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 JanuaryOctober 1, 2022

 

OR

 

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: 001-40840

 

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
Identification No.)

 

One Tribology Center
Oxford, CT
06478

(Address of principal executive offices)
 
06478
(Zip 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 ROLLRBC Nasdaq NMSThe New York Stock Exchange
5.00% Series A Mandatory Convertible Preferred Stock, par value $0.01 per share ROLLPRBCP Nasdaq NMSThe New York Stock Exchange

 

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 filerAccelerated filer
Non-accelerated filerSmaller 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 FebruaryNovember 4, 2022, RBC Bearings Incorporated had 28,876,35929,017,346 shares of Common Stock and 4,600,000 shares of Preferred Stock outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

Part I -FINANCIAL INFORMATION 1
   
Item 1.Consolidated Financial Statements1
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations2119
Item 3.Quantitative and Qualitative Disclosures About Market Risk3432
Item 4.Controls and Procedures34
Changes in Internal Control over Financial Reporting3433
   
Part II -OTHER INFORMATION 35
   
Item 1.Legal Proceedings34
Item 1.Legal Proceedings35
Item 1A.Risk Factors3534
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds3734
Item 3.Defaults Upon Senior Securities3735
Item 4.Mine Safety Disclosures3735
Item 5.Other Information3735
Item 6.Exhibits3835

 

i

 

 

Part I. FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements

 

RBC Bearings Incorporated

Consolidated Balance Sheets

(dollars in thousands, except per share data)

 

 January 1,
2022
  

April 3,

2021

 
 (Unaudited)    

October 1,

2022

 

April 2,

2022

 
ASSETS      (Unaudited)   
Current assets:          
Cash and cash equivalents $255,503  $151,086  $88,495  $182,862 
Marketable securities     90,249 
Accounts receivable, net of allowance for doubtful accounts of $2,619 as of January 1, 2022 and $1,792 as of April 3, 2021  199,785   110,472 
Accounts receivable, net of allowance for doubtful accounts of $2,986 as of October 1, 2022 and $2,737 as of April 2, 2022  236,527   247,487 
Inventory  510,175   364,147   557,801   516,140 
Prepaid expenses and other current assets  21,774   12,248   28,708   15,748 
Total current assets  987,237   728,202   911,531   962,237 
Property, plant and equipment, net  396,164   208,264   378,291   386,732 
Operating lease assets, net  42,816   35,664   43,263   44,535 
Goodwill  1,886,874   277,536   1,872,689   1,902,104 
Intangible assets, net  1,524,715   154,399   1,485,016   1,511,515 
Other noncurrent assets  37,244   30,195   36,270   38,294 
Total assets $4,875,050  $1,434,260  $4,727,060  $4,845,417 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY             
Current liabilities:             
Accounts payable $140,374  $36,336  $148,870  $158,606 
Accrued expenses and other current liabilities  131,169   43,564   147,584   145,252 
Current operating lease liabilities  7,974   5,726   8,283   8,059 
Current portion of long-term debt  63,519   2,612   1,512   1,543 
Total current liabilities  343,036   88,238   306,249   313,460 
Long-term debt, less current portion  1,726,734   13,495   1,520,602   1,686,798 
Long-term operating lease liabilities  35,076   29,982   35,109   36,680 
Deferred income taxes  307,819   17,178   308,956   315,463 
Other noncurrent liabilities  127,411   55,416   116,007   120,408 
Total liabilities  2,540,076   204,309   2,286,923   2,472,809 
                
Stockholders’ equity:                
Preferred stock, $.01 par value; authorized shares: 10,000,000 as of January 1, 2022 and April 3, 2021, respectively; issued shares: 4,600,000 and 0 as of January 1, 2022 and April 3, 2021, respectively  46    
Common stock, $.01 par value; authorized shares: 60,000,000 as of January 1, 2022 and April 3, 2021, respectively; issued shares: 29,798,240 and 26,110,320 as of January 1, 2022 and April 3, 2021, respectively  298   261 
Preferred stock, $.01 par value; authorized shares: 10,000,000 as of October 1, 2022 and April 2, 2022, respectively; issued shares: 4,600,000 as of October 1, 2022 and April 2, 2022, respectively  46   46 
Common stock, $.01 par value; authorized shares: 60,000,000 as of October 1, 2022 and April 2, 2022, respectively; issued shares: 29,975,914 and 29,807,208 as of October 1, 2022 and April 2, 2022, respectively  300   298 
Additional paid-in capital  1,531,552   445,073   1,582,455   1,564,261 
Accumulated other comprehensive loss  (10,896)  (10,409)  (20,208)  (5,800)
Retained earnings  885,456   858,852   955,895   886,155 
Treasury stock, at cost, 923,340 shares and 884,701 shares as of January 1, 2022 and April 3, 2021, respectively  (71,482)  (63,826)
Treasury stock, at cost, 958,854 shares and 928,322 shares as of October 1, 2022 and April 2, 2022, respectively  (78,351)  (72,352)
Total stockholders’ equity  2,334,974   1,229,951   2,440,137   2,372,608 
Total liabilities and stockholders’ equity $4,875,050  $1,434,260  $4,727,060  $4,845,417 

 

See accompanying notes.

 


 

 

RBC Bearings Incorporated

Consolidated Statements of Operations

(dollars in thousands, except per share data)

(Unaudited)

 

  Three Months Ended  Nine Months Ended 
  January 1,
2022
  December 26,
2020
  January 1,
2022
  December 26,
2020
 
Net sales $266,953  $145,861  $584,058  $448,689 
Cost of sales  173,608   90,273   364,476   277,052 
Gross margin  93,345   55,588   219,582   171,637 
Operating expenses:                
Selling, general and administrative  43,196   25,739   102,672   78,591 
Other, net  35,778   3,308   44,693   11,328 
Total operating expenses  78,974   29,047   147,365   89,919 
Operating income  14,371   26,541   72,217   81,718 
Interest expense, net  11,848   327   27,937   1,095 
Other non-operating (income)/expense  1,395   (50)  639   203 
Income before income taxes  1,128   26,264   43,641   80,420 
Provision for income taxes  1,191   4,695   10,776   15,741 
Net income/(loss)  (63)  21,569   32,865   64,679 
Preferred stock dividends  5,751      6,261    
Net income/(loss) available to common stockholders $(5,814) $21,569  $26,604  $64,679 
                 
Net income/(loss) per share available to common stockholders:                
Basic $(0.20) $0.87  $1.01  $2.61 
Diluted $(0.20) $0.86  $1.00  $2.59 
Weighted average common shares:                
Basic  28,618,495   24,861,792   26,379,984   24,816,451 
Diluted  28,618,495   25,060,812   26,663,990   24,985,848 

  Three Months Ended  Six Months Ended 
  October 1,
2022
  October 2,
2021
  October 1,
2022
  October 2,
2021
 
Net sales $369,167  $160,900  $723,247  $317,105 
Cost of sales  218,020   98,436   430,948   190,868 
Gross margin  151,147   62,464   292,299   126,237 
Operating expenses:                
Selling, general and administrative  57,519   40,223   113,347   71,435 
Other, net  21,611   5,667   42,465   8,915 
Total operating expenses  79,130   45,890   155,812   80,350 
Operating income  72,017   16,574   136,487   45,887 
Interest expense, net  18,332   15,770   34,131   16,089 
Other non-operating (income)/expense  184   (291)  951   (756)
Income before income taxes  53,501   1,095   101,405   30,554 
Provision for income taxes  9,699   2,447   20,165   7,868 
Net income/(loss)  43,802   (1,352)  81,240   22,686 
Preferred stock dividends  5,750   510   11,500   510 
Net income/(loss) available to common stockholders $38,052  $(1,862) $69,740  $22,176 
                 
Net income/(loss) per share available to common stockholders:                
Basic $1.32  $(0.07) $2.43  $0.88 
Diluted $1.31  $(0.07) $2.40  $0.87 
Weighted average common shares:                
Basic  28,758,403   25,500,393   28,714,445   25,260,728 
Diluted  29,093,791   25,500,393   29,020,403   25,632,845 

 

See accompanying notes.

 


 

 

RBC Bearings Incorporated

Consolidated Statements of Comprehensive Income/(Loss)Income

(dollars in thousands)

(Unaudited)

 

 Three Months Ended  Nine Months Ended  Three Months Ended  Six Months Ended 
 January 1,
2022
  December 26,
2020
  January 1,
2022
  December 26,
2020
  October 1,
2022
  October 2,
2021
  October 1,
2022
  October 2,
2021
 
Net income/(loss) $(63) $21,569  $32,865  $64,679  $43,802  $(1,352) $81,240  $22,686 
Pension and postretirement liability adjustments, net of taxes (1)  318   260   954   779   535   318   1,070   636 
Foreign currency translation adjustments  (1,951)  3,823   (1,441)  5,609   (8,993)  (1,409)  (15,478)  510 
Total comprehensive income/(loss) $(1,696) $25,652  $32,378  $71,067  $35,344  $(2,443) $66,832  $23,832 

 

(1)These adjustments were net of tax expense of $82$148 and $79$82 for the three-month periods ended JanuaryOctober 1, 2022 and December 26, 2020,October 2, 2021, respectively and $247$296 and $237$165 for the nine-monthsix-month periods ended JanuaryOctober 1, 2022 and December 26, 2020,October 2, 2021, respectively.

 

See accompanying notes.

 


 

 

RBC Bearings Incorporated

Consolidated Statements of Stockholders’ Equity

(dollars in thousands)

(Unaudited)

 

 Common Stock  Preferred Stock  Additional
Paid-in
  Accumulated
Other
Comprehensive
  Retained 

 

 

Treasury Stock

  Total
Stockholders’
  Common Stock Preferred Stock Additional
Paid-in
 Accumulated
Other
Comprehensive
  Retained 

Treasury Stock

  Total
Stockholders’
 
 Shares  Amount  Shares  Amount  Capital  Income/(Loss)  Earnings  Shares  Amount  Equity  Shares  Amount  Shares  Amount  Capital  Income/(Loss)  Earnings  Shares  Amount  Equity 
Balance at April 3, 2021  26,110,320  $261     $  $445,073  $(10,409) $858,852   (884,701) $(63,826) $1,229,951 
Balance at April 2, 2022  29,807,208  $298   4,600,000  $46  $1,564,261  $(5,800) $886,155   (928,322) $(72,352) $2,372,608 
Net income                    25,999         25,999                     37,438         37,438 
Share-based compensation              5,772               5,772 
Repurchase of common stock                       (31,572)  (6,264)  (6,264)
Exercise of equity awards  135,518   2         16,679               16,681 
Change in net prior service cost and actuarial losses, net of tax expense of $83                 318            318 
Issuance of restricted stock, net of forfeitures  91,056                            
Currency translation adjustments                 1,919            1,919 
Balance at July 3, 2021  26,336,894  $263     $  $467,524  $(8,172) $884,851   (916,273) $(70,090) $1,274,376 
Net income                    6,929         6,929 
Share-based compensation              6,224               6,224 
Preferred stock issuance, net of issuance costs        4,600,000   46   445,407               445,453 
Common stock issuance, net of issuance costs  3,450,000   35         605,642               605,677 
Preferred stock dividends                    (510)        (510)
Repurchase of common stock                       (406)  (92)  (92)
Exercise of equity awards  1,332            131               131 
Change in net prior service cost and actuarial losses, net of taxes of $82                 318            318 
Issuance of restricted stock, net of forfeitures  (1,064)                           
Currency translation adjustments                 (1,409)           (1,409)
Balance at October 2, 2021  29,787,162  $298   4,600,000  $46  $1,524,928  $(9,263) $891,270   (916,679) $(70,182) $2,337,097 
Net income/(loss)                    (63)        (63)
Share-based compensation              6,038               6,038               3,819               3,819 
Preferred stock dividends                    (5,751)        (5,751)                    (5,750)        (5,750)
Repurchase of common stock                       (6,661)  (1,300)  (1,300)                       (30,469)  (5,984)  (5,984)
Exercise of equity awards  9,759            905               905   13,713   1         1,459               1,460 
Change in net prior service cost and actuarial losses, net of taxes of $82                 318            318 
Change in net prior service cost and actuarial losses, net of tax expense of $148                 535            535 
Issuance of restricted stock, net of forfeitures  1,319                              56,955                            
Preferred stock issuance, net of issuance costs              

(134

)              

(134

)

Common stock issuance, net of issuance costs

              (185)              (185)
Currency translation adjustments                 (1,951)           (1,951)                 (6,485)           (6,485)
Balance at January 1, 2022  29,798,240  $298   4,600,000  $46  $1,531,552  $(10,896) $885,456   (923,340) $(71,482) $2,334,974 
Balance at July 2, 2022  29,877,876  $299   4,600,000  $46  $1,569,539  $(11,750) $917,843   (958,791) $(78,336) $2,397,641 
Net income                    43,802         43,802 
Share-based compensation              4,354               4,354 
Preferred stock dividends                    (5,750)        (5,750)
Repurchase of common stock                       (63)  (15)  (15)
Exercise of equity awards  89,509   1         8,562               8,563 
Change in net prior service cost and actuarial losses, net of tax expense of $148                 535            535 
Issuance of restricted stock, net of forfeitures  8,529                            
Currency translation adjustments                 (8,993)           (8,993)
Balance at October 1, 2022  29,975,914  $300   4,600,000  $46  $1,582,455  $(20,208) $955,895   (958,854) $(78,351) $2,440,137 

 

See accompanying notes.

