely affected; (o) we depend heavily on our senior management and other key personnel, the loss of whom could materially affect our financial performance and prospects; (p) our international operations are subject to risks inherent in such activities; (q) currency translation risks may have a material impact on our results of operations; (r) we are subject to changes in legislative, regulatory and legal developments involving income and other taxes; (s) we may be required to make significant future contributions to our pension plan; (t) we may incur material losses for product liability and recall-related claims; (u) environmental and health and safety laws and regulations impose substantial costs and limitations on our operations, and environmental compliance may be more costly than we expect; (v) our intellectual property and proprietary information are valuable, and any inability to protect them could adversely affect our business and results of operations; in addition, we may be subject to infringement claims by third parties; (w) cancellation of orders in our backlog could negatively impact our revenues, cash flows and profitability; (x) if we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud; (y) litigation could adversely affect our financial condition; (z) changes in accounting standards or changes in the interpretations of existing standards could affect our financial results; and (aa) risks associated with utilizing information technology systems could adversely affect our operations. Additional information regarding these and other risks and uncertainties is contained in our periodic filings with the SEC, including, without limitation, the risks identified under the heading “Risk Factors” set forth in the Annual Report on Form 10-K for the year ended March 28, 2020. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. We do not intend, and undertake no obligation, to update or alter any forward-looking statement. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appears elsewhere in this Quarterly Report.

Overview

We are a well-known international manufacturer and maker of highly engineered precision bearings and components. Our precision solutions are integral to the manufacture and operation of most machines and mechanical systems, reduce wear to moving parts, facilitate proper power transmission, and reduce damage and energy loss caused by friction. While we manufacture products in all major bearings categories, we focus primarily on the higher end of the bearing and engineered component markets where we believe our value-added manufacturing and engineering capabilities enable us to differentiate ourselves from our competitors and enhance profitability. We believe our unique expertise has enabled us to garner leading positions in many of the product markets in which we primarily compete. With 4243 facilities in 7seven countries, of which 3331 are manufacturing facilities, we have been able to significantly broaden our end markets, products, customer base and geographic reach. We currently operate under four reportable business segments: Plain Bearings, Roller Bearings, Ball Bearings, and Engineered Products. The following further describes these reportable segments:

Plain Bearings. Plain bearings are produced with either self-lubricating or metal-to-metal designs and consists of several sub-classes, including rod end bearings, spherical plain bearings and journal bearings. Unlike ball bearings, which are used in high-speed rotational applications, plain bearings are primarily used to rectify inevitable misalignments in various mechanical components.

Roller Bearings. Roller bearings are anti-friction bearings that use rollers instead of balls. We manufacture four basic types of roller bearings: heavy-duty needle roller bearings with inner rings, tapered roller bearings, track rollers and aircraft roller bearings.

Ball Bearings. We manufacture four basic types of ball bearings: high precision aerospace, airframe control, thin section and commercial ball bearings, which are used in high-speed rotational applications.

Engineered Products. Engineered Products consists of highly engineered hydraulics, fasteners, collets and precision components used in aerospace, marine and industrial applications.

Purchasers of bearings and engineered products include industrial equipment and machinery manufacturers, producers of commercial and military aerospace equipment such as missiles and radar systems, agricultural machinery manufacturers, construction, energy, mining, marine and specialized equipment manufacturers, marine products, automotive and commercial truck manufacturers. The markets for our products are cyclical, and we have endeavored to mitigate this cyclicality by entering into sole-source relationships and long-term purchase agreements, through diversification across multiple market segments within the aerospace and defense and diversified industrial segments, by increasing sales to the aftermarket and by focusing on developing highly customized solutions.

Currently, our strategy is built around maintaining our role as a leading manufacturer of precision-engineered bearings and components through the following efforts:

●

Developing innovative solutions. By leveraging our design and manufacturing expertise and our extensive customer relationships, we continue to develop new products for markets in which there are substantial growth opportunities.

●

Expanding customer base and penetrating end markets. We continually seek opportunities to access new customers, geographic locations and bearing platforms with existing products or profitable new product opportunities.

●

Increasing aftermarket sales. We believe that increasing our aftermarket sales of replacement parts will further enhance the continuity and predictability of our revenues and enhance our profitability. Such sales include sales to third party distributors and sales to OEMs for replacement products and aftermarket services. We will increase the percentage of our revenues derived from the replacement market by continuing to implement several initiatives.

●

Pursuing selective acquisitions. The acquisition of businesses that complement or expand our operations has been and continues to be an important element of our business strategy. We believe that there will continue to be consolidation within the industry that may present us with acquisition opportunities.

Outlook

The COVID-19 health crisis, which was declared a pandemic in March 2020, has led to governments around the world implementing measures to reduce the spread. These measures include quarantines, “shelter in place” orders, travel restrictions, and other measures and have resulted in a slowdown of worldwide economic activity.

Our business is operating as an essential business, and as such, our facilities have remained open, with the exception of a few temporary closures at some of our locations. The COVID-19 pandemic is impacting our commercial aerospace and industrial sales in fiscal 2021. Our commercial aerospace sales continue to face headwinds associated with build rate changes within the industry, while the general decline in global economic activity has had an impact on the industrial markets.

Our production and sales in the ~~second~~third quarter of fiscal 2021 have been negatively affected by the economic implications of the pandemic. We expect that commercial aerospace OEM and aftermarket will continue to be impacted by the year-over-year decline in air travel and changes in aircraft production rates. ~~Conversely,~~Although our sales to aerospace defense markets ~~are expected to grow throughout fiscal 2021. Sales in these markets grew 24.1%~~have grown 9.1% through the first nine months of the year, they were down 6.2% during the ~~second~~third quarter of fiscal 2021 ~~(17.8% for the first six months of fiscal 2021)~~ as compared to the same period last year. ~~Our sales~~Sales to industrial markets ~~will be adversely affected~~benefited from strong sales in our marine, wind and other general industrial business during the ~~next~~ quarter, while we faced headwinds in mining and energy markets. We expect this trend to continue through the remainder of ~~fiscal 2021 due to~~ the ~~slowdown of economic activity compared to last~~fiscal year. Management is continuously evaluating the status of our orders and operations, and restructuring efforts are being implemented where necessary to align our cost structure to the new demand levels we experience in the marketplace.

We experienced solid cash flow generation during the ~~second~~third quarter of fiscal 2021 (as discussed in the section “Liquidity and Capital Resources” below). Management believes that these operating cash flows and available credit under all credit agreements will provide adequate resources to fund internal and external growth initiatives for ~~the foreseeable future, including~~ at least the next ~~twelve~~12 months. As of ~~September~~December 26, 2020, we had cash, ~~and~~ cash equivalents and highly liquid marketable securities of ~~$166.4~~$201.7 million, of which, approximately ~~$13.1~~$16.0 million was cash held by our foreign operations.

The Company expects net sales to be approximately ~~$140.0~~$155.0 million to ~~$145.0~~$160.0 million in the ~~third~~fourth quarter of fiscal 2021.

Results of Operations

(dollars in millions)

	Three Months Ended										Three Months Ended
	September 26, 2020		September 28, 2019		$ Change			% Change			December 26, 2020		December 28, 2019		$ Change			% Change
Total net sales	$	146.3	$	181.9	$	(35.6	)		(19.6	)%	$	145.9	$	177.0	$	(31.1	)		(17.6	)%

Net income	$	20.4	$	31.3	$	(10.9	)		(34.7	)%	$	21.6	$	30.5	$	(8.9	)		(29.3	)%

Net income per common share: diluted	$	0.82	$	1.26							$	0.86	$	1.22
Weighted average common shares: diluted		24,957,158		24,905,173								25,060,812		24,981,480

Our net sales for the three-month period ended ~~September~~December 26, 2020 decreased ~~19.6%~~17.6% compared to the same period last fiscal year. The decrease in net sales was a result of a ~~25.8%~~29.7% decrease in our aerospace markets ~~and an 8.3% decrease~~partially offset by a 5.5% increase in our industrial markets. The decrease in aerospace sales was primarily due to the commercial markets, both OEM and aftermarket, which were down ~~36.7%~~37.2% and 31.2%, respectively. Aerospace defense was also down 6.2% this quarter compared to the same period in the prior year with OEM sales down by 8.2% partially offset by ~~increases~~a 15.9% increase in ~~our defense business of 24.1%.~~aftermarket sales. The ~~decrease~~increase in industrial sales was driven ~~by decreases in the mining, energy, marine and general industrial markets partially offset~~primarily by increases in the ~~semiconductor, military vehicles, wind, nuclear,~~marine and ~~a few other~~certain general industrial markets. ~~Excluding $0.4 million~~Compared to the second quarter of ~~July sales associated with Swiss Tool, which was acquired in August~~ fiscal ~~2020,~~2021, overall net sales have been consistent. Industrial sales have increased by 8.5% while aerospace sales have decreased ~~19.8% year over year.~~by 13.3%. The increase in industrial sales was driven mostly by the marine and certain general industrial markets. The decrease in aerospace sales was attributable to the commercial and defense OEM markets offset by increases to the defense distribution markets.

Net income for the ~~second~~third quarter of fiscal 2021 was ~~$20.4~~$21.6 million compared to ~~$31.3~~$30.5 million for the same period last year. Net income for the ~~second~~third quarter of fiscal 2021 was affected by ~~$2.8~~$1.1 million of after-tax restructuring costs and related items primarily associated with the consolidation of ~~two~~certain manufacturing facilities, ~~and $0.1~~as well as $0.2 million of losses on foreign exchange, partially offset by ~~$0.4~~$1.0 million of tax benefits associated with share-based ~~compensation and $0.1 million of other discrete tax benefits.~~compensation. Net income for the ~~second~~third quarter of fiscal 2020 was affected by ~~$2.5~~$0.9 million of tax ~~benefits~~benefit associated with share-based compensation and $0.6 million of tax benefit associated with the decrease in the Company’s unrecognized tax positions due to the statute of limitations expiration, partially offset by ~~$0.8~~$0.2 million of ~~after-tax~~inventory purchase accounting costs associated with the acquisition of Swiss Tool, ~~$0.1~~$0.2 million of losses on foreign exchange, and $0.1 million of other ~~discrete tax losses.~~items.

Six Months Ended

September 26,
2020

September 28,
2019
$
Change %
Change
Total net sales $ 302.8 $ 364.6 $ (61.8 ) (16.9 )%

Net income $ 43.1 $ 61.8 $ (18.7 ) (30.2 )%

Net income per common share: diluted $ 1.73 $ 2.49
Weighted average common shares: diluted 24,944,608 24,856,561

	Nine Months Ended
	December 26, 2020		December 28, 2019		$ Change			% Change
Total net sales	$	448.7	$	541.6	$	(92.9	)		(17.2	)%

Net income	$	64.7	$	92.3	$	(27.6	)		(29.9	)%

Net income per common share: diluted	$	2.59	$	3.71
Weighted average common shares: diluted		24,985,848		24,898,635

Net sales decreased ~~$61.8~~$92.9 million, or ~~16.9%~~17.2%, for the ~~six-month~~nine-month period ended ~~September~~December 26, 2020 over the same period last year. The decrease in net sales was mainly the result of a ~~20.4%~~23.5% decrease in aerospace sales and a ~~10.8%~~5.7% decrease in industrial sales. The decrease in aerospace sales was primarily due to the commercial markets, both OEM and aftermarket, which were down ~~29.2%~~32.2% and 28.1%, ~~which~~respectively, and was partially offset by defense OEM and aftermarket, which increased ~~17.8%~~ year over ~~year.~~year by 8.4% and 17.1%, respectively. The decrease in industrial sales was primarily due to mining ~~energy,~~ and ~~general industrial markets~~energy, partially offset by increases in the semiconductor, military vehicles, wind, nuclear, and a few other industrial markets. Excluding $2.6 million of sales associated with Swiss Tool, overall net sales decreased ~~17.7%~~17.6% year over year.

Net income for the ~~six~~nine months ended ~~September~~December 26, 2020 was ~~$43.1~~$64.7 million compared to ~~$61.8~~$92.3 million for the same period last year. Net income for the ~~six~~nine month period in fiscal 2021 was affected by ~~$3.7~~$4.8 million of after-tax restructuring costs and related items, and ~~$0.2~~$0.4 million of losses on foreign exchange, partially offset by ~~$0.7~~$1.7 million of tax benefits associated with share-based compensation. The net income of $92.3 million for fiscal 2020 was impacted by $3.9 million of tax benefits associated with share-based compensation, and ~~$0.1 million of other discrete tax benefits. The net income of $61.8 million in fiscal 2020 was impacted by $3.0 million of tax benefits associated with share-based compensation and $0.2~~$0.7 million of discrete tax benefits, partially offset by ~~$0.8~~$1.0 million of after-tax cost associated with the acquisition of Swiss Tool, ~~and $0.3~~$0.5 million of loss on foreign ~~exchange.~~exchange, and $0.2 million of other items.

Gross Margin

	Three Months Ended												Three Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

Gross Margin	$	56.6		$	71.1		$	(14.5	)		(20.4	)%	$	55.6		$	70.7		$	(15.1	)		(21.4	)%
Gross Margin %		38.7	%		39.1	%								38.1	%		39.9	%

Gross margin was ~~38.7%~~38.1% of net sales for the ~~second~~third quarter of fiscal 2021 compared to ~~39.1%~~39.9% for the ~~second~~third quarter of fiscal 2020. ~~The decrease in gross~~Gross margin ~~as a percentage~~for the third quarter of ~~net sales~~fiscal 2021 was ~~primarily due to $2.0~~impacted by $0.8 million in inventory rationalization costs associated with the consolidation of ~~two~~certain manufacturing ~~facilities partially offset~~facilities. The year-over-year decrease in gross margin as a percentage of sales was driven by ~~product mix.~~these additional rationalization costs and reduced sales volumes during the period.

	Six Months Ended												Nine Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

Gross Margin	$	116.0		$	141.8		$	(25.8	)		(18.2	)%	$	171.6		$	212.5		$	(40.9	)		(19.2	)%
Gross Margin %		38.3	%		38.9	%								38.3	%		39.2	%

Gross margin was 38.3% of net sales for the first ~~six~~nine months of fiscal 2021 compared to ~~38.9%~~39.2% for the same period last year. Although gross margin dollars decreased year over year, resulting from current economic conditions, gross margin as a percentage of net sales is consistent due to product mix and cost containment efforts during the period. Gross margin for the first ~~six~~nine months of fiscal 2021 was ~~also~~ impacted by $0.8 million of capacity inefficiencies driven by the decrease in volume and ~~$2.0~~$2.8 million in inventory rationalization costs associated with the consolidation of ~~two~~certain manufacturing ~~facilities, partially offset by beneficial product mix.~~facilities.