 


 

 

RBC Bearings Incorporated

Consolidated Statements of Stockholders’ Equity (continued)

(dollars in thousands)

(Unaudited)

  

 Common Stock  Additional
Paid-in
  Accumulated
Other
Comprehensive
  Retained 

 

 

Treasury Stock

  Total
Stockholders’
  Common Stock Preferred Stock Additional
Paid-in
 Accumulated
Other
Comprehensive
 Retained Treasury Stock Total
Stockholders’
 
 Shares  Amount  Capital  Income/(Loss)  Earnings  Shares  Amount  Equity  Shares  Amount  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 
Balance at April 3, 2021  26,110,320  $261     $  $462,616  $(10,409) $843,456   (884,701) $(63,826) $1,232,098 
Net income              22,689         22,689                     24,038         24,038 
Share-based compensation        5,438               5,438               7,182               7,182 
Repurchase of common stock                 (31,179)  (4,391)  (4,391)                       (31,572)  (6,264)  (6,264)
Exercise of equity awards  4,200      231               231   135,518   2         16,679               16,681 
Change in net prior service cost and actuarial losses, net of taxes of $79           260            260 
Change in net prior service cost and actuarial losses, net of tax expense of $83                 318            318 
Issuance of restricted stock, net of forfeitures  56,157                        91,056                            
Currency translation adjustments           409            409                  1,919            1,919 
Balance at June 27, 2020  25,941,772  $259  $418,069  $(6,229) $791,908   (870,161) $(61,372) $1,142,635 
Net income              20,421         20,421 
Balance at July 3, 2021  26,336,894  $263     $  $486,477  $(8,172) $867,494   (916,273) $(70,090) $1,275,972 
Net loss                    (1,352)        (1,352)
Share-based compensation        5,231               5,231               16,774               16,774 
Preferred stock issuance, net of issuance costs        4,600,000   46   445,407               445,453 
Common stock issuance, net of issuance costs  3,450,000   35         605,642               605,677 
Preferred stock dividends                    (510)        (510)
Repurchase of common stock                 (62)  (8)  (8)                       (406)  (92)  (92)
Exercise of equity awards  31,200   1   2,188               2,189   1,332            131               131 
Change in net prior service cost and actuarial losses, net of taxes of $79           259            259 
Change in net prior service cost and actuarial losses, net of tax expense of $82                 318            318 
Issuance of restricted stock, net of forfeitures  (2,299)                       (1,064)                           
Currency translation adjustments           1,377            1,377                  (1,409)           (1,409)
Balance at September 26, 2020  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 
Balance at October 2, 2021  29,787,162  $298   4,600,000  $46  $1,554,431  $(9,263) $865,632   (916,679) $(70,182) $2,340,962 

 

See accompanying notes.

 


 

 

RBC Bearings Incorporated

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

 

 Nine Months Ended  Six Months Ended 
 

January 1,

2022

 

December 26,

2020

  

October 1,

2022

 

October 2,

2021

 
Cash flows from operating activities:             
Net income $32,865  $64,679  $81,240  $22,686 
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization  37,355   24,812   57,068   16,857 
Deferred income taxes  778   2,580   (6,523)  1,276 
Amortization of deferred financing costs  17,600   365   4,338   15,682 
Share-based compensation  18,034   15,842   8,173   23,955 
Loss/(gain) on disposition of assets  68   965   85   75 
Loss on extinguishment of debt  890   - 
Consolidation, restructuring, and other noncash charges  2,378   2,313   318   2,378 
Changes in operating assets and liabilities, net of acquisitions:                
Accounts receivable  (5,929)  23,285   9,265   642 
Inventory  (8,531)  (4,717)  (45,176)  (7,173)
Prepaid expenses and other current assets  (10,298)  (251)  (12,954)  (12,059)
Other noncurrent assets  (225)  (11,724)  5,238  (1,310)
Accounts payable  34,215   (11,400)  (8,664)  11,248 
Accrued expenses and other current liabilities  6,003   (4,575)  2,402   14,000 
Other noncurrent liabilities  8,223   8,412   (6,430)  5,217 
Net cash provided by operating activities  133,426   110,586   88,380   93,474 
                
Cash flows from investing activities:                
Purchase of property, plant and equipment  (21,761)  (8,809)

Capital expenditures

  (23,076)  (6,882)
Proceeds from sale of assets  22   18   510   10 
Purchase of marketable securities  (29,982)  (75,075)  -   (29,982)
Proceeds from sale of marketable securities  120,483   -   -   120,483 
Acquisition of business, net of cash acquired  (2,908,241)  245 
Net cash provided by/(used in) investing activities  (2,839,479)  (83,621)
Purchase price adjustments for acquisition of business  22,966   - 
Net cash (used in)/ provided by investing activities  400   83,629 
                
Cash flows from financing activities:                
Proceeds received from issuance of common stock  605,492   -   -   605,677 
Proceeds received from issuance of preferred stock  445,319   -   -   445,453 
Proceeds received from term loans, net of financing costs  1,286,230   - 
Proceeds received from senior notes, net of financing costs  494,200   - 
Finance fees paid in connection with credit facilities and senior notes  (20,000)  - 
Finance fees paid in connection with credit facilities and term loans  -   (32,208)
Repayments of term loans  (9,952)  (3,287)  (170,000)  (8,866)
Repayments of revolving credit facilities  -   (773)
Repayments of notes payable  (380)  (379)  (240)  (254)
Principal payments on finance lease obligations  (679)  -   (2,219)  - 
Preferred stock dividends paid  (11,500)  - 
Exercise of stock options  17,717   6,105   10,023   16,812 
Repurchase of common stock  (7,656)  (6,206)  (5,999)  (6,356)
Net cash provided by/(used in) financing activities  2,810,291   (4,540)  (179,935)  1,020,258 
                
Effect of exchange rate changes on cash  179   512   (3,212)  164 
                
Cash and cash equivalents:                
Increase during the period  104,417   22,937 
Increase/(Decrease) during the period  (94,367)  1,197,525 
Cash and cash equivalents, at beginning of period  151,086   103,255   182,862   151,086 
Cash and cash equivalents, at end of period $255,503  $126,192  $88,495  $1,348,611 
                
Supplemental disclosures of cash flow information:                
Cash paid for:                
Income taxes $12,405  $12,880  $34,881  $10,777 
Interest  4,925   737   30,101   416 

 

See accompanying notes.

 


 

 

RBC Bearings Incorporated

Notes to Unaudited Interim Consolidated Financial Statements

(dollars in thousands, except 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.Commission (“SEC”). 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-K10-K/A for the fiscal year ended April 3, 2021.2, 2022. 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.10-K/A.

The results of operations for the three- and nine-monthsix-month periods ended JanuaryOctober 1, 2022 are not necessarily indicative of the operating results for the entire fiscal year ending April 2, 2022.1, 2023. The three- and nine-monthsix-month periods ended JanuaryOctober 1, 2022 and December 26, 2020October 2, 2021 each included 13 weeks 39 weeks, 13 weeks and 3926 weeks, respectively. The amounts shown are in thousands, unless otherwise indicated.

 

2. Significant Accounting Policies

 

The Company’s significant accounting policies are detailed in “Note 2 - Summary of Significant Accounting Policies” of our Annual Report on Form 10-K10-K/A for the year ended April 3, 2021.2, 2022.

Significant changes to our accounting policies as a result of adopting new accounting standards are discussed below.


Recent Accounting Standards Adopted

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 U.S. 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 adopted this ASU effective April 4, 2021 and the impact of adoption was not material to the Company’s financial position, results of operations or liquidity.

In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in this ASU simplify the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this ASU in fiscal 2022.

The adoption of this ASU did not have a material impact on our financial position, results of operations or liquidity. Adoption of this ASU did simplify the accounting of the 5.00% Series A Mandatory Convertible Preferred Stock (“MCPS”) referred to in Note 5 by removing the requirement to assess the financial instrument for beneficial conversion features and clarifying how diluted EPS should be calculated using the “if-converted” method. Refer to Note 6 for further details regarding the “if-converted” method.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 840): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this ASU require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements in accordance with U.S. GAAP. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this ASU in fiscal 2022 and the impact of adoption was not material to the Company’s financial position, results of operations or liquidity.Not applicable.

 

Recent Accounting Standards Yet to Be Adopted

 

In March 2020, the FASBFinancial Accounting Standards Board (“FASB”)  issued ASUAccounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The objective of the standard is to address operational challenges likely to arise in accounting for contract modifications and hedge accounting due to reference rate reform. The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The standard update is effective for all entities as of March 12, 2020 through December 31, 2022. An entityThis guidance is available immediately and may electbe implemented in any period prior to apply the amendments for contract modifications by topic or industry subtopic asguidance expiration on December 31, 2022. The Company will adopt this ASU during the third quarter of any date fromour fiscal year. The impact of the beginningadoption of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. Once elected for a topic or industry subtopic, the amendments in this standard update must be applied prospectively for all eligible contractis dependent on the Company's contracts modifications for that topic or industry subtopic. An entity may elect to apply the amendments for eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. If an entity elects to apply any of the amendments for an eligible hedging relationship existing as of the beginning of the interim period that includes March 12, 2020, any adjustments as a result of those elections must be reflected as ofreference rate reform; however, the beginning of that interim period. If an entity elects to apply anyCompany does not expect the adoption of the amendments forassociated with hedging relationships to have a new hedging relationship entered into between the beginning of the interim period that includes March 12, 2020 and March 12, 2020, any adjustments as a result of those elections must be reflected as of the beginning of the hedging relationship. The Company has not yet assessed thematerial impact of adoption will have on the Company’sCompany's consolidated financial statements.

Other new pronouncements issued but not effective until after April 2, 20221, 2023 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 following table disaggregates total revenue by end market which is how we view our reportable segments (see Note 12):

 

Three Months Ended

  

Nine Months Ended

 
 

January 1,

2022

  

December 26,

2020

  

January 1,

2022

  

December 26,

2020

  Three Months Ended  Six Months Ended 
          October 1,
2022
  October 2,
2021
  October 1,
2022
  October 2,
2021
 
Aerospace/Defense $93,203  $93,267  $276,483  $299,833  $103,548  $92,915  $202,947  $183,280 
Industrial  173,750   52,594   307,575   148,856   265,619   67,985   520,300   133,825 
 $266,953  $145,861  $584,058  $448,689 
Total $369,167  $160,900  $723,247  $317,105 

The following table disaggregates total revenue by geographic origin:

 

Three Months Ended

  

Nine Months Ended

 
 

January 1,

2022

  

December 26,

2020

  

January 1,

2022

  

December 26,

2020

  Three Months Ended  Six Months Ended 
          October 1,
2022
  October 2,
2021
  October 1,
2022
  October 2,
2021
 
United States $233,900  $130,082  $517,764  $402,808  $324,774  $144,074  $635,404  $283,864 
International  33,053   15,779   66,294   45,881   44,393   16,826   87,843   33,241 
 $266,953  $145,861  $584,058  $448,689 
Total $369,167  $160,900  $723,247  $317,105 

The following table illustrates the approximate percentage of revenue recognized for performance obligations satisfied over time versus the amount of revenue recognized for performance obligations satisfied at a point in time:

 

Three Months Ended

  

Nine Months Ended

 
 

January 1,

2022

  

December 26,

2020

  

January 1,

2022

  

December 26,

2020

  Three Months Ended  Six Months Ended 
          October 1,
2022
  October 2,
2021
  October 1,
2022
  October 2,
2021
 
Point-in-time  98%  96%  97%  96%  98%  96%  98%  96%
Over time  2%  4%  3%  4%  2%  4%  2%  4%
  100%  100%  100%  100%
Total  100%  100%  100%  100%

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of orders meeting the definition of a contract for which work has not been performed or has been partially performed and excludes unexercised contract options. The duration of the majority of our contracts, as defined by ASC Topic 606, is less than one year. The Company has elected to apply the practical expedient, which allows companies to exclude remaining performance obligations with an original expected duration of one year or less. 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 $289,870$305,457 at JanuaryOctober 1, 2022. The Company expects to recognize revenue on approximately 59%63% and 86%91% 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 affect accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities) on the consolidated balance sheets. These assets and liabilities are reported on the consolidated balance sheets on an individual contract basis at the end of each reporting period.