Selling, General and Administrative

	Three Months Ended												Three Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

SG&A	$	26.0		$	30.8		$	(4.8	)		(15.4	)%	$	25.7		$	30.7		$	(5.0	)		(16.2	)%
% of net sales		17.8	%		16.9	%								17.6	%		17.4	%

SG&A expenses for the ~~second~~third quarter of fiscal 2021 was ~~$26.0~~$25.7 million, or ~~17.8%~~17.6% of net sales, as compared to ~~$30.8~~$30.7 million, or ~~16.9%~~17.4% of net sales, for the same period of fiscal 2020. This reduction was due to decreases in personnel costs of ~~$4.9~~$4.4 million, ~~partially offset by~~professional fees of $0.1 million, and $0.5 million of other items.

	Six Months Ended												Nine Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

SG&A	$	52.9		$	60.9		$	(8.0	)		(13.2	)%	$	78.6		$	91.6		$	(13.0	)		(14.2	)%
% of net sales		17.5	%		16.7	%								17.5	%		16.9	%

SG&A expenses decreased by ~~$8.0~~$13.0 million to ~~$52.9~~$78.6 million for the first ~~six~~nine months of fiscal 2021 compared to ~~$60.9~~$91.6 million for the same period last year. This decrease iswas primarily due to ~~$8.7~~reductions of $13.1 million ~~of reductions~~ in personnel costs, ~~and~~partially offset by $0.1 million of other ~~items partially offset by $0.8 million of additional share-based compensation.~~items.

Other, Net

	Three Months Ended											Three Months Ended
	September 26, 2020			September 28, 2019			$ Change		% Change			December 26, 2020			December 28, 2019			$ Change		% Change

Other, net	$	4.2		$	3.0		$	1.2		38.9	%	$	3.3		$	2.5		$	0.8		31.0	%
% of net sales		2.9	%		1.7	%							2.3	%		1.4	%

Other operating expenses for the ~~second~~third quarter of fiscal 2021 totaled ~~$4.2~~$3.3 million compared to ~~$3.0~~$2.5 million for the same period last year. For the ~~second~~third quarter of fiscal 2021, other operating expenses included ~~$1.5~~$2.6 million of amortization of intangible assets, $0.5 million of restructuring costs and related items, ~~$2.6 million of amortization of intangible assets~~ and ~~$0.1~~$0.2 million of other costs. Other operating expenses last year were comprised mainly of ~~$2.3~~$2.5 million of amortization of intangible assets and $0.1 million of restructuring costs, partially offset by $0.1 million of other income.

	Nine Months Ended
	December 26, 2020			December 28, 2019			$ Change		% Change

Other, net	$	11.3		$	7.7		$	3.6		47.6	%
% of net sales		2.5	%		1.4	%

Other operating expenses for the first nine months of fiscal 2021 totaled $11.3 million compared to $7.7 million for the same period last year. For the first nine months of fiscal 2021, other operating expenses were comprised mainly of $7.7 million in amortization of intangibles, $3.1 million of restructuring and related items, $0.4 million of additions to the allowance for doubtful accounts, and $0.1 million of other items. For the first nine months of fiscal 2020, other operating expenses were comprised mainly of $7.1 million of amortization of intangibles, $0.9 million of costs associated with the acquisition of Swiss Tool, and $0.2 million of restructuring costs, partially offset by ~~$0.2~~$0.5 million of other income.

Six Months Ended

September 26,
2020

September 28,
2019
$
Change
%
Change

Other, net $ 8.0 $ 5.1 $ 2.9 55.8 %
% of net sales 2.6 % 1.4 %

Other operating expenses for the first six months of fiscal 2021 totaled $8.0 million compared to $5.1 million for the same period last year. For the first six months of fiscal 2021, other operating expenses were comprised mainly of $5.1 million in amortization of intangibles, $2.6 million of restructuring and related items and $0.3 million of other items. For the first six months of fiscal 2020, other operating expenses were comprised mainly of $4.6 million in amortization of intangibles and $0.9 million of costs associated with the acquisition of Swiss Tool, partially offset by $0.4 million of other income.

Interest Expense, Net

Three Months Ended

September 26,
2020

September 28,
2019

$
Change

%
Change

Interest expense, net $ 0.3 $ 0.5 $ (0.2 ) (27.5 )%
% of net sales 0.2 % 0.3 %

	Three Months Ended
	December 26, 2020			December 28, 2019			$ Change			% Change

Interest expense, net	$	0.3		$	0.5		$	(0.2	)		(29.8	)%
% of net sales		0.2	%		0.3	%

Interest expense, net, generally consists of interest charged on the Company’s debt agreements and amortization of deferred financing fees, offset by interest income (see “Liquidity and Capital Resources” below). Interest expense, net, was $0.3 million for the ~~second~~third quarter of fiscal 2021 compared to $0.5 million for the same period last year.

	Six Months Ended												Nine Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

Interest expense, net	$	0.8		$	1.0		$	(0.2	)		(24.7	)%	$	1.1		$	1.5		$	(0.4	)		(26.3	)%
% of net sales		0.3	%		0.3	%								0.2	%		0.3	%

Interest expense, net, was ~~$0.8~~$1.1 million for the first ~~six~~nine months of fiscal 2021 compared to ~~$1.0~~$1.5 million for the first ~~six~~nine months of fiscal 2020.

Other Non-Operating Expense (Income)

	Three Months Ended											Three Months Ended
	September 26, 2020			September 28, 2019			$ Change		% Change			December 26, 2020			December 28, 2019			$ Change			% Change

Other non-operating expense	$	0.2		$	0.2		$	0.0		8.2	%
Other non-operating expense (income)												$	(0.1	)	$	0.2		$	(0.3	)		(123.0	)%
% of net sales		0.1	%		0.1	%							0.0	%		0.1	%

Other non-operating income was $0.1 million for the third quarter of fiscal 2021 compared to $0.2 million of expense for the same period in the prior year. For the third quarter of fiscal 2021, other non-operating income was comprised of $0.5 million of gains on marketable securities, partially offset by $0.2 million of foreign exchange loss and $0.2 million of other items. For the third quarter of fiscal 2020, other non-operating expenses were comprised of $0.2 million of foreign exchange loss.

	Nine Months Ended
	December 26, 2020			December 28, 2019			$ Change			% Change

Other non-operating expense (income)	$	0.2		$	0.6		$	(0.4	)		(65.1	)%
% of net sales		0.0	%		0.1	%

Other non-operating expenses were $0.2 million for the second quarter of fiscal 2021 compared to $0.2 million for the same period in the prior year. For the second quarter of fiscal 2021, other non-operating expenses were comprised of $0.1 million of foreign exchange loss and $0.1 million of other items. For the second quarter of fiscal 2020, other non-operating expenses were primarily comprised of $0.1 million of foreign exchange loss and $0.1 million of other items.

Six Months Ended

September 26,
2020

September 28,
2019
$
Change
%
Change

Other non-operating expense $ 0.3 $ 0.4 $ (0.1 ) (30.5 )%
% of net sales 0.1 % 0.1 %

~~Other non-operating expenses were $0.3 million for the~~ first ~~six~~nine months of fiscal 2021 compared to ~~$0.4~~$0.6 million for the same period in the prior year. For the first ~~six~~nine months of fiscal 2021, other non-operating expenses were comprised of ~~$0.2~~$0.4 million of foreign exchange loss and ~~$0.1~~$0.3 million of other ~~items.~~items, partially offset by $0.5 million of gains on marketable securities. For the first ~~six~~nine months of fiscal 2020, other non-operating expenses were ~~primarily~~ comprised of ~~$0.3~~$0.6 million of foreign exchange ~~loss and $0.1 million of other items.~~loss.