 

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.

As of JanuaryOctober 1, 2022 and April 3, 2021,2, 2022, current contract assets were $4,499$4,707 and $5,584,$3,882, respectively, and included within prepaid expenses and other current assets on the consolidated balance sheets. The decreaseincrease in contract assets was primarily due to amounts billed to customers during the period partially offset by the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations prior to billing.billing partially offset by amounts billed to customers during the period. As of JanuaryOctober 1, 2022 and April 3, 2021,2, 2022, the Company did not have any contract assets classified as noncurrent on the consolidated balance sheets. There were $0 and $77 of impairment losses related to the Company’s contract assets during the three and nine months ended January 1, 2022, respectively.

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.

As of JanuaryOctober 1, 2022 and April 3, 2021,2, 2022, current contract liabilities were $14,038$22,414 and $16,998,$19,556, respectively, and included within accrued expenses and other current liabilities on the consolidated balance sheets. The decreaseincrease in current contract liabilities was primarily due to the amount of advancedadvance payments received and reclassifications between current andthe reclassification of a portion of advance payments received from the noncurrent contract liabilities based on anticipated timing of performance obligations and revenue recognized during the period. $2,205portion of contract liabilities were acquired during the quarter as part of the Dodge acquisition (see Note 13).partially offset by revenue recognized on customer contracts. For the three and ninesix months ended JanuaryOctober 1, 2022, the Company recognized revenues related toof $3,606 and $7,474, respectively, that were included in the contract liabilitiesliability balance as of $3,783 and $10,562, respectively.April 2, 2022. For the three and ninesix months ended December 26, 2020,October 2, 2021, the Company recognized revenues related toof $2,129 and $6,779, respectively, that were included in the contract liabilities of $2,291 and $10,056, respectively. liability balance at April 3, 2021.

As of JanuaryOctober 1, 2022 and April 3, 2021,2, 2022, noncurrent contract liabilities were $8,072$9,295 and $3,754,$10,401, respectively, and included within other noncurrent liabilities on the consolidated balance sheets. The increasedecrease in noncurrent contract liabilities was primarily due to the amount of advancedadvance payments received and reclassifications betweenoffset by the reclassification of a portion of advance payments received to the current and noncurrentportion of contract liabilities based on anticipated timing of performance obligations and revenue recognized during the period. liabilities.

Accounts ReceivableVariable Consideration - As of January 1, 2022 and April 3, 2021, accounts receivable with customers, net, were $199,785 and $110,472, respectively.

Variable Consideration

The amount of consideration to which the Company expects to be entitled in exchange for the goods and services is not generally subject to significant variations. However, the Company does offer certain customers rebates, prompt payment discounts, end-user discounts, the right to return eligible products, and/or other forms of variable consideration. The Company estimates this variable consideration using the expected value amount, which is based on historical experience. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company adjusts the estimate of revenue at the earlier of when the amount of consideration the Company expects to receive changes or when the consideration becomes fixed. Accrued customer rebates were $37,314$38,829 and $2,674$35,234 at JanuaryOctober 1, 2022 and April 3, 2021,2, 2022, respectively, and are included within accrued expenses and other current liabilities on the consolidated balance sheets.


4. Accumulated Other Comprehensive Income (Loss)

The components of comprehensive income (loss) that relate to the Company are net income,income/(loss), 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 
Balance at April 2, 2022 $860  $(6,660) $(5,800)
Other comprehensive income (loss) before reclassifications  (15,478)     (15,478)
Amounts recorded in/reclassified from accumulated other comprehensive income (loss)     1,070   1,070 
Net current period other comprehensive income (loss)  (15,478)  1,070   (14,408)
Balance at October 1, 2022 $(14,618) $(5,590) $(20,208)

  

Currency
Translation

  

Pension and
Postretirement
Liability

  Total 
Balance at April 3, 2021 $445  $(10,854) $(10,409)
Other comprehensive income (loss) before reclassifications  (1,441)      (1,441)
Amounts recorded in/reclassified from accumulated other comprehensive income (loss)      954   954 
Net current period other comprehensive income (loss)  (1,441)  954   (487)
Balance at January 1, 2022 $(996) $(9,900) $(10,896)


5. Stockholders’ Equity

Preferred Stock

We are authorized to issue 10,000,000 shares of preferred stock, $0.01 par value per share, in one or more series and to fix the powers, designations, preferences and relative participating, option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by our stockholders.

On September 24, 2021, we completed an offering of 4,600,000 shares of 5.00% Series A Mandatory Convertible Preferred Stock (“MCPS”) in a public offering registered under the Securities Act of 1933, as amended (the “Securities Act”), including 600,000 shares issued pursuant to the full exercise of the option granted to the underwriters of the MCPS offering to purchase additional shares solely to cover over-allotments. The trading symbol for the MCPS is “ROLLP.” The net proceeds from the offering were approximately $445,273 after deducting underwriting discounts and commissions and offering expenses. On November 1, 2021, the Company used the proceeds to fund a portion of the cash purchase price for the acquisition of the Dodge Mechanical Power Transmission business (“Dodge”) from ABB Asea Brown Boveri Ltd.

Holders of MCPS are entitled to receive, when, as and if declared by our Board of Directors, or an authorized committee thereof, out of funds legally available for payment, cumulative dividends at the annual rate of 5.00% of the liquidation preference of $100 per share, payable in cash or, subject to certain limitations, by delivery of shares of common stock or any combination of cash and shares of common stock, at our election; provided, however, that any unpaid dividends on the MCPS will continue to accumulate as described in the Certificate of Designations that sets forth the rights, preferences and privileges of the MCPS. During the third quarter of fiscal 2022, the Company had accrued dividends of $5,751, which were included in the dividend payment to be made on January 15, 2022.

The MCPS has a liquidation preference of $100 per share plus accrued and unpaid dividends. As of January 1, 2022, the MCPS had an aggregate liquidation preference of $466,261.

Subject to certain exceptions, no dividend or distribution will be declared or paid on shares of our common stock, and no common stock will be purchased, redeemed or otherwise acquired for consideration by us or any of our subsidiaries unless, in each case, all accumulated and unpaid dividends for all preceding dividend periods have been declared and paid, or a sufficient amount of cash or number of shares of common stock has been set apart for the payment of such dividends, on all outstanding shares of MCPS. In the event of our voluntary or involuntary liquidation, winding-up or dissolution, no distribution of our assets may be made to holders of our common stock until we have paid holders of MCPS, each of which will be entitled to receive a liquidation preference in the amount of $100 per share plus accumulated and unpaid dividends.

Unless earlier converted or redeemed, each share of MCPS will automatically convert, for settlement on or about October 15, 2024, into between 0.4413 and 0.5405 shares of common stock, subject to customary anti-dilution adjustments. The conversion rate that will apply to mandatory conversions will be determined based on the average of the daily volume-weighted average prices over the 20 consecutive trading days beginning on, and including, the 21st scheduled trading day immediately before October 15, 2024. The conversion rate applicable to mandatory conversions may in certain circumstances be increased to compensate holders of the MCPS for certain unpaid accumulated dividends.


Common Stock

We are authorized to issue 60,000,000 shares of common stock, $0.01 par value per share. Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends, if and when declared by our Board of Directors, and to share ratably in our assets legally available for distribution to our stockholders in the event of liquidation after giving effect to any liquidation preference for the benefit of the MCPS or any other preferred stock then outstanding. Holders of common stock have no preemptive, subscription, redemption, or conversion rights. The holders of common stock do not have cumulative voting rights. The holders of a majority of the shares of common stock can elect all of the directors and can control our management and affairs.

On September 24, 2021, we completed an offering of 3,450,000 shares of common stock in a public offering registered under the Securities Act at an offering price of $185 per share, including 450,000 shares issued pursuant to the full exercise of the option granted to the underwriters of the offering to purchase additional shares. The net proceeds from the offering were approximately $605,457 after deducting underwriting discounts and commissions and offering expenses. On November 1, 2021, the Company used the proceeds to fund a portion of the cash purchase price for the acquisition of Dodge.

6. Net IncomeIncome/(Loss) Per Share Available to Common Stockholders

Basic net incomeincome/(loss) per share available to common stockholders is computed by dividing net incomeincome/(loss) available to common stockholders by the weighted-average number of common shares outstanding.

Diluted net incomeincome/(loss) per share available to common stockholders is computed by dividing net incomeincome/(loss) available to common stockholders 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 exercise of stock options and the conversion of MCPS5.00% Series A Mandatory Convertible Preferred Stock (“MCPS”) to common shares. The MCPS was issued on September 24, 2021.

We exclude outstanding stock options, stock awards and the MCPS from the calculations if the effect would be anti-dilutive. The dilutive effect of the MCPS is calculated using the if-converted method. The if-converted method assumes that these securities were converted to shares of common stock at the later of the September 24, 2021 issuance date or the beginning of the reporting period to the extent that the effect is dilutive. If the effect is anti-dilutive, we calculate net incomeincome/(loss) per share available to common stockholders by adjusting net incomeincome/(loss) in the numerator for the effect of the cumulative MCPS dividends for the respective period.

For the three- and nine-monthsix-month periods ended JanuaryOctober 1, 2022, the effect of assuming the conversion of the 4,600,000 shares of MCPS into shares of common stock was anti-dilutive, and therefore excluded from the calculation of diluted earnings per share available to common stockholders. Accordingly, net incomeincome/(loss) was reduced by cumulative MCPS dividends, as presented in our consolidated statement of operations, for purposes of calculating net incomeincome/(loss) available to common stockholders.

For the three months ended JanuaryOctober 1, 2022, all90,796 employee stock options and restricted shares were excluded from the calculation of diluted earnings per share available to common stockholders as the Company generated a loss for the period. For the nine months ended January 1, 2022, 164,265 employee stock options and 200485 restricted shares were excluded from the calculation of diluted earnings per share available to common stockholders. For the threesix months ended December 26, 2020, 443,294October 1, 2022, 110,692 employee stock options and 1,000 restricted shares were excluded from the calculation of diluted earnings per share available to common stockholders. For the nine months ended December 26, 2020, 480,631 employee stock options and 1,2809,780 restricted shares were excluded from the calculation of diluted earnings per share available to common stockholders. The inclusion of these employee stock options and restricted shares would have been anti-dilutive.


 

For the three months ended October 2, 2021, no employee stock options or restricted shares were excluded from the calculation of diluted earnings per share available to common stockholders. For the six months ended October 2, 2021, 159,925 employee stock options and no restricted shares were excluded from the calculation of diluted earnings per share available to common stockholders. The inclusion of these employee stock options would have been anti-dilutive.

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 incomeincome/(loss) per share available to common stockholders. Since we were in a loss position for the three months ended January 1, 2022, basic net loss per share was the same as diluted net loss per share.

  Three Months Ended  Six Months Ended 
  October 1,
2022
  October 2,
2021
  October 1,
2022
  October 2,
2021
 
             
Net income/(loss) $43,802  $(1,352) $81,240  $22,686 
Preferred stock dividends  5,750   510   11,500   510 
Net income/(loss) available to common stockholders $38,052  $(1,862) $69,740  $22,176 
                 
Denominator for basic net income/(loss)  per share available to common stockholders — weighted-average shares outstanding  28,758,403   25,500,393   28,714,445   25,260,728 
                 
Effect of dilution due to employee stock awards  335,388      305,958   372,117 
Denominator for diluted net income/(loss) per share available to common stockholders — weighted-average shares outstanding  29,093,791   25,500,393   29,020,403   25,632,845 
                 
Basic net income/(loss) per share available to common stockholders $1.32  $(0.07) $2.43  $0.88 
                 
Diluted net income/(loss) per share available to common stockholders $1.31  $(0.07) $2.40  $0.87 

6. Fair Value

  Three Months Ended  Nine months Ended 
  

January 1,

2022

  

December 26,

2020

  

January 1,

2022

  

December 26,

2020

 
             
Net income/(loss) $(63) $21,569  $32,865  $64,679 
Preferred stock dividends  5,751      6,261    
Net income/(loss) available to common stockholders $(5,814) $21,569  $26,604  $64,679 
                 
Denominator for basic net income/(loss) per share available to common stockholders — weighted-average shares outstanding  28,618,495   24,861,792   26,379,984   24,816,451 
Effect of dilution due to employee stock awards     199,020   284,006   169,397 
Effect of dilution due to MCPS            
Denominator for diluted net income/(loss) per share available to common stockholders — weighted-average shares outstanding  28,618,495   25,060,812   26,663,990   24,985,848 
                 
Basic net income/(loss) per share available to common stockholders $(0.20) $0.87  $1.01  $2.61 
                 
Diluted net income/(loss) per share available to common stockholders $(0.20) $0.86  $1.00  $2.59 

7. Cash and Cash EquivalentsFair value is defined as the price that would be expected to be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The FASB provides accounting rules that classify the inputs used to measure fair value into the following hierarchy:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3 – Unobservable inputs for the asset or liability.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

As a result of the occurrence of triggering events such as purchase accounting for acquisitions, the Company does measure certain assets and liabilities based on Level 3 inputs.

Financial Instruments:

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, trade accounts payable, short-term borrowings and long-term debt. Due to their short-term nature, the carrying value of cash and cash equivalents, accounts receivable, trade accounts payable, accrued expenses and short-term borrowings are a reasonable estimate of their fair value. Long-term assets held on our balance sheet related to benefit plan obligations are measured at fair value. Due to the nature of fair value calculations for variable-rate debt, the carrying value of the Company’s long-term variable-rate debt is a reasonable estimate of its fair value. The fair value of the Company’s long-term fixed-rate debt, based on quoted market prices, was $421,745 and $463,750 at October 1, 2022 and April 2, 2022, respectively. The carrying value of this debt was $492,822 at October 1, 2022 and $492,396 at April 2, 2022. The fair value of long-term fixed-rate debt was measured using Level 2 inputs. The Company considers all highly liquid investments purchaseddoes not believe it has significant concentrations of risk associated with an original maturity of three months or lessthe counterparties to be cash equivalents. The Company maintains its cash accounts primarily with Bank of America, N.A., JPMorgan Chase & Co., HSBC Holdings plc, Credit Suisse Group AG, and Wells Fargo & Company. The Company has not experienced any losses in such accounts.financial instruments.


8.7. Inventory

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

 

January 1,
2022

  

April 3,

2021

  

October 1,

2022

 

April 2,

2022

 
Raw materials $106,737  $57,764  $118,612  $112,651 
Work in process  117,063   86,183   128,860   122,983 
Finished goods  286,375   220,200   310,329   280,506 
 $510,175  $364,147  $557,801  $516,140 


9.8. Goodwill and Intangible Assets

Goodwill

Goodwill balances, by segment, consist of the following:

  Aerospace/
Defense
  Industrial  Total 
April 2, 2022 $194,124  $1,707,980  $1,902,104 
Acquisition (1)     (22,912)  (22,912)
Translation adjustments     (6,503)  (6,503)
October 1, 2022 $194,124  $1,678,565  $1,872,689 

  Plain  Roller  Ball  Engineered Products  Aerospace/Defense  Industrial  Total 
April 3, 2021 $79,597  $16,007  $5,623  $176,309        $277,536 
Allocation in the third quarter of fiscal 2022 (1)  (79,597)  (16,007)  (5,623)  (176,309)  194,124   83,412    
Acquisition (2)                 1,611,470   1,611,470 
Translation adjustments                 (2,132)  (2,132)
January 1, 2022             $194,124  $1,692,750  $1,886,874 

(1)Represents reallocation ofPurchase accounting adjustments to goodwill as a result of our change in segments in the third quarter of fiscal 2022. See Note 12 for further details.

(2)Goodwill associated with the acquisition of Dodge discussed further in Note 13.

We evaluate our reportable operating segments periodically, as well as when changes in our operating segments occur. For changes in reportable segments, we reassign goodwill using a relative fair value allocation approach as mentioned in tickmark 1 above. As a result of this change in segments during the quarter, the Company performed an interim goodwill impairment analysis and determined that the estimated fair values of the segments exceeded their carrying values (including goodwill). As such, there was no impairment as a result of this change.

Intangible Assets

   

January 1, 2022

  

April 3, 2021

     October 1, 2022  April 2, 2022 
 

Weighted
Average
Useful Lives

 

Gross
Carrying
Amount

  

 

Accumulated
Amortization

  

Gross
Carrying
Amount

  

 

Accumulated
Amortization

  

Weighted Average Useful Lives

(Years)

  Gross Carrying Amount  

 

Accumulated Amortization

  Gross Carrying Amount  

 

Accumulated Amortization

 
Product approvals 24 $50,878  $16,199  $50,878  $14,691   24  $50,878  $17,645  $50,878  $16,680 
Customer relationships and lists (1) 24  1,294,952   39,999   109,762   28,253   24   1,293,729   80,225   1,294,577   53,376 
Trade names (1) 25  216,346   12,786   16,333   10,392   25   216,317   19,639   216,340   15,073 
Distributor agreements 5  722   722   722   722   5   722   722   722   722 
Patents and trademarks 16  12,545   6,594   11,612   6,211   16   13,017   6,878   12,342   6,607 
Domain names 10  437   437   437   437   10   437   437   437   437 
Other(1) 3  5,521   4,230   3,745   2,665   5   14,469   3,288   9,720   4,887 
    1,581,401   80,967   193,489   63,371       1,589,569   128,834   1,585,016   97,782 
Non-amortizable repair station certifications n/a  24,281      24,281      n/a   24,281      24,281    
Total 24 $1,605,682  $80,967  $217,770  $63,371   24  $1,613,850  $128,834  $1,609,297  $97,782 

(1)Includes $1,185,000 of customer relationships, $200,000 of trade names and $82 of software intangibles resulting from the Dodge acquisition.


Amortization expense for definite-lived intangible assets during the three-month periods ended JanuaryOctober 1, 2022 and December 26, 2020October 2, 2021 were $12,133$16,755 and $2,594,$2,825, respectively. Amortization expense for definite-lived intangible assets during the nine-monthsix-month periods ended JanuaryOctober 1, 2022 and December 26, 2020October 2, 2021 were $17,542$34,059 and $7,683,$5,409, respectively. These amounts are included in other, net on the Company’s consolidated statements of operations. Estimated amortization expense for the remainder of fiscal 20222023 and the five succeeding fiscal years and thereafter is as follows:

Remainder of Fiscal 2023 $34,307 
Fiscal 2024  68,040 
Fiscal 2025  67,926 
Fiscal 2026  66,634 
Fiscal 2027  65,591 
Fiscal 2028  64,832 
Fiscal 2029 and thereafter  1,093,405 

9. Accrued Expenses and Other Current Liabilities

The significant components of accrued expenses and other current liabilities are as follows:

Remainder of Fiscal 2022 $16,735 
Fiscal 2023  67,403 
Fiscal 2024  67,273 
Fiscal 2025  66,570 
Fiscal 2026  64,081 
Fiscal 2027  63,489 
Fiscal 2028 and thereafter  1,154,883 


  

October 1,

2022

  

April 2,

2022

 
Employee compensation and related benefits $35,982  $34,697 
Taxes  8,447   11,706 
Contract liabilities  22,414   19,556 
Accrued rebates  38,829   35,234 
Workers’ compensation and insurance  1,067   1,144 
Acquisition costs  2,487   4,568 
Current finance lease liabilities  4,686   3,863 
Accrued preferred stock dividends  4,919   4,919 
Interest  10,685   10,987 
Audit fees  464   599 
Legal  925   450 
Returns and warranties  8,409   7,889 
Other  8,270   9,640 
  $147,584  $145,252 

10. Debt

The balances payable under all borrowing facilities are as follows:

  

January 1,

2022

  

April 3,

2021

 
Revolver and term loan facilities $1,302,082  $11,657 
Senior notes  500,000    
Debt issuance costs  (22,298)  (1,216)
Other  10,469   5,666 
Total debt  1,790,253   16,107 
Less: current portion  63,519   2,612 
Long-term debt $1,726,734  $13,495 

The current portion of long-term debt as of January 1, 2022 included the current portion of the Term Loan Facility, a mortgage held at one of our foreign entities and a note payable for purchased equipment. The current portion of long-term debt as of April 3, 2021 included the current portion of the Foreign Term Loan and a mortgage held at one of our foreign entities.

Domestic Credit Facility

On November 1, 2021 RBC Bearings Incorporated, our top holding company, and our Roller Bearing Company of America, Inc. subsidiary (“RBCA”) entered into a Credit Agreement (the “New Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer and the other lenders party thereto, and terminated the Company’s prior Credit Agreement, which was entered into with Wells Fargo in 2015 (the “2015 Credit Agreement”). The New Credit Agreement provides the Company with (a) a $1,300,000 term loan facility (the “Term Loan Facility”), which was used to fund a portion of the cash purchase price for the acquisition of Dodge and to pay related fees and expenses, and (b) a $500,000 revolving credit facility (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Facilities”). Debt issuance costs associated with the New Credit Agreement totaled $14,947 and will be amortized over the life of the New Credit Agreement. When the 2015 Credit Agreement was terminated the Company wrote off $890 of previously unamortized debt issuance costs.


Amounts outstanding under the Facilities generally bear interest at either, at the Company’s option, (a) a base rate determined by reference to the higher of (i) Wells Fargo’s prime lending rate, (ii) the federal funds effective rate plus 1/2 of 1.00% and (iii) the one-month LIBOR rate plus 1.00% or (b) the LIBOR rate plus a specified margin, depending on the type of borrowing being made. The applicable margin is based on the Company'sCompany’s consolidated ratio of total net debt to consolidated EBITDA from time to time. Currently, the Company'sCompany’s margin is 0.75%0.50% for base rate loans and 1.75%1.50% for LIBOR rate loans. The Facilities are subject to a “LIBOR” floor of 0.00% and contain “hard-wired” LIBOR replacement provisions as set forth in the New Credit Agreement. We are also required to pay a commitment fee on the unutilized portion of the Revolving Credit Facility as well as letter of credit fees on any amounts secured by the revolver. As of JanuaryOctober 1, 2022, the Company’s commitment fee rate is 0.25%0.20% and the letter of credit fee rate is 1.75%was 1.50%.


The Term Loan Facility and the Revolving Credit Facility will mature on November 2, 2026 (the “Maturity Date”).and amortizes in quarterly installments with the balance payable on the Maturity Date. The Company can elect to prepay some or all of the outstanding balance from time to time without penalty. Commencing one full fiscal quarter after the execution of the New Credit Agreement, the Term Loan Facilitypenalty, which will amortize inoffset future quarterly installments with the balance payable on the Maturity Date unless otherwise extended in accordance with the terms of the Term Loan Facility.amortization installments. The required future principal payments on the Term Loan Facility are approximately $16,250$0 for the remainder of fiscal 2022, $65,000 for fiscal 2023, $73,125$0 for fiscal 2024, $105,625and $0 for fiscal 2025, $138,125due to prepayments previously made, and approximately $87,500 for fiscal 2026, and $901,875$942,500 for fiscal 2027. The Revolving Credit Facility will mature on November 2, 2026, at which time all amounts outstanding under the Revolving Credit Facility will be payable.

The New Credit Agreement requires the Company to comply with various covenants, including the following financial covenants beginning with the test period ending December 31, 2021:covenants: (a) a maximum Total Net Leverage Ratio of 5.50:1.00, which maximum Total Net Leverage Ratio shall decrease during certain subsequent test periods as set forth in the New Credit Agreement (provided that, no more than once during the term of the Facilities, such maximum ratio applicable at such time may be increased by the BorrowerCompany by 0.50:1.00 for a period of 12 months after the consummation of a material acquisition), and (b) a minimum Interest Coverage Ratio of 2.00:1.00. As of October 1, 2022, the Company was in compliance with all debt covenants.

The New Credit Agreement allows the Company to, among other things, make distributions to shareholders,stockholders, 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 New Credit Agreement.

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

As of JanuaryOctober 1, 2022, $1,300,000$1,030,000 was outstanding under the Term Loan Facility and approximately $3,550$3,675 of the Revolving Credit Facility was being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs, and the Company had the ability to borrow up to an additional $496,450$496,325 under the Revolving Credit Facility. The Term Loan is reported at carrying value on the consolidated balance sheets. As the Term Loan is variable-rate debt, the carrying value approximates fair value. The Term Loan is classified within Level 2 of the fair value hierarchy. 

Senior Notes

On October 7, 2021, RBCA issued $500,000 aggregate principal amount of 4.375% Senior Notes due 2029 (the “Senior Notes”). The net proceeds from the issuance of the Senior Notes were approximately $491,992 after deducting initial purchasers’ discounts and commissions and offering expenses. On November 1, 2021, the Company used the proceeds to fund a portion of the cash purchase price for the acquisition of Dodge.