Income Taxes

Three Months Ended

September 26,
2020

September 28,
2019

Income tax expense (benefit) $ 5.4 $ 5.4
Effective tax rate 20.9 % 14.7 %

	Three Months Ended
	December 26, 2020			December 28, 2019

Income tax expense	$	4.7		$	6.3
Effective tax rate		17.9	%		17.0	%

Income tax expense for the three-month period ended ~~September~~December 26, 2020 was ~~$5.4~~$4.7 million compared to ~~$5.4~~$6.3 million for the three-month period ended ~~September~~December 28, 2019. Our effective income tax ~~rate~~rates for the three-month period ended ~~September~~December 26, 2020 was ~~20.9%~~17.9% compared to ~~14.7%~~17.0% for the three-month period ended ~~September~~December 28, 2019. The effective income tax rate for the three-month period ended ~~September~~December 26, 2020 of ~~20.9%~~17.9% includes ~~$0.4~~$1.0 million of tax ~~benefits associated with share-based compensation~~. The effective income tax rate without these benefits for the three-month period ended September 26, 2020 would have been 22.0%. The effective income tax rate for the three-month period ended September 28, 2019 of 14.7% includes $2.5 million of tax benefits associated with share-based compensation. ~~The effective income tax rate without these benefits for the three-month period ended September 28, 2019 would have been 21.3%.~~

Six Months Ended

September 26,
2020

September 28,
2019

Income tax expense (benefit) $ 11.0 $ 12.6
Effective tax rate 20.4 % 17.0 %

Income tax expense for the six-month period ended September 26, 2020 was $11.0 million compared to $12.6 million for the six-month period ended September 28, 2019. Our effective income tax rate for the six-month period ended September 26, 2020 was 20.4% compared to 17.0% for the six-month period ended September 28, 2019. The effective income tax rate for the six-month period ended September 26, 2020 of 20.4% includes $0.7 million of tax benefitsbenefit associated with share-based compensation. The effective income tax rate without these benefits and other items for the ~~six-month~~three-month period ended ~~September~~December 26, 2020 would have been ~~21.6%~~21.4%. The effective income tax rate for the ~~six-month~~three-month period ended ~~September~~December 28, 2019 of 17.0% ~~included $3.0~~includes $0.9 million of tax ~~benefits~~benefit associated with share-based compensation and $0.6 million of tax benefit associated with the decrease in the Company’s unrecognized tax positions related to statute of limitations expiration. The effective income tax rate without this benefit and other items for the three-month period ended December 28, 2019 would have been 20.9%.

	Nine Months Ended
	December 26, 2020			December 28, 2019

Income tax expense	$	15.7		$	18.9
Effective tax rate		19.6	%		17.0	%

Income tax expense for the nine-month period ended December 26, 2020 was $15.7 million compared to $18.9 million for the nine-month period ended December 28, 2019. Our effective income tax rates for the nine-month period ended December 26, 2020 was 19.6% compared to 17.0% for the nine-month period ended December 28, 2019. The effective income tax rate for the nine-month period ended December 26, 2020 of 19.6% includes $1.7 million of tax benefit associated with share-based compensation. The effective income tax rate without these benefits and other items for the nine-month period ended December 26, 2020 would have been 21.5%. The effective income tax rate for the nine-month period ended December 28, 2019 of 17.0% includes $3.9 million of tax benefit associated with share-based compensation and $0.5 million of tax benefit associated with the decrease in the Company’s unrecognized tax positions related to statute of limitations expiration and $0.2 million of tax ~~benefits~~benefit associated with other permanent adjustments from filing the Company’s fiscal 2018 foreign tax returns. The effective income tax rate without ~~these benefits~~this benefit and other items for the ~~six-month~~nine-month period ended ~~September~~December 28, 2019 would have been ~~21.3%~~21.2%.

Segment Information

We have four reportable product segments: Plain Bearings, Roller Bearings, Ball Bearings and Engineered Products. We use gross margin as the primary measurement to assess the financial performance of each reportable segment.

Plain Bearings Segment

	Three Months Ended												Three Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

Total net sales	$	71.1		$	90.0		$	(18.9	)		(21.1	)%	$	69.3		$	86.9		$	(17.6	)		(20.2	)%

Gross margin	$	29.8		$	35.7		$	(5.9	)		(16.7	)%	$	27.8		$	35.0		$	(7.2	)		(20.5	)%
Gross margin %		41.9	%		39.7	%								40.2	%		40.3	%

SG&A	$	5.3		$	6.5		$	(1.2	)		(19.3	)%	$	5.4		$	6.7		$	(1.3	)		(19.1	)%
% of segment net sales		7.4	%		7.3	%								7.9	%		7.7	%

Net sales decreased ~~$18.9~~$17.6 million, or ~~21.1%~~20.2%, for the three months ended ~~September~~December 26, 2020 compared to the same period last year. The ~~21.1%~~20.2% decrease was primarily driven by a decrease of ~~27.4%~~28.2% in our aerospace markets, partially offset by ~~a 1.5%~~an 8.0% increase in the industrial markets. The decrease in aerospace net sales was due to commercial aerospace OEM and aftermarket, partially offset by defense OEM. The increase in industrial net sales was mostly driven by the wind and general industrial markets.

Gross margin as a percentage of net sales was ~~41.9%~~40.2% for the ~~second~~third quarter of fiscal 2021 compared to ~~39.7%~~40.3% for the same period last year. ~~The increase in gross~~Gross margin ~~as a percentage~~for the third quarter of ~~net sales~~fiscal 2021 was ~~mainly due to product mix.~~affected by $0.8 million of inventory rationalization costs associated with the restructuring of certain manufacturing facilities.

	Six Months Ended												Nine Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

Total net sales	$	149.9		$	177.5		$	(27.6	)		(15.5	)%	$	219.2		$	264.4		$	(45.2	)		(17.1	)%

Gross margin	$	61.8		$	69.8		$	(8.0	)		(11.4	)%	$	89.7		$	104.8		$	(15.1	)		(14.5	)%
Gross margin %		41.2	%		39.3	%								40.9	%		39.7	%

SG&A	$	10.5		$	13.0		$	(2.5	)		(19.2	)%	$	16.0		$	19.8		$	(3.8	)		(19.1	)%
% of segment net sales		7.0	%		7.4	%								7.3	%		7.5	%

Net sales decreased ~~$27.6~~$45.2 million, or ~~15.5%~~17.1%, for the ~~six~~nine months ended ~~September~~December 26, 2020 compared to the same period last year. The ~~15.5%~~17.1% decrease was primarily driven by a decrease of ~~19.8%~~22.5% in our aerospace markets ~~and~~offset by a ~~0.9% decrease~~2.0% increase in the industrial markets. The decrease in aerospace was primarily due to commercial OEM and aftermarket, partially offset by defense OEM ~~and~~ aftermarket. The ~~decrease~~increase in industrial sales was mostly driven by the wind and general industrial markets.

Gross margin as a percentage of net sales increased to ~~41.2%~~40.9% for the first ~~six~~nine months of fiscal 2021 compared to ~~39.3%~~39.7% for the same period last year. The increase iswas a result of product mix during the period. Gross margin in the first nine months of fiscal 2021 was affected by $0.8 million of inventory rationalization costs associated with the restructuring of certain manufacturing facilities during the period.