The Senior Notes were issued pursuant to an indenture dated as of October 7, 2021 (the “Indenture”), between RBCA andwith Wilmington Trust, National Association, as trustee.trustee (the “Indenture”). The Indenture contains covenants limiting the ability of the Company to (i) incur additional indebtedness or guarantee indebtedness, (ii) declare or pay dividends, redeem stock or make other distributions to stockholders, (iii) make investments, (iv) create liens or use assets as security in other transactions, (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of its assets, (vi) enter into transactions with affiliates, and (vii) sell or transfer certain assets. These covenants contain various exceptions, limitations and qualifications. At any time that the Senior Notes are rated investment grade, certain of these covenants will be suspended.


The Senior Notes are guaranteed jointly and severally on a senior unsecured basis by RBC Bearings and certain of RBCA’s existing and future wholly-ownedwholly owned domestic subsidiaries that also guarantee the New Credit Agreement.

Interest on the Senior Notes accrues from October 7, 2021 at a rate of 4.375% and will beis payable semi–annually in cash in arrears on April 15 and October 15 of each year, commencing April 15, 2022.year.

The Senior Notes will mature on October 15, 2029. The Company may redeem some or all of the Senior Notes at any time on or after October 15, 2024 at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Company may also redeem up to 40% of the Senior Notes using the proceeds of certain equity offerings completed before October 15, 2024, at a redemption price equal to 104.375% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to October 15, 2024, the Company may redeem some or all of the Senior Notes at a price equal to 100% of the principal amount, plus a “make–whole” premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. If the Company sells certain of its assets or experiences specific kinds of changes in control, the Company must offer to purchase the Senior Notes.

The Senior Notes are reported at carrying value on the consolidated balance sheets. The fair value of the Senior Notes as of January 1, 2022 was $510,790 and was computed based on quoted market prices (observable inputs). The Senior Notes are classified within Level 2 of the fair value hierarchy.

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 (i) finance the acquisition of Swiss Tool, and (ii) 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, 2024was extinguished in February 2022 and a CHF 15,000 (approximately $15,383) revolving credit facility (the “Foreign Revolver”), which continues in effect untilwas 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 lifeas of the Foreign Credit Agreements. As of JanuaryOctober 1, 2022, approximately $76 in unamortized debt issuance costs remained.2022.

Amounts outstanding underA summary of the Foreign Term Loan andCompany’s debt is presented in 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%.table below:

  

October 1,

2022

  

April 2,

2022

 
Revolver and term loan facilities $1,030,000  $1,200,000 
Senior notes  500,000   500,000 
Debt issuance costs  (16,557)  (20,895)
Other  8,671   9,236 
Total debt  1,522,114   1,688,341 
Less: current portion  1,512   1,543 
Long-term debt $1,520,602  $1,686,798 

11. Income Taxes

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 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 January 1, 2022, 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 two operating companies in the Swiss Tool System group of companies.

As of January 1, 2022, there was approximately $2,082 outstanding under the Foreign Term Loan and no amounts outstanding under the Foreign Revolver, and Schaublin had the ability to borrow up to $16,439 under the Foreign Revolver. Schaublin’s required future principal payments are approximately $0 for the remainder of fiscal 2022, $0 for fiscal 2023 through fiscal 2024 and $2,082 for fiscal 2025.


11. 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.March 30, 2019, although certain tax credits generated in earlier years are open under statute from March 29, 2008. The Company is no longer subject to U.S. federal tax examination by the Internal Revenue Service for years ending before March 31, 2018.30, 2019.

The effective income tax rates for the three-month periods ended JanuaryOctober 1, 2022 and December 26, 2020October 2, 2021, were 105.6%18.1% and 17.9%223.5%, respectively. In addition to discrete items, the effective income tax rates for these periods are 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 the rate, and state income taxes, whichforeign income taxes, and nondeductible stock-based compensation, that increase the rate. The effective rate is higher in the three-month period ended January 1, 2022 because of non-deductible transaction costs incurred in connection with the Dodge acquisition and executive compensation deductions that may be disallowed under Section 162(m).

The effective income tax rate for the three-month period ended JanuaryOctober 1, 2022 of 105.6%18.1% includes $473$2,372 of tax benefits associated with share-based compensation partially offset by $146and $174 of other items. The effective income tax rate without discrete items for the three-month period ended JanuaryOctober 1, 2022 would have been 134.6%22.9%. The effective income tax rate for the three-month period ended December 26, 2020October 2, 2021 of 17.9% included $1,003223.5% includes $91 of tax benefits associated with share-based compensation.compensation offset by the establishment of a $1,853 valuation allowance for capital loss carryforwards we do not expect to recognize and $100 of other items. The effective income tax rate without discrete items for the three-month period ended December 26, 2020October 2, 2021 would have been 21.4%53.5%. The Company believes it is reasonably possible that some of its unrecognized tax positions may be effectively settled within the next twelve12 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, reserve, pertaining primarily to federal and state credits and state tax, is estimated to be approximately $1,429 over the next 12 months.$3,068.


Income tax expense for the six-month period ended October 1, 2022 was $20,165 compared to $7,868 for the six-month period ended October 2, 2021. Our effective income tax rate for the six-month period ended October 1, 2022 was 19.9% compared to 25.8% for the six-month period ended October 2, 2021. The effective income tax rate for the nine-monthsix-month period ended JanuaryOctober 1, 2022 was 24.7% compared to 19.6%of 19.9% includes $2,971 of tax benefits associated with share-based compensation partially offset by $187 of other items. The effective income tax rate without these benefits and other items for the nine-monthsix-month period ended December 26, 2020.October 1, 2022 would have been 23.0%. The effective income tax rate for the nine-monthsix-month period ended January 1, 2022October 2, 2021 of 24.7%25.8% includes $2,703$2,231 of tax benefits associated with share-based compensation and partially offset by the establishment of a $1,853 valuation allowance for capital loss carryforwards we do notdon’t expect to recognize.recognize and $60 of other items. The effective income tax rate without these benefits and other items for the nine-monthsix-month period ended January 1, 2022October 2, 2021 would have been 26.4%27.2%. The effective income tax rate for the nine-month period ended December 26, 2020 of 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 nine-month period ended December 26, 2020 would have been 21.5%.

12. Reportable Segments

The Company previously reportedoperates through operating segments and reports its financial results under 4 operating segments: Plain Bearings; Roller Bearings; Ball Bearings; and Engineered Products. During the third quarter of fiscal 2022, the Company completed the acquisition of Dodge, which has resulted in a change in the internal organization of the Company andbased on how its chief operating decision maker makes operating decisions, assesses the performance of the business, and allocates resources. Accordingly, the Company’s financial results will now be reported in two newThese reportable operating segments:segments are Aerospace/Defense and Industrial:Industrial and are described below.

Aerospace/Defense.This segment represents the end markets for the Company’s highly engineered bearings and precision components used in commercial aerospace, defense aerospace, and sea and ground defense applications.

Industrial.This segment represents the end markets for the Company’s highly engineered bearings and precision components used in various industrial applications including: power transmission; construction, mining, energy and specialized equipment manufacturing; semiconductor production equipment manufacturing; agricultural machinery, commercial truck and automotive manufacturing; and tool holding.

Financial information for fiscal 2021 has been recast to conform to the new segment presentation.


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. Identifiable assets by reportable segment consist of those directly identified with the segment’s operations.


  

Three Months Ended

  

Nine Months Ended

 
  

January 1,

2022

  

December 26,

2020

  

January 1,

2022

  

December 26,

2020

 
Net External Sales                
Aerospace/Defense $93,203  $93,267  $276,483  $299,833 
Industrial  173,750   52,594   307,575   148,856 
  $266,953  $145,861  $584,058  $448,689 
Gross Margin                
Aerospace/Defense $37,486  $38,056  $112,666  $121,960 
Industrial  55,859   17,532   106,916   49,677 
  $93,345  $55,588  $219,582  $171,637 
Selling, General & Administrative Expenses                
Aerospace/Defense $7,114  $7,116  $21,646  $21,483 
Industrial  18,168   4,396   29,836   13,019 
Corporate  17,914   14,227   51,190   44,089 
  $43,196  $25,739  $102,672  $78,591 
Operating Income                
Aerospace/Defense $28,543  $28,630  $84,629  $93,646 
Industrial  23,197   12,904   62,414   35,247 
Corporate  (37,369)  (14,993)  (74,826)  (47,175)
  $14,371  $26,541  $72,217  $81,718 

  Three Months Ended  Six Months Ended 
  October 1,
2022
  October 2,
2021
  October 1,
2022
  October 2,
2021
 
Net External Sales            
Aerospace/Defense $103,548  $92,915  $202,947  $183,280 
Industrial  265,619   67,985   520,300   133,825 
  $369,167  $160,900  $723,247  $317,105 
Gross Margin                
Aerospace/Defense $41,033  $36,580  $79,633  $75,212 
Industrial  110,114   25,884   212,666   51,025 
  $151,147  $62,464  $292,299  $126,237 
Selling, General & Administrative Expenses                
Aerospace/Defense $7,472  $7,287  $14,940  $14,535 
Industrial  30,101   5,918   60,073   11,665 
Corporate  19,946   27,018   38,334   45,235 
  $57,519  $40,223  $113,347  $71,435 
Operating Income                
Aerospace/Defense $31,480  $26,521  $60,984  $56,111 
Industrial  60,050   19,813   113,345   39,199 
Corporate  (19,513)  (29,760)  (37,842)  (49,423)
  $72,017  $16,574  $136,487  $45,887 

                
 

January 1,
2022

  

April 3,
2021

  October 1,
2022
  April 2,
2022
       
Total Assets                        
Aerospace/Defense $856,071  $792,280  $789,204  $776,505               
Industrial  3,818,541   357,353   3,824,386   3,920,957         
Corporate  200,438   284,627   113,470   147,955         
 $4,875,050  $1,434,260  $4,727,060  $4,845,417         

13. Dodge Acquisition

On November 1, 2021, the Company completed the acquisition of Dodge for approximately $2,908,241, net of cash acquired and subject to certain adjustments. The purchase price was paid with (i) $1,285,053$1,285,761 of borrowing under the Term Loan Facility, net of issuance costs, (see Note 10), (ii) $1,050,730$1,050,811 of net proceeds from the common stock and MCPS offerings, (see Note 5), (iii) $491,992$494,200 of net proceeds from the Senior Notes offering, (see Note 10), and (iv) approximately $80,466$77,469 of cash on hand. Since the close of the transaction, purchase price adjustments totaling $22,966 have been recorded.

In the acquisition, the Company purchased 100% of the capital stock of certain entities, including Dodge Mechanical Power Transmission Company Inc. (now known as Dodge Industrial, Inc.), and certain other assets relating to ABB Asea Brown Boveri Ltd’sLtd.’s mechanical power transmission business.

With headquartersoffices in Greenville, South Carolina, Dodge is a leading manufacturer of mounted bearings, gearings and mechanical products with market-leading brand recognition. Dodge manufactures a complete line of mounted bearings, enclosed gearing and power transmission components across a diverse set of industrial end markets. Dodge primarily operates across the construction and mining aftermarket, and the food & beverage, warehousing and general machinery verticals, with sales predominately in the Americas.

 

When the Company entered into the Dodge acquisition agreement in July 2021, its obligation to pay the purchase price was supported by a $2,800,000 bridge financing commitment (the “Bridge Commitment”), which was replaced prior to the closing of the acquisition by the equity and debt financings described in Notes 5 and 10 and cash on hand.


Acquisition costs incurred infor the three- and nine- month periodsfiscal year ended January 1,April 2, 2022 totaled $20,141 and $21,574$22,598 and were recorded as period expenses and included within other, net within the consolidated statements of operations.


Remaining acquisition-related costs incurred for the three and six months ended October 1, 2022 were immaterial. This acquisition was accounted for as a purchase transaction. The preliminary purchase price allocation is subject to change pending a final valuationwill be completed during the third quarter of fiscal 2023 as we finalize the assetsimpact from taxes and liabilities acquired.other minor items. The assets acquired and liabilities assumed were recorded based on their fair values at the date of acquisition as follows:

  November 1,
2021
 
Cash and cash equivalents $81,868 
Accounts receivable  83,533 
Inventory  136,376 
Prepaid expenses and other current assets  1,261 
Property, plant and equipment  165,109 
Operating lease assets  9,768 
Goodwill  1,601,881 
Other intangible assets  1,385,082 
Other noncurrent assets  3,672 
Accounts payable  (69,757)
Accrued rebates  (30,184)
Accrued expenses and other current liabilities  (44,766)
Deferred tax liabilities  (299,711)
Other noncurrent liabilities  (56,989)
Net assets acquired  2,967,143 
Less cash received  81,868 
Net consideration $2,885,275 

  November 1,
2021
 
Cash and cash equivalents $81,868 
Accounts receivable  83,532 
Inventory  137,652 
Prepaid expenses and other current assets  1,261 
Property, plant and equipment  168,606 
Operating lease assets  9,768 
Goodwill  1,611,470 
Other intangible assets  1,385,082 
Other noncurrent assets  2,714 
Accounts payable  69,757 
Accrued rebates  29,352 
Accrued expenses and other current liabilities  43,948 
Deferred tax liabilities  289,792 
Other noncurrent liabilities  58,995 
Net assets acquired  2,990,109 
Less cash received  81,868 
Net consideration $2,908,241 

The goodwill associated with this acquisition is the result of expected synergies from combining the operations of the acquired business with the Company’sCompany's operations, and intangible assets that do not qualify for separate recognition, such as an assembled workforce. The majority$44,941 of the acquired goodwill is not deductible for tax purposes.

The fair value of the identifiable intangible assets of $1,385,082, consisting primarily of customer relationships and trade name,names, was determined using the income approach. Specifically, a multi-period, excess earnings method was utilized for the customer relationships and the relief-from-royalty method was utilized for the trade name. The fair value of the customer relationships, $1,185,000, is being amortized based on the economic pattern of benefit over a period of 24 years; the fair value of the trade name,names, $200,000, is being amortized on a straight-line basis over a 26 year26-year term. These amortization periods represent the estimated useful lives of the assets.

The results of operations for Dodge have been included in the Company’s financial statements for the period subsequent to the completion of the acquisition on November 1, 2021. Dodge contributed $109,976$192,267 of revenue and $5,348$38,152 of operating income for the quarterthree months ended JanuaryOctober 1, 2022. The following table reflects the unaudited pro formaDodge contributed $369,740 of revenue and $68,646 of operating results of the Companyincome for the three- and nine-month fiscal periodssix months ended JanuaryOctober 1, 2022 and December 26, 2020, which gives effect to the acquisition of Dodge as if the Company had been acquired on March 29, 2020. The pro forma results are based on assumptions that the Company believes are reasonable under the circumstances. The pro forma results are not necessarily indicative of the operating results that would have occurred had the acquisitions been effective March 29, 2020, nor are they intended to be indicative of results that may occur in the future. The underlying pro forma information includes the historical financial results of the Company and the acquired business adjusted for certain items such as amortization of acquired intangible assets and acquisition costs incurred. The pro forma information does not include the effects of any synergies, cost reduction initiatives or anticipated integration costs related to the acquisitions.2022.

  

Three Months Ended

  

Nine Months Ended

 
  

January 1,

2022

  

December 26,

2020

  

January 1,

2022

  

December 26,

2020

 
             
Net sales $319,100  $287,116  $968,680  $852,757 
Net income $17,958  $25,013  $72,623  $40,764 
Basic net income per share available to common stockholders $0.45  $0.72  $2.27  $1.28 
Diluted net income per share available to common stockholders $0.45  $0.72  $2.25   1.27 

Upon closing, the Company entered into a transition services agreement ("TSA") with ABB, pursuant to which ABB agreed to support the information technology, human resources and benefits, finance, tax and treasury functions of the Dodge business for six to twelve12 months. The Company hasSubstantially all services terminated on November 1, 2022. Costs associated with the option to extendTSA were $3,999 and $7,704 for the support period for up to a maximumthree and six months ended October 1, 2022, respectively, and are included in other, net on the Company’s consolidated statement of an additional year for certain IT services. RBC has the right to terminate individual services at any point over the renewal term. All services are expected to be terminated by the end of the second quarter of fiscal 2023.operations. Since the purchase of the Dodge business on November 1, 2021, costs associated with the TSA were $3,325$15,707 through JanuaryOctober 1, 2022 and were included in other, net on the Company's consolidated statement of operations.2022.

14. Subsequent Events

 

On October 28, 2022, the Company entered into a three-year USD-denominated interest rate swap (“the Swap”) from a third-party financial counterparty under the New Credit Agreement (see Note 10). The acquisitionSwap was executed to protect the Company from interest rate volatility on our variable-rate Term Loan Facility. The Swap has an effective date of Dodge resulted in additional lease obligations.December 30, 2022 and is comprised of a $600,000 notional with a maturity of three years. RBC will receive a variable rate based on one-month USD-SOFR CME Term and will pay a fixed rate of 4.455%. The Company’s total lease obligations, including leases acquired, are $3,029 fornotional on the remainder of fiscal 2022, $11,880 for fiscal 2023, $10,093 for fiscal 2024, $8,605 for fiscal 2025, $8,024 for fiscal 2026, $8,175 for fiscal 2027 and $71,063 thereafter.Swap will amortize as follows:

Year 1: $600,000

Year 2: $400,000

Year 3: $100,000


 

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

Cautionary Statement as to Forward-Looking Information

The objective of the discussion and analysis is to provide material information relevant to an assessment of the financial condition and results of operations of the registrant including an evaluation of the amounts and certainty of cash flows from operations and from outside sources.

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 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’ 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 (such as Dodge) or that we may acquire in the future may have liabilities 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; (aa) risks associated with utilizing information technology systems could adversely affect our operations; (bb) our quarterly performance can be affected by the timing of government product inspections and approvals; (cc) we may not be able to efficiently integrate Dodge into our operations; (dd) we may fail to realize some or all of the anticipated benefits of the Dodge acquisition or those benefits may take longer to realize than expected; (ee) we incurred substantial debt in order to complete the Dodge acquisition, which could constrain our business and exposes us to the risk of defaults under our debt instruments; and (ff) increases in interest rates would increase the cost of servicing the Term Loan Facility and could reduce our profitability. 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-K10-K/A for the year ended April 3, 2021.2, 2022. 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-engineeredhighly engineered bearings and precision 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 expertise has enabled us to garner leading positions in many of the product markets in which we primarily compete. With 5356 facilities in 10 countries, of which 3837 are manufacturing facilities, we have been able to significantly broaden our end markets, products, customer base and geographic reach.

 

Previously we operated under four reportable business segments – Plain Bearings, Roller Bearings, Ball Bearings, and Engineered Products – but the Dodge acquisition has resulted in a change in the internal organization of the Company and how our chief operating decision maker makes operating decisions, assesses the performance of the business, and allocates resources so that we now operate under two reportable business segments – Aerospace/Defense and Industrial:

 

Aerospace/Defense. This segment represents the end markets for the Company’s highly engineered bearings and precision components used in commercial aerospace, defense aerospace, and seamarine and ground defense applications.

Industrial. This segment represents the end markets for the Company’s highly engineered bearings, gearings and precision components used in various industrial applications including: power transmission; construction, mining, energy and specialized equipment manufacturing; semiconductor production equipment manufacturing; agricultural machinery, commercial truck and automotive manufacturing; and tool holding.

 

Financial information for fiscal 20212022 has been recast to conform to the new segment presentation.

 

The markets for our products are cyclical, and we have endeavored to mitigate this cyclicality by entering into single and sole-source relationships and long-term purchase agreements, through diversification across multiple market segments within the Aerospace/Defense and 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 highly-engineeredhighly engineered bearings and precision 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. The acquisition of Dodge has had a profound impact on our sales volumes to distributors and other aftermarket customers. We will further 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

 

Our net sales for the three-month period ended JanuaryOctober 1, 2022 increased 83.0%129.4% compared to the same period last fiscal year; excluding Dodge sales in the thirdsecond quarter of fiscal 2022,2023, net sales were up 7.6%9.9% period over period. The increase in net sales was a result of a 230.4%290.7% increase in our Industrial segment while salesand 11.4% increase in our Aerospace/Defense segment. Excluding sales from Dodge, our Industrial segment were flat.increased 7.9% year over year. Our backlog, as of JanuaryOctober 1, 2022, was $552.7$653.2 million compared to $394.8$603.1 million as of April 3, 2021.2, 2022.

 


Although we experienced a comparative increase in our

We are continuing to see the recovery of the commercial aerospace business, which increased by 31.3% for the three-month period ended October 1, 2022 versus the same period last year. We anticipate this recovery to continue throughout the rest of the fiscal year the overall recovery of this space has been marginally slower than anticipated. The ordersand beyond. Orders have startedcontinued to fill in however,grow as noted inevidenced by our backlog increase over recent periods.backlog. Defense sales, which represented approximately 38.0%32.3% of segment sales this period,during the quarter, were down more than 10.0%15.3% year over year. This is in part due to the timing of delivery on parts that require government approval and/or completion of certain milestone achievements prior to invoicing.

 


Excluding Dodge sales, sales toThe increase in our industrial segment increased 21.3% year over year. Thissales reflects a pattern of sustained growth in our industrial sales,over the last year, with strong results in several areas. Mining increased by more than 50.0% year over year, driven by strong order activity from large OEM customers. Our oil and gas business thisduring the quarter showed the startcontinued a pattern of a strong recoverygrowth which is expected to continue into future periods. Other notable strengths in industrial were in semiconductor and general industrial markets.

 

On November 1, 2021, RBC completed the acquisition of Dodge, which operates in our Industrial segment, with a significant amount of their sales derived from customers in industrial distribution. Including the positive impact of this acquisition, theThe Company expects net sales to be approximately $340.0$348.0 million to $350.0$360.0 million in the fourththird quarter of fiscal 2022.2023.

 

We experienced strong cash flow generation during the thirdsecond quarter of fiscal 20222023 (as discussed in the section “Liquidity and Capital Resources” below). With the addition of Dodge, weWe expect this trend to continue throughout the fiscal year as customer demand continues to be significant. We believe that operating cash flows and available credit under the Revolving Credit Facility and Foreign Revolver will provide adequate resources to fund internal growth initiatives for the foreseeable future, including at least the next 12 months. For further discussion regarding the funding of the Dodge acquisition, refer to Part I, Item 1 – Notes 5, 10 and 13. As of JanuaryOctober 1, 2022, we had cash and cash equivalents of $255.5$88.5 million, of which approximately $29.4$25.2 million was cash held by our foreign operations.

 

Results of Operations

(dollars in millions)

 

 Three Months Ended  Three Months Ended 
 

January 1,

2022

 

December 26,

2020

  $ Change  % Change  October 1,
2022
  October 2,
2021
  $
Change
  %
Change
 
Total net sales $267.0  $145.9  $121.1   83.0% $369.2  $160.9  $208.3   129.4%
                                
Net income/(loss) available to common stockholders $(5.8) $21.6  $(27.4)  (127.0)% $38.1  $(1.9) $40.0   2,143.6%
                                
Net income/(loss) per share available to common stockholders: diluted $(0.20) $0.86          $1.31  $(0.07)        
Weighted average common shares: diluted  28,618,495   25,060,812           29,093,791   25,500,393         

 

Our net sales for the three-month period ended JanuaryOctober 1, 2022 increased 83.0%129.4% compared to the same period last fiscal year; excluding Dodge sales in the thirdsecond quarter of fiscal 2022,2023, net sales were up 7.6% period9.9% year over period. The increase in netyear. Net sales was a result of a 230.4% increase in our Industrial segment. Sales to our Aerospace/Defense segment were led by aircraft OEM, which was up 10.5% compared to the same period in the prior year. Sales to the defense sector were down, principally as a result of production delays, rendering the Aerospace/Defense segment to be even with the prior year. Excluding Dodge sales, sales to our industrial segment increased 21.3%290.7% year over year; excluding Dodge, Industrial segment sales increased 7.9% year over year. This reflects a pattern of sustained growth, in our industrial sales, with strong results in areas including the semiconductor, mining, energy, and general industrial markets. Within aerospace, we experienced an increaseNet sales in our Aerospace/Defense segment increased 11.4% year over year, led by commercial aerospace business while the defense end markets were down asOEM, which was up 32.4% compared to the same period last year.in the prior year while sales to the defense sector were down 15.3%. The increase in commercial aerospace reflects continued recovery in orders from large OEMs as build rates escalate and stability in the aftermarket. Defense sales were negatively impacted by the timing of delivery on parts that require government approval and/or completion of certain milestone achievements prior to invoicing.

 

Net income available to common stockholders for the thirdsecond quarter of fiscal 2023 was $38.1 million compared to $1.9 million net loss for the same period last year. Net income for the second quarter of fiscal 2023 was affected by approximately $4.0 million of pre-tax transition services costs associated with the Dodge acquisition. Net loss for the second quarter of fiscal 2022 was affected by approximately $16.9 million of pre-tax costs associated with the acquisition of Dodge and $2.0 million of pre-tax restructuring costs primarily associated with consolidation efforts at one of our domestic manufacturing facilities.