Roller Bearings Segment

	Three Months Ended												Three Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

Total net sales	$	21.6		$	32.6		$	(11.0	)		(33.8	)%	$	22.4		$	31.8		$	(9.4	)		(29.6	)%

Gross margin	$	6.2		$	13.4		$	(7.2	)		(53.4	)%	$	7.6		$	14.0		$	(6.4	)		(45.7	)%
Gross margin %		28.9	%		41.1	%								34.0	%		44.1	%

SG&A	$	1.2		$	1.6		$	(0.4	)		(29.4	)%	$	1.1		$	1.6		$	(0.5	)		(31.1	)%
% of segment net sales		5.4	%		5.1	%								5.0	%		5.1	%

Net sales decreased ~~$11.0~~$9.4 million, or ~~33.8%~~29.6%, for the three months ended ~~September~~December 26, 2020 compared to the same period last year. Our aerospace markets decreased ~~39.5%~~41.6% while our industrial markets decreased by ~~27.0%~~15.3%. The decrease in aerospace was driven by the commercial and defense OEM and ~~commercial and defense aftermarkets.~~aftermarket. The decrease in industrial net sales was primarily due to mining and energy market activity.

Gross margin for the three months ended ~~September~~December 26, 2020 was ~~28.9%~~34.0% of net sales compared to ~~41.1% in~~44.1% for the comparable period in fiscal 2020. This decrease in ~~the~~ gross margin as a percentage of net sales was primarily due to ~~$2.0 million in inventory rationalization costs associated with the consolidation of two manufacturing facilities~~decreased sales volumes and ~~decreased volumes during the period.~~product mix.

	Six Months Ended												Nine Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

Total net sales	$	44.5		$	69.4		$	(24.9	)		(35.9	)%	$	66.9		$	101.3		$	(34.4	)		(34.0	)%

Gross margin	$	14.6		$	27.9		$	(13.3	)		(47.6	)%	$	22.3		$	42.0		$	(19.7	)		(46.9	)%
Gross margin %		32.9	%		40.2	%								33.3	%		41.4	%

SG&A	$	2.4		$	3.3		$	(0.9	)		(26.4	)%	$	3.5		$	4.9		$	(1.4	)		(27.9	)%
% of segment net sales		5.4	%		4.7	%								5.3	%		4.8	%

Net sales decreased ~~$24.9~~$34.4 million, or ~~35.9%~~34.0%, for the ~~six~~nine months ended ~~September~~December 26, 2020 compared to the same period last year. Our industrial markets decreased ~~36.7%~~30.1% while our aerospace markets decreased by ~~35.3%~~37.3%. The decrease in industrial sales was primarily due to mining, energy and general industrial market activity while the decrease in aerospace was driven by the commercial and defense OEM markets and commercial ~~and defense aftermarkets.~~aftermarket.

Gross margin for the ~~six~~nine months ended ~~September~~December 26, 2020 was ~~32.9%~~33.3% of net sales compared to ~~40.2% in~~41.4% for the comparable period in fiscal 2020. This decrease in ~~the~~ gross margin as a percentage of net sales was ~~primarily due to~~driven by a reduction in sales volume and product mix. Further, the first nine months of fiscal 2021 were impacted by $2.0 million in inventory rationalization costs associated with the consolidation of ~~two~~certain manufacturing facilities, ~~and decreased volumes during the period. During the first six months of fiscal 2021, gross margin was also impacted by~~as well as approximately $0.3 million of capacity inefficiencies driven by the impact of the COVID-19 pandemic.

Ball Bearings Segment

	Three Months Ended												Three Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

Total net sales	$	21.1		$	17.4		$	3.7			21.1	%	$	20.7	��	$	18.5		$	2.2			11.9	%

Gross margin	$	9.1		$	7.5		$	1.6			21.7	%	$	9.2		$	8.2		$	1.0			12.2	%
Gross margin %		43.3	%		43.1	%								44.4	%		44.3	%

SG&A	$	1.3		$	1.6		$	(0.3	)		(18.1	)%	$	1.3		$	1.6		$	(0.3	)		(19.1	)%
% of segment net sales		6.1	%		9.0	%								6.3	%		8.6	%

Net sales increased by ~~$3.7~~$2.2 million for the ~~second~~third quarter of fiscal 2021 compared to the same period last year. Our aerospace markets increased ~~43.7%~~14.1% while our industrial sales increased ~~11.8%~~10.8%. The increase in aerospace net sales was primarily driven by the defense and space OEM market. The increase in industrial was primarily due to the semiconductor and general industrial markets.

Gross margin as a percentage of net sales was ~~43.3%~~44.4% for the ~~second~~third quarter of fiscal 2021 as compared to ~~43.1%~~44.3% for the same period last year. ~~The increase in gross margin year over year is a result of additional sales during the period.~~

	Six Months Ended												Nine Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

Total net sales	$	39.9		$	35.1		$	4.8			13.7	%	$	60.6		$	53.6		$	7.0			13.1	%

Gross margin	$	17.1		$	15.3		$	1.8			11.5	%	$	26.2		$	23.5		$	2.7			11.7	%
Gross margin %		42.7	%		43.6	%								43.3	%		43.8	%

SG&A	$	2.6		$	3.2		$	(0.6	)		(17.8	)%	$	3.9		$	4.8		$	(0.9	)		(18.3	)%
% of segment net sales		6.6	%		9.1	%								6.5	%		9.0	%

Net sales increased ~~$4.8~~$7.0 million, or ~~13.7%~~13.1% for the ~~six~~nine months ended ~~September~~December 26, 2020 compared to the same period last year. Our ~~industrial~~aerospace market sales increased ~~4.0%~~28.2% while sales to our ~~aerospace~~industrial markets increased ~~36.3%~~6.3%. The increase in industrial was primarily due to the semiconductor market. The increase in aerospace net sales was primarily driven by the defense and space ~~OEM market.~~markets.

Gross margin as a percentage of net sales decreased to ~~42.7%~~43.3% for the ~~six~~nine months ended ~~September~~December 26, 2020 compared to ~~43.6%~~43.8% for the same period last year. The decrease was primarily due to product mix during the period.

Engineered Products Segment

	Three Months Ended												Three Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

Total net sales	$	32.6		$	41.9		$	(9.3	)		(22.2	)%	$	33.5		$	39.8		$	(6.3	)		(16.0	)%

Gross margin	$	11.5		$	14.5		$	(3.0	)		(20.9	)%	$	10.9		$	13.5		$	(2.6	)		(18.8	)%
Gross margin %		35.2	%		34.6	%								32.7	%		33.8	%

SG&A	$	3.8		$	4.4		$	(0.6	)		(13.4	)%	$	3.8		$	4.4		$	(0.6	)		(14.5	)%
% of segment net sales		11.8	%		10.6	%								11.3	%		11.1	%

Net sales decreased ~~$9.3~~$6.3 million, or ~~22.2%~~16.0%, for the ~~second~~third quarter of fiscal 2021 compared to the same period last year. Our aerospace markets decreased ~~25.7%~~36.3% while our industrial markets ~~decreased 17.3%~~increased 18.0%. Excluding $0.4 million of current year net sales associated with our Swiss Tool division, acquired in August of fiscal 2020, net sales decreased 23.2% for the second quarter of fiscal 2021 compared to the same period last year. The decrease in aerospace net sales ~~were~~was driven by the commercial and defense OEM and ~~aftermarket, partially offset by the defense OEM market.~~aftermarket. The ~~decrease~~increase in our industrial net ~~sales were driven by the marine and general industrial markets.~~

Gross margin as a percentage of net sales was 35.2% for the second quarter of fiscal 2021 compared to 34.6% for the same period last year. This increase was primarily attributable to product mix and cost reductions during the period.

Six Months Ended

September 26,
2020

September 28,
2019

$
Change

%
Change

Total net sales $ 68.5 $ 82.5 $ (14.0 ) (17.0 )%

Gross margin $ 22.5 $ 28.8 $ (6.3 ) (21.7 )%
Gross margin % 32.9 % 34.9 %

SG&A $ 7.7 $ 8.7 $ (1.0 ) (12.4 )%
% of segment net sales 11.2 % 10.6 %

Net sales decreased $14.0 million, or 17.0%, for the six months ended September 26, 2020 compared to the same period last year. Our aerospace sales decreased 22.9% while industrial sales decreased 8.6%. Excluding $2.6 million of sales associated with the acquisition of Swiss Tool in fiscal 2020, overall sales decreased 20.2%. The decrease in aerospace sales was primarily driven by the commercial OEM and aftermarket partially offset by the defense OEM markets. The decrease in industrial sales was driven by the marine and general industrial markets.

Gross margin as a percentage of net sales ~~decreased to 32.9%~~was 32.7% for the ~~six months ended September 26, 2020~~third quarter of fiscal 2021 compared to ~~34.9%~~33.8% for the same period last year. This decrease iswas primarily attributable to product mix and decreased sales volume compared to the same period in the prior year.

	Nine Months Ended
	December 26, 2020			December 28, 2019			$ Change			% Change

Total net sales	$	101.9		$	122.4		$	(20.5	)		(16.7	)%

Gross margin	$	33.5		$	42.2		$	(8.7	)		(20.8	)%
Gross margin %		32.8	%		34.5	%

SG&A	$	11.4		$	13.1		$	(1.7	)		(13.1	)%
% of segment net sales		11.2	%		10.7	%

Net sales decreased $20.5 million, or 16.7%, for the nine months ended December 26, 2020 compared to the same period last year. Our aerospace sales decreased 27.5% while industrial sales decreased 0.4%. Excluding $2.6 million of sales associated with the acquisition of Swiss Tool in fiscal 2020, overall sales decreased 18.8%. The decrease in aerospace sales was primarily driven by the commercial OEM market and commercial aftermarket. The decrease in industrial sales was driven by the general industrial markets offset by increased sales in the marine markets.

Gross margin as a percentage of net sales decreased to 32.8% for the nine months ended December 26, 2020 compared to 34.5% for the same period last year. This decrease was primarily due to lower sales volume and product mix. During the first ~~half~~nine months of fiscal 2021, gross margin was also impacted by approximately $0.5 million of capacity inefficiencies driven by the impact of the COVID-19 pandemic.

Corporate

Three Months Ended

September 26,
2020

September 28,
2019

$
Change

%
Change

SG&A $ 14.5 $ 16.6 $ (2.1 ) (12.8 )%
% of total net sales 9.9 % 9.1 %

	Three Months Ended
	December 26, 2020			December 28, 2019			$ Change			% Change

SG&A	$	14.1		$	16.4		$	(2.3	)		(13.7	)%
% of total net sales		9.7	%		9.2	%

Corporate SG&A decreased ~~$2.1~~$2.3 million, or ~~12.8%~~13.7%, for the ~~second~~third quarter of fiscal 2021 compared to the same period last year. This was primarily due to a decrease of ~~$2.7~~$2.0 million in personnel costs, ~~partially offset by an increase of $0.2~~$0.1 million in professional fees ~~$0.2 million of share-based compensation expenses,~~ and $0.2 million of other items.

	Six Months Ended												Nine Months Ended
	September 26, 2020			September 28, 2019			$ Change			% Change			December 26, 2020			December 28, 2019			$ Change			% Change

SG&A	$	29.6		$	32.6		$	(3.0	)		(9.2	)%	$	43.7		$	49.0		$	(5.3	)		(10.7	)%
% of total net sales		9.8	%		8.9	%								9.7	%		9.0	%

Corporate SG&A decreased ~~$3.0~~$5.3 million for the ~~six~~nine months ended ~~September~~December 26, 2020 compared to the same period last year due to a decrease of ~~$4.7~~$6.7 million in personnel costs and ~~$0.1~~$0.3 million of other items, partially offset by $0.8 million of additional share-based compensation expenses and ~~$1.0~~$0.9 million of additional professional costs.

Liquidity and Capital Resources

Our business is capital-intensive. Our capital requirements include manufacturing equipment and materials. In addition, we have historically fueled our growth, in part, through acquisitions. We have historically met our working capital, capital expenditure requirements and acquisition funding needs through our net cash flows provided by operations, various debt arrangements and sale of equity to investors. We believe that operating cash flows and available credit under the Revolver and Foreign Revolver (see below) will provide adequate resources to fund internal and external growth initiatives for the foreseeable future.

Our ability to meet future working capital, capital expenditures and debt service requirements will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, particularly the COVID-19 pandemic, interest rates, cyclical changes in our end markets, and prices for steel and our ability to pass through price increases on a timely basis, many of which are outside of our control. In addition, future acquisitions could have a significant impact on our liquidity position and our need for additional funds.

From time to time, we evaluate our existing facilities and operations and their strategic importance to us. If we determine that a given facility or operation does not have future strategic importance, we may sell, partially or completely, relocate production lines, consolidate or otherwise dispose of those operations. Although we believe our operations would not be materially impaired by such dispositions, relocations or consolidations, we could incur significant cash or non-cash charges in connection with them.

Liquidity

As of ~~September~~December 26, 2020, we had cash, ~~and~~ cash equivalents and highly liquid marketable securities of ~~$166.4~~$201.7 million, of which, approximately ~~$13.1~~$16.0 million was cash held by our foreign operations. We expect that our undistributed foreign earnings will be re-invested indefinitely for working capital, internal growth and acquisitions for and by our foreign ~~entities.~~subsidiaries.

Domestic Credit Facility

The Company’s credit agreement with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer, and the other lenders party thereto (the “Credit Agreement”) provides the Company with a $250.0 million revolving credit facility (the “Revolver”), which expires on January 31, 2024. Debt issuance costs associated with the Credit Agreement totaled $0.9 million and will be amortized through January 31, 2024 along with the unamortized debt issuance costs remaining from the Company’s prior credit agreement. As of December 26, 2020, $1.2 million in unamortized debt issuance costs remain.

Approximately $3.7 million of the Revolver is being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs. ~~As of September 26, 2020, $1.3 million in unamortized debt issuance costs remain.~~ The Company has the ability to borrow up to an additional $246.3 million under the Revolver as of ~~September~~December 26, 2020.

Foreign Term Loan and Revolving Credit Facility

On August 15, 2019, one of our foreign subsidiaries, Schaublin SA (“Schaublin”), entered into two separate credit agreements (the “Foreign Credit Agreements”) with Credit Suisse (Switzerland) Ltd. to finance the acquisition of Swiss Tool and provide future working capital. The Foreign Credit Agreements provided Schaublin with a CHF 15.0 million (approximately $15.4 million) term loan (the “Foreign Term Loan”), which expires on July 31, 2024 and a CHF 15.0 million (approximately $15.4 million) revolving credit facility (the “Foreign Revolver”), which continues in effect until terminated by either Schaublin or Credit Suisse. Debt issuance costs associated with the Foreign Credit Agreements totaled CHF 0.3 million (approximately $0.3 million) and will be amortized throughout the life of the Foreign Credit Agreements. As of December 26, 2020, approximately $0.1 million in unamortized debt issuance costs remain.