  Six Months Ended 
  

October 1,

2022

  

October 2,

2021

  $
Change
  %
Change
 
Total net sales $723.2  $317.1  $406.1   128.1%
                 
Net income available to common stockholders $69.7  $22.2  $47.5   214.5%
                 
Net income per share available to common stockholders: diluted $2.40  $0.87         
Weighted average common shares: diluted  29,020,403   25,632,845         

Our net sales for the six-month period ended October 1, 2022 increased 128.1% compared to the same period last fiscal year; excluding Dodge sales in the first six months of fiscal 2023, net sales were up 11.5% year over year. Net sales in our Industrial segment increased 288.8% year over year; excluding Dodge, Industrial segment sales increased 12.5% year over year. This reflects a losspattern of $5.8sustained growth, with strong results in areas including the semiconductor, mining, energy, and general industrial markets. Net sales in our Aerospace/Defense segment increased 10.7% year over year, led by commercial OEM, which was up 27.8% compared to the same period in the prior year while sales to the defense sector were down 9.6%. The increase in commercial aerospace reflects the recovery in build rates from large OEMs and stability in the aftermarket. Defense sales were negatively impacted by the timing of shipments associated with our marine business.

Net income available to common stockholders for the six months ended October 1, 2022 was $69.7 million compared to income of $21.6$22.2 million for the same period last year. Net income for the third quarter ofsix-month period in fiscal 20222023 was affected by approximately $7.0$7.7 million of pre-tax inventory purchase accounting adjustmentstransition services costs associated with the Dodge acquisition, $23.5 million of other costs associated with the acquisition of Dodge, interest expense of $11.9 million, and tax expense of $1.2 million.acquisition. Net income for the third quarter of fiscal 2021 was affected by $1.1 million of after-tax restructuring costs and related items primarily associated with the consolidation of certain manufacturing facilities, as well as $0.2 million of losses on foreign exchange, partially offset by $1.0 million of tax benefits associated with share-based compensation.


  Nine months Ended 
  

January 1,

2022

  

December 26,

2020

  $ Change  % Change 
Total net sales $584.1  $448.7  $135.4   30.2%
                 
Net income available to common stockholders $26.6  $64.7  $(38.1)  (58.9)%
                 
Net income per share available to common stockholders: diluted $1.00  $2.59         
Weighted average common shares: diluted  26,663,990   24,985,848         

Net sales increased $135.4 million, or 30.2% for the nine-month period ended January 1, 2022 over the same period last year. The increase in net sales was mainly the result of a 106.6% increase in Industrial sales partially offset by a 7.8% decrease in Aerospace/Defense sales. The increase in Industrial sales was felt across many end markets, notably in mining, energy, and general industrial markets. The decrease in Aerospace/Defense sales was realized in both our commercial and defense markets. While the first half of the year reflected difficult results in aerospace and defense, we have seen an improvement in our commercial aerospace end market, which has slowed the decline in this segment. This trend is expected to continue to improve in future periods.

Net income for the nine months ended January 1, 2022 was $26.6 million compared to $64.7 million for the same period last year. Net income for the nine-monthsix-month period in fiscal 2022 was affected by approximately $7.0$16.9 million of pre-tax inventory purchase accounting adjustments associated with the Dodge acquisition, $24.9 million of other costs associated with the acquisition of Dodge interest expense of $27.9 million and tax expense of $10.8 million. Net income for the nine-month period in fiscal 2021 was affected by $0.8$2.5 million of capacity inefficiencies driven by the decrease in volume, $5.9 millionpre-tax restructuring costs primarily associated with the consolidation efforts at one of certainour domestic manufacturing facilities, and $15.7 million of tax expense.facilities.

 

Gross Margin

  Three Months Ended 
  

October 1,

2022

  

October 2,

2021

  $
Change
  

%

Change

 
             
Gross Margin $151.1  $62.5  $88.6   142.0%
% of net sales  40.9%  38.8%        

 

  

Three Months Ended

 
  

January 1,

2022

  

December 26,

2020

  

$
Change

  

%
Change

 
             
Gross Margin $93.3  $55.6  $37.7   67.9%
% of net sales  35.0%  38.1%        

Gross margin was 35.0%40.9% of net sales for the thirdsecond quarter of fiscal 20222023 compared to 38.1%38.8% for the thirdsecond quarter of fiscal 2021. Gross2022. The increase in gross margin foras a percentage of net sales was driven by increased volumes and efficiencies achieved and approximately $0.9 million of restructuring costs associated with consolidation efforts at one of our domestic facilities during the thirdsecond quarter of fiscal 2022 included the unfavorable impact of $7.0 million of inventory purchase accounting adjustments associated with the Dodge acquisition.2022.

 

 Nine months Ended  Six Months Ended 
 

January 1,

2022

 

December 26,

2020

  $ Change  

%

Change

  October 1,
2022
  October 2,
2021
  $
Change
  %
Change
 
                  
Gross Margin $219.6  $171.6  $48.0   27.9% $292.3  $126.2  $166.1   131.5%
% of net sales  37.6%  38.3%          40.4%  39.8%        

Gross margin was 37.6%40.4% of net sales for the first ninesix months of fiscal 20222023 compared to 38.3%39.8% for the same period last year. Gross margin for the nine-monthsix-month period of fiscal 2022 included the unfavorable impact of $7.0 million of inventory purchase accounting adjustments associated with the Dodge acquisition andwas impacted by approximately $0.9 million of other inventory rationalizationrestructuring costs associated with consolidation efforts at one of our domestic facilities. Gross margin for the nine-month period of fiscal 2021 was impacted by $0.8 million of capacity inefficiencies driven by the decrease in volume and $2.8 million in inventory rationalization costs associated with the consolidation of certain manufacturing facilities.

 


 

Selling, General and Administrative

 

 Three Months Ended  Three Months Ended 
 

January 1,

2022

 

December 26,

2020

 

$
Change

 

%
Change

  

October 1,

2022

 

October 2,

2021

  $
Change
  

%

Change

 
                  
SG&A 

$

43.2  $25.7  $17.5   68.1% $57.5  $40.2  $17.3   43.0%
% of net sales  16.2%  17.6%          15.6%  25.0%        

 

SG&A for the thirdsecond quarter of fiscal 20222023 was $43.2$57.5 million, or 16.2%15.6% of net sales, as compared to $25.7$40.2 million, or 17.6%25.0% of net sales, for the same period of fiscal 2021.2022. The improvement in SG&A foras a % of net sales is primarily due to $12.4 million less stock-based compensation expense recognized in the thirdsecond quarter of fiscal 2022 includes approximately $12.0 million of costs from2023 compared to the Dodge business. The remainder of the increase is primarily associated with an increase in personnel costs year overprior year.

 

Nine months Ended

  Six Months Ended 
 

January 1,

2022

 

December 26,

2020

  

$
Change

  

%

Change

  

October 1,

2022

 

October 2,

2021

  $
Change
  

%

Change

 
                  
SG&A $102.7  $78.6  $24.1   30.1% $113.3  $71.4  $41.9   58.7%
% of net sales  17.6%  17.5%          15.7%  22.5%        

SG&A expenses increased by $24.1$41.9 million to $102.7$113.3 million for the first ninesix months of fiscal 20222023 compared to $78.6$71.4 million for the same period last year. SG&A for the first ninesix months of fiscal 2022 includes2023 included approximately $12.0$48.0 million of costs from the Dodge business. The remainder of the increase is primarily associated with an increasebusiness and increases in professional fees and personnel costs, year over year.partially offset by a decrease in stock compensation expense.

 

Other, Net

 

  

Three Months Ended

 
  

January 1,

2022

  

December 26,

2020

  

$

Change

  

%

Change

 
             
Other, net $35.8  $3.3  $32.5   984.8%
% of net sales  13.4%  2.3%        

  Three Months Ended 
  

October 1,

2022

  

October 2,

2021

  $
Change
  

%

Change

 
             
Other, net $21.6  $5.7  $15.9   281.3%
% of net sales  5.9%  3.5%        

 

Other operating expenses for the thirdsecond quarter of fiscal 20222023 totaled $35.8$21.6 million compared to $3.3$5.7 million for the same period last year. For the thirdsecond quarter of fiscal 2023, other operating expenses included $4.0 million of TSA costs and other costs associated with the Dodge acquisition, $16.8 million of amortization of intangible assets, and $0.8 million of other items. For the second quarter of fiscal 2022, other operating expenses included $23.5 million of costs associated with the Dodge acquisition, $12.1 million of amortization of intangible assets, and $0.2 million of other items. For the third quarter of fiscal 2021, other operating expenses included $2.6 million of amortization of intangible assets, $0.5$1.1 million of restructuring costs and related items, $2.8 million of amortization of intangible assets, $1.4 million of costs associated with the acquisition of Dodge and $0.2$0.4 million of other costs.

 

Nine months Ended

  Six Months Ended 
 

January 1,

2022

 

December 26,

2020

  

$
Change

  

%

Change

  

October 1,

2022

 

October 2,

2021

 $
Change
 

%

Change

 
                  
Other, net $44.7  $11.3  $33.4   295.6% $42.5 $8.9 $33.6 376.3%
% of net sales  7.7%  2.5%         5.9% 2.8%     


Other operating expenses for the first ninesix months of fiscal 20222023 totaled $44.7$42.5 million compared to $11.3$8.9 million for the same period last year. For the first ninesix months of fiscal 2023, other operating expenses were comprised mainly of $7.8 million of TSA costs and other costs associated with the Dodge acquisition, $34.1 million of amortization of intangible assets, and $0.6 million of other items. For the first six months of fiscal 2022, other operating expenses were comprised mainly of $24.9$5.4 million in amortization of intangibles, $1.6 million of restructuring and related items, $1.4 million of costs associated with the acquisition of Dodge, acquisition, $17.5 million of amortization of intangible assets, $1.7 million of restructuring and related items, and $0.6$0.5 million of other items. 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.


Interest Expense, Net

 

  Three Months Ended 
  January 1,
2022
  December 26,
2020
  $
Change
  %
Change
 
             
Interest expense, net $11.9  $0.3  $11.6   3,866.7%
% of net sales  4.4%  0.2%        

  Three Months Ended 
  

October 1,

2022

  

October 2,

2021

  

$

Change

  

%

Change

 
             
Interest expense, net $18.3  $15.8  $2.5   16.2%
% of net sales  5.0%  9.8%        

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 $11.9$18.3 million for the thirdsecond quarter of fiscal 20222023 compared to $0.3$15.8 million for the same period last year. During the third quarter, theThe Company incurred approximately $1.1$15.5 million in costs associated with the amortization of fees for the Bridge Commitmenta bridge financing commitment established in associationconnection with the Dodge acquisition (see Note 13during the second quarter of Part 1, Item 1 above),fiscal 2022, which was replaced during the quarter with the permanent financings discussedTerm Loan Facility and Senior Notes in Notes 5 and 9the third quarter of Part 1, Item 1 above.fiscal 2022. The increase in interest costexpense was primarily due to the increase in LIBOR during the period is a resultsecond quarter of the quarterly impact of the permanent financing in place.fiscal 2023.

  Nine months Ended 
  January 1,
2022
  December 26,
2020
  $
Change
  %
Change
 
             
Interest expense, net $27.9  $1.1  $26.8   2,436.4%
% of net sales  4.7%  0.2%        

  Six Months Ended 
  

October 1,

2022

  

October 2,

2021

  

$

Change

  

%

Change

 
             
Interest expense, net $34.1  $16.1  $18.0   112.1%
% of net sales  4.7%  5.1%        

Interest expense, net was $27.9$34.1 million for the first ninesix months of fiscal 20222023 compared to $1.1$16.1 million for the first ninesix months of fiscal 2021. During the nine months ended January 1, 2022 the2022. The Company incurred approximately $16.6$15.5 million in costs associated with the amortization of fees for a bridge financing commitment established in association with the Bridge CommitmentDodge acquisition during the second quarter of fiscal 2022, which was replaced with the Term Loan Facility and $11.3 million of interest expense on outstanding financing.

Other Non-operating Expense

  Three Months Ended 
  January 1,
2022
  December 26,
2020
  $
Change
  %
Change
 
             
Other non-operating expense $1.4  $(0.1) $1.5   1,500.0%
% of net sales  0.5%  0.0%        

Other non-operating expenses were $1.4 million forSenior Notes in the third quarter of fiscal 20222022. The increase in interest expense was primarily due interest we are now incurring related to the debt disclosed within Item 1, Part I, Note 10 of this report.

Other Non-Operating Expense/(Income)

  Three Months Ended 
  

October 1,

2022

  

October 2,

2021

  $
Change
  

%

Change

 
             
Other non-operating expense /(income) $0.2  $(0.3) $0.5   (163.2)%
% of net sales  0.0%  (0.2)%        

Other non-operating expenses were $0.2 million for the second quarter of fiscal 2023 compared to $0.1$0.3 million of income for the same period in the prior year. For the thirdsecond quarter of fiscal 2022,2023, other non-operating expenses were primarily comprised of $0.9 million of charges associated with the elimination of a domestic debt facility, $0.4 million of post retirementpost-retirement benefit costs, and $0.1partially offset by $0.2 million of other items.foreign exchange gain. For the thirdsecond quarter of fiscal 2021,2022, other non-operating income was comprised of $0.5 million of gains onincome associated with short-term marketable securities partially offset by $0.2$0.1 million of foreign exchange loss and $0.2$0.1 million of other items.