The Foreign Credit Agreements require Schaublin to comply with various covenants, which are tested annually on March 31. These covenants include, among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.00 to 1 as of March 31, 2020 and not greater than 2.50 to 1 as of March 31, 2021 and thereafter. Schaublin is also required to maintain an economic equity of CHF 20.0 million at all times. The Foreign Credit Agreements allow Schaublin to, among other things, incur other debt or liens and acquire or dispose of assets provided that Schaublin complies with certain requirements and limitations of the Foreign Credit Agreements. As of March 31, 2020, Schaublin was in compliance with all such covenants.

As of ~~September~~December 26, 2020, there was approximately ~~$2.9~~$2.2 million outstanding under the Foreign Revolver and approximately ~~$12.9~~$13.5 million outstanding under the Foreign Term Loan. These borrowings have been classified as Level 2 of the valuation hierarchy. ~~As of September 26, 2020, approximately $0.1 million in unamortized debt issuance costs remain.~~ Schaublin has the ability to borrow up to an additional ~~$13.2~~$14.6 million under the Foreign Revolver as of ~~September~~December 26, 2020.

Schaublin’s required future annual principal payments are approximately ~~$6.1~~$5.6 million for the next ~~twelve~~12 months and approximately ~~$3.2~~$3.4 million for each ~~year for~~of the ~~next~~following three years.

Other Notes Payable

~~On October 1,~~In 2012 Schaublin purchased the land and building that it ~~occupied and had been leasing~~occupies for approximately $14.9 million. Schaublin obtained a 20-year fixed-rate mortgage of approximately $9.9 million at an interest rate of 2.9%. The balance of the purchase price of approximately $5.1 million was paid from cash on hand. The balance on this mortgage as of ~~September~~December 26, 2020 was approximately ~~$6.0~~$6.1 million and has been classified as Level 2 of the valuation hierarchy.

The Company’s required future annual principal payments are approximately $0.5 million each year for the next five years and $3.5 million thereafter.

Cash Flows

~~Six-month~~Nine-month Period Ended ~~September~~December 26, 2020 Compared to the ~~Six-month~~Nine-month Period Ended ~~September~~December 28, 2019

The following table summarizes our cash flow activities:

	FY21			FY20			$ Change			FY21			FY20			$ Change
Net cash provided by (used in):
Operating activities	$	74.5		$	64.6		$	9.9		$	110.6		$	111.2		$	(0.6	)
Investing activities		(5.8	)		(53.8	)		48.0			(83.6	)		(61.1	)		(22.5	)
Financing activities		(5.5	)		(5.0	)		(0.5	)		(4.6	)		(20.7	)		16.1
Effect of exchange rate changes on cash		(0.1	)		0.7			(0.8	)		0.5			1.0			(0.5	)
Increase in cash and cash equivalents	$	63.1		$	6.5		$	56.6		$	22.9		$	30.4		$	(7.5	)

During the first ~~six~~nine months of fiscal 2021, we generated cash of ~~$74.5~~$110.6 million from operating activities compared to ~~$64.6~~$111.2 million of cash generated during the same period of fiscal 2020. The ~~increase~~decrease of ~~$9.9~~$0.6 million for fiscal 2021 was mainly a result of a decrease in net income of $27.6 million offset by the favorable impact of a net change in operating assets and liabilities of ~~$20.1~~$19.1 million and a favorable change in non-cash charges of ~~$8.5 million, offset by a decrease in net income of $18.7~~$7.9 million. The favorable change in operating assets and liabilities is detailed in the table ~~below, while the~~below. The increase in non-cash charges resulted from ~~$0.5~~$0.6 million of amortization of intangible assets, ~~$0.1 million of amortization of deferred financing costs, $3.2~~$2.3 million in deferred taxes, ~~$1.0~~$0.9 million of depreciation, ~~$0.8~~$0.9 million of share-based compensation charges, and ~~$2.9~~$3.2 million of other non-cash charges related to restructuring efforts. Excluded from the consolidated statements of cash flows are right of use assets obtained in exchange for new operating lease liabilities of $7.7 million during the fiscal year.

The following chart summarizes the favorable change in operating assets and liabilities of ~~$20.1~~$19.1 million for fiscal 2021 versus fiscal 2020 and the favorable change of ~~$3.8~~$26.3 million for fiscal 2020 versus fiscal 2019.

	FY21			FY20			FY21			FY20
Cash provided by (used in):
Accounts receivable	$	19.0		$	5.4		$	13.0		$	13.4
Inventory		8.1			6.9			16.0			11.2
Prepaid expenses and other current assets		2.8			(0.5	)		1.8			1.1
Other non-current assets		(5.1	)		1.3			(5.3	)		(4.1	)
Accounts payable		(12.2	)		(2.6	)		(11.4	)		0.4
Accrued expenses and other current liabilities		1.6			(6.2	)		(0.5	)		(1.0	)
Other non-current liabilities		5.9			(0.5	)		5.5			5.3
Total change in operating assets and liabilities:	$	20.1		$	3.8		$	19.1		$	26.3

During the first ~~six~~nine months of fiscal 2021, we used ~~$5.8~~$83.6 million for investing activities as compared to ~~$53.8~~$61.1 million used during the first ~~six~~nine months of fiscal 2020. This ~~decrease~~increase in cash used was attributable to ~~a $14.2~~the purchase of $75.1 million of highly liquid marketable securities during the current period, offset by an $18.8 million decrease in capital expenditures and the use of $33.8 million in the prior year for the acquisition of Swiss Tool.

During the first ~~six~~nine months of fiscal 2021, we used ~~$5.5~~$4.5 million for financing activities compared to ~~$5.0~~$20.7 million for the first ~~six~~nine months of fiscal 2020. This ~~increase~~decrease in cash used was primarily attributable to ~~$8.0 million less exercises of share-based awards offset by $2.1~~$41.3 million less payments made on outstanding debt, $0.3 million less financing fees paid in connection with credit facilities, and ~~$5.4~~$5.3 million less treasury stock ~~purchases.~~purchases, partially offset by proceeds received from borrowings of $24.8 million for the acquisition of Swiss Tool in the prior year and $6.0 million less exercises of share-based awards.

Capital Expenditures

Our capital expenditures were ~~$2.1~~$2.8 million and ~~$6.0~~$8.8 million for the three- and ~~six-month~~nine-month periods ended ~~September~~December 26, 2020, respectively. We expect to make additional capital expenditures of ~~$6.0~~$3.0 to ~~$8.0~~$4.0 million during the remainder of fiscal 2021 in connection with our existing business. We expect to fund these capital expenditures principally through existing cash and internally generated funds. We may also make substantial additional capital expenditures in connection with acquisitions.

Other Matters

Critical Accounting Policies and Estimates

Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We believe the most complex and sensitive judgments, because of their significance to the Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Notes to the Consolidated Financial Statements in our fiscal 2020 Annual Report on Form 10-K describe the significant accounting estimates and policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management’s estimates. There have been no significant changes in our critical accounting estimates during the first ~~six~~nine months of fiscal 2021 other than those described in Note 2 to the unaudited interim consolidated financial statements contained in this quarterly report.

Off-Balance Sheet Arrangements

As of ~~September~~December 26, 2020, we had no significant off-balance sheet arrangements other than $3.7 million of outstanding standby letters of credit, all of which were under the Revolver.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks, which arise during the normal course of business from changes in interest rates and foreign currency exchange rates.

Interest Rates. We currently have variable rate debt outstanding under our credit agreements. We regularly evaluate the impact of interest rate changes on our net income and cash flow and take action to limit our exposure when appropriate.

Foreign Currency Exchange Rates. Our Swiss operations utilize the Swiss franc as the functional currency, our French and German operations utilize the euro as the functional currency and our Polish operations utilize the Polish zloty as the functional currency. As a result, we are exposed to risk associated with fluctuating currency exchange rates between the U.S. dollar and these currencies. Foreign currency transaction gains and losses are included in earnings. Approximately 8%10% of our net sales were impacted by foreign currency fluctuations for ~~both~~ the ~~three- and six-month periods~~three-month period ended ~~September~~December 26, 2020 compared to 8%10% for ~~both~~ the ~~three- and six-month periods~~three-month period ended ~~September~~December 28, 2019. Approximately 9% of our net sales were impacted by foreign currency fluctuations for the nine-month period ended December 26, 2020 compared to 9% for the same period in the prior year. We expect that this proportion is likely to increase as we seek to increase our penetration of foreign markets, particularly within the aerospace and defense markets. Foreign currency transaction exposure arises primarily from the transfer of foreign currency from one subsidiary to another within the group, and to foreign currency denominated trade receivables. Unrealized currency translation gains and losses are recognized upon translation of the foreign operations’ balance sheets to U.S. dollars. Because our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our earnings. We periodically enter into derivative financial instruments in the form of forward exchange contracts to reduce the effect of fluctuations in exchange rates on certain third-party sales transactions denominated in non-functional currencies. Based on the accounting guidance related to derivatives and hedging activities, we record derivative financial instruments at fair value. For derivative financial instruments designated and qualifying as cash flow hedges, the effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive income, and is reclassified into earnings when the hedged transaction affects earnings. As of ~~September~~December 26, 2020, we had no derivatives.

ITEM 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of ~~September~~December 26, 2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~September~~December 26, 2020, our disclosure controls and procedures were (1) designed to ensure that information relating to our Company required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported to our Chief Executive Officer and Chief Financial Officer within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, and (2) effective, in that they provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the three-month period ended ~~September~~December 26, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

From time to time, we are involved in litigation and administrative proceedings, which arise in the ordinary course of our business. We do not believe that any litigation or proceeding in which we are currently involved, either individually or in the aggregate, is likely to have a material adverse effect on our business, financial condition, operating results, cash flow or prospects.

ITEM 1A. Risk Factors

There have been no material changes to our risk factors and uncertainties since the most recent filing of our Form 10-K. For a discussion of the risk factors, refer to Part I, Item 2, “Cautionary Statement as to Forward-Looking Information” contained in this quarterly report and Part I, Item 1A, “Risk Factors,” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2020.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Use of Proceeds

Not applicable.

Issuer Purchases of Equity Securities

In 2019, our Board of Directors authorized us to repurchase up to $100.0 million of our common stock from time to time on the open market, in block trade transactions, and through privately negotiated transactions, in compliance with SEC Rule 10b-18 depending on market conditions, alternative uses of capital, and other relevant factors. Purchases may be commenced, suspended, or discontinued at any time without prior notice.

Total share repurchases under the 2019 plan for the three months ended ~~September~~December 26, 2020 are as follows:

Period
Total
number
of shares
purchased

Average
price paid
per share

Number of
shares
purchased
as part of the
publicly
announced
program

Approximate
dollar value
of shares still
available to
be
purchased
under the
program
(000’s)

06/28/2020 – 07/25/2020 — $ — — $ 90,033
07/26/2020 – 08/22/2020 62 122.42 62 90,026
08/23/2020 – 09/26/2020 — — — $ 90,026
Total 62 $ 122.42 62

Period	Total number of shares purchased		Average price paid per share		Number of shares purchased as part of the publicly announced program		Approximate dollar value of shares still available to be purchased under the program (000’s)
09/27/2020 – 10/24/2020		24	$	124.55		24	$	90,023
10/25/2020 – 11/21/2020		104		118.71		104		90,011
11/22/2020 – 12/26/2020		10,745		166.82		10,745	$	88,218
Total		10,873	$	166.26		10,873

ITEM 3. Defaults Upon Senior Securities

Not applicable.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

Not applicable.

ITEM 6. Exhibits

Exhibit Number		Exhibit Description
31.01		Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a).
31.02		Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a).
32.01		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*
32.02		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

This certification accompanies this Quarterly Report on Form 10-Q, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

RBC Bearings Incorporated
	(Registrant)

By:	/s/ Michael J. Hartnett
	Name:	Michael J. Hartnett
	Title:	Chief Executive Officer
	Date:	January 29, 2021

By:	/s/ Robert M. Sullivan
	Name:	Robert M. Sullivan
	Title:	Chief Financial Officer
	Date:	January 29, 2021

EXHIBIT INDEX

Exhibit Number		Exhibit Description
31.01		Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a).
31.02		Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a).
32.01		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*
32.02		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

~~SIGNATURES~~

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.~~

~~RBC Bearings Incorporated~~
	~~(Registrant)~~

~~By:~~	~~/s/ Michael J. Hartnett~~
	~~Name:~~	~~Michael J. Hartnett~~
	~~Title:~~	~~Chief Executive Officer~~
	~~Date:~~	~~October 30, 2020~~

~~By:~~	~~/s/ Robert M. Sullivan~~
	~~Name:~~	~~Robert M. Sullivan~~
	~~Title:~~	~~Chief Financial Officer~~
	~~Date:~~	~~October 30, 2020~~

~~EXHIBIT INDEX~~

Exhibit Number		~~Exhibit Description~~
~~31.01~~		~~Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a).~~
~~31.02~~		~~Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a).~~
~~32.01~~		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*
~~32.02~~		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*
~~101.INS~~		~~XBRL Instance Document.~~
~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document.~~
~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document.~~
~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document.~~
~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document.~~
~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document.~~

0 0 0 0 0 0 164000 237000 55000 79000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 false --04-03 Q3 2021 0001324948

Part I -	FINANCIAL INFORMATION	1

ITEM 1.	Consolidated Financial Statements	1
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3132
ITEM 4.	Controls and Procedures	32
	Changes in Internal Control over Financial Reporting	32

Part II -	OTHER INFORMATION	3233

ITEM 1.	Legal Proceedings	3233
ITEM 1A.	Risk Factors	3233
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3233
ITEM 3.	Defaults Upon Senior Securities	3334
ITEM 4.	Mine Safety Disclosures	3334
ITEM 5.	Other Information	3334
ITEM 6.	Exhibits	34

Contract Assets - Current ⁽¹⁾

Balance at March 28, 2020	$	2,604
Additional revenue recognized in excess of billings		3,732
Less: amounts billed to customers		(1,732	)
Balance at September 26, 2020	$	4,604

Contract Liabilities – Current ⁽²⁾

Balance at March 28, 2020	$	11,116
Payments received prior to revenue being recognized		6,611
Revenue recognized		(9,326	)
Reclassification (to)/from noncurrent		(498	)
Balance at September 26, 2020	$	7,903

Period	Total number of shares purchased		Average price paid per share		Number of shares purchased as part of the publicly announced program		Approximate dollar value of shares still available to be purchased under the program (000’s)
06/28/2020 – 07/25/2020		—	$	—		—	$	90,033
07/26/2020 – 08/22/2020		62		122.42		62		90,026
08/23/2020 – 09/26/2020		—		—		—	$	90,026
Total		62	$	122.42		62