  Nine months Ended 
  January 1,
2022
  December 26,
2020
  $
Change
  %
Change
 
             
Other non-operating expense $0.6  $0.2  $0.4   200.0%
% of net sales  0.1%  0.0%        


 

  Six Months Ended 
  

October 1,

2022

  

October 2,

2021

  $
Change
  

%

Change

 
             
Other non-operating expense /(income) $1.0  $(0.8) $1.8   (225.8)%
% of net sales  0.1%  (0.2)%        
                 

Other non-operating expenses were $0.6$1.0 million for the first ninesix months of fiscal 20222023 compared to $0.2$0.8 million of income for the same period in the prior year. For the first ninesix months of fiscal 2023, other non-operating expenses were comprised of $1.4 million of post-retirement benefit costs, partially offset by $0.4 million of foreign exchange gain. For the first six months of fiscal 2022, other non-operating expenses wereincome was comprised of $0.9 million of charges associated with the elimination of a debt facility, $0.6 million of post retirement benefit costs, $0.1 million of foreign exchange loss, and $0.2 million of other items partially offset by $1.2 million of income associated with short-term marketable securities. For the first nine months of fiscal 2021, other non-operating expenses were comprised of $0.4securities partially offset by $0.1 million of foreign exchange loss and $0.3 million of other items, partially offset by $0.5 million of gains on marketable securities.items.

Income Taxes

  Three Months Ended 
  January 1,
2022
  December 26,
2020
 
Income tax expense $1.2  $4.7 
Effective tax rate  105.6%  17.9%

  Three Months Ended 
  

October 1,

2022

  

October 2,

2021

 
       
Income tax expense $9.7  $2.4 
Effective tax rate  18.1%  223.5%

Income tax expense for the three-month period ended JanuaryOctober 1, 2022 was $1.2$9.7 million compared to $4.7$2.4 million for the three-month period ended December 26, 2020.October 2, 2021. Our effective income tax rate for the three-month period ended JanuaryOctober 1, 2022 was 105.6%18.1% compared to 17.9%223.5% for the three-month period ended December 26, 2020.October 2, 2021. The effective income tax rate for the three-month period ended JanuaryOctober 1, 2022 of 105.6%18.1% includes $2.4 million of tax benefits associated with share-based compensation and $0.2 million of other items. The effective income tax rate without discrete items would have been 22.9%. The effective income tax rate for the three-month period ended October 2, 2021 of 223.5% included $0.5$0.1 million of tax benefits associated with share-based compensation offset by the establishment of a $1.9 million valuation allowance for capital loss carryforwards we do not expect to recognize and $0.1 million of other items. The effective income tax rate without discrete items for the three-month period ended October 2, 2021 would have been 53.5%. The effective income tax rate without discrete items differed from the statutory rate primarily due to nondeductible share-based compensation expense recognized in the period and R&D credits.

  Six Months Ended 
  

October 1,

2022

  

October 2,

2021

 
       
Income tax expense $20.2  $7.9 
Effective tax rate  19.9%  25.8%

Income tax expense for the six-month period ended October 1, 2022 was $20.2 million compared to $7.9 million for the six-month period ended October 2, 2021. Our effective income tax rate for the six-month period ended October 1, 2022 was 19.9% compared to 25.8% for the six-month period ended October 2, 2021. The effective income tax rate for the six-month period ended October 1, 2022 of 19.9% includes $3.0 million of tax benefits associated with share-based compensation partially offset by $0.1 million of discrete tax expense; the effective income tax rate without these items would have been 134.6%. The tax rate for the third quarter was negatively impacted by the inclusion of certain pre-tax acquisition related charges that are not deductible for tax purposes. The effective income tax rate for the three-month period ended December 26, 2020 of 17.9% includes $1.0 million of tax benefit associated with share-based compensation. The effective income tax rate without these benefits and other items for the three-month period ended December 26, 2020 would have been 21.4%.

  Nine months Ended 
  January 1,
2022
  December 26,
2020
 
       
Income tax expense $10.8  $15.7 
Effective tax rate  24.7%  19.6%

Income tax expense for the nine-month period ended January 1, 2022 was $10.8 million compared to $15.7 million for the nine-month period ended December 26, 2020. Our effective income tax rate for the nine-month period ended January 1, 2022 was 24.7% compared to 19.6% for the nine-month period ended December 26, 2020. The effective income tax rate for the nine-month period ended January 1, 2022 of 24.7% included $2.7 million of tax benefits associated with share-based compensation partially offset by $1.9$0.2 million of discrete tax expense primarily associated with establishing a valuation allowance on a loss carryforward; the effective income tax rate without these benefits and other items would have been 26.4%23.0%. The tax rate for the nine months ended January 1, 2022 was negatively impacted by the inclusion of certain pre-tax acquisition related charges that are not deductible for tax purposes. The effective income tax rate for the nine-monthsix-month period ended December 26, 2020October 2, 2021 of 19.6%25.8% includes $1.7$2.2 million of tax benefitbenefits associated with share-based compensation.compensation offset by the establishment of a $1.9 million valuation allowance for capital loss carryforwards we don’t expect to recognize and $0.1 million of other items. The effective income tax rate without these benefits and other items for the nine-monthsix-month period ended December 26, 2020October 2, 2021 would have been 21.5%27.2%.

Segment Information


Segment Information

We previously reported our financial results under four operating segments (Plain Bearings; Roller Bearings; Ball Bearings; and Engineered Products), but the Dodge acquisition has resulted in a change in the internal organization of the Company and how our chief operating decision maker makes operating decisions, assesses the performance of the business, and allocates resources. Accordingly, we will now report our financial results under two operating segments: Aerospace/Defense; and Industrial. Financial information for fiscal 20212022 has been recast to conform to the new segment presentation. We use gross margin as the primary measurement to assess the financial performance of each reportable segment.


Aerospace/Defense Segment

 

 Three Months Ended  Three Months Ended 
 

January 1,

2022

 

December 26,

2020

 

$

Change

 

%

Change

  

October 1,

2022

 

October 2,

2021

 

$

Change

 

%

Change

 
                  
Total net sales $93.2  $93.3  $(0.1)  (0.1)% $103.5 $92.9 $10.6 11.4%
                         
Gross margin $37.5  $38.1  $(0.6)  (1.5)% $41.0 $36.6 $4.4 12.2%
% of segment net sales  40.2%  41.6%         39.6% 39.4%     
                         
SG&A $7.1  $7.1  $(0.0)  (0.0)% $7.4 $7.2 $0.2 2.5%
% of segment net sales  7.6%  7.6%         7.2% 7.8%     

Net sales decreased $0.1increased $10.6 million, or 0.1%11.4%, for the three months ended JanuaryOctober 1, 2022 compared to the same period last year. Commercial aerospace increased during the period 7.5%31.3% year over year. The aerospacecommercial OEM componentbusiness was up 10.5%32.4%, demonstrating early signs of acontinued recovery as build rates and orders escalate in the OEM markets. This was further evidenced by continuing expansion of our backlog during the period. Our defense markets, which represent about 38.0%represented approximately 32.3% of segment sales, decreased by approximately 10.3%15.3% during the period. These markets were impacted by the timing of deliveries to certain government customers which require sign off or achievement of certain milestones prior to shipment. Overall distribution and aftermarket sales, which represent a little less than 20.0%18.4% of segment sales, were down 14.8%increased 14.9% year over year.

Gross margin as a percentage of segment net sales was 40.2%39.6% for the thirdsecond quarter of fiscal 20222023 compared to 41.6%39.4% for the same period last year. The decreaseincrease in gross margin as a percentage of net sales was driven by product mixincreased volumes and greater cost efficiencies achieved in our plants during the period.

 Nine months Ended  Six Months Ended 
 

January 1,

2022

 

December 26,

2020

 

$

Change

 

%

Change

  

October 1,

2022

 

October 2,

2021

 

$

Change

 

%

Change

 
                  
Total net sales $276.5  $299.8  $(23.3)  (7.8)% $202.9 $183.3 $19.6 10.7%
                         
Gross margin $112.7  $122.0  $(9.3)  (7.6)% $79.6 $75.2 $4.4 5.9%
% of segment net sales  40.8%  40.1%         39.2% 41.0%     
                         
SG&A $21.7  $21.5  $0.2   0.8% $14.9 $14.5 $0.4 2.8%
% of segment net sales  7.8%  7.2%         7.4% 7.9%     

Net sales decreased $23.4increased $19.6 million, or 7.8%10.7%, for the ninesix months ended JanuaryOctober 1, 2022 compared to the same period last year. The 7.8% decrease10.7% increase was primarily driven by a 7.5% decrease25.0% increase in our commercial aerospace market, both OEM and aftermarket, while our defense market iswas down 7.7%9.6% year over year for reasons outlined above.due to the timing of shipments related to our marine business. During the year, as evidenced in the quarter discussion above, we have noted improvement in the sales and orders to our commercial aerospace customers. Although the recovery has taken longer than previously anticipated, ourcustomers as build rates continue to grow. Our backlog and recent results reflect the early stages of this process which we expect to continue to see in the future.upcoming quarters. Overall distribution and aftermarket sales were down 16.9%up 8.6% year over year as excess channel inventory is consumed.year.

 


Gross margin as a percentage of net sales increaseddecreased to 40.8%39.2% for the first ninesix months of fiscal 20222023 compared to 40.1%41.0% for the same period last year. GrossThe decrease in gross margin for the nine-month period ended January 1, 2022 was impacted by approximately $0.9 million of inventory rationalization costs associated with a consolidation efforts at one of our facilities.percentage is due to product mix.


 

Industrial Segment

 

  Three Months Ended 
  January 1,
2022
  December 26,
2020
  $
Change
  %
Change
 
             
Total net sales $173.8  $52.6  $121.2   230.4%
                 
Gross margin $55.9  $17.5  $38.4   218.6%
% of segment net sales  32.2%  33.3%        
                 
SG&A $18.2  $4.4  $13.8   313.3%
% of segment net sales  10.5%  8.4%        

  Three Months Ended 
  

October 1,

2022

  

October 2,

2021

  

$

Change

  

%

Change

 
             
Total net sales $265.6  $68.0  $197.6   290.7%
                 
Gross margin $110.1  $25.8  $84.3   325.4%
% of segment net sales  41.5%  38.1%        
                 
SG&A $30.1  $6.0  $24.1   408.6%
% of segment net sales  11.3%  8.7%        

Net sales increased $121.2$197.6 million, or 230.4%290.7%, for the three months ended JanuaryOctober 1, 2022 compared to the same period last year. The increase was primarily due to twothree months of Dodge sales in fiscal 20222023 and continued strong performance across the majority of our industrial markets. Excluding Dodge sales of $110.0$192.3 million, net sales increased $11.2$5.3 million, or 21.3%7.9%, period over period. This increase was driven by performance in semiconductor, energy, mining, and the general industrial markets. Sales to distribution and the aftermarket reflected more than 60.0%67.0% of our quarterly industrial sales. These distribution and aftermarket sales increased 445.1%637.2% compared to the same quarter in the prior year and 15.5% on an organic basis.0.6% organically.

Gross margin for the three months ended JanuaryOctober 1, 2022 was 32.2%41.5% of net sales, compared to 33.3%38.1% in the comparable period in fiscal 2021.2022. The improved gross margin for the third quarter of fiscal 2022 includedis due to price increases and also the unfavorable impact of $7.0$0.9 million of inventory purchase accounting adjustmentsrestructuring costs associated with consolidation efforts at one of our domestic facilities in the Dodge acquisition. Gross margin for the thirdsecond quarter of fiscal 2021 was impacted by approximately $0.8 million of inventory rationalization costs associated with the consolidation of certain manufacturing facilities.2022.

 

 Nine months Ended  Six Months Ended 
 

January 1,

2022

 

December 26,

2020

 

$

Change

 

%

Change

  

October 1,

2022

 

October 2,

2021

 

$

Change

 

%

Change

 
                  
Total net sales $307.6  $148.9  $158.7   106.6% $520.3 $133.8 $386.5 288.8%
                         
Gross margin $106.9  $49.7  $57.2   115.2% $212.7 $51.0 $161.7 316.8%
% of segment net sales  34.8%  33.4%         40.9% 38.1%     
                         
SG&A $29.8  $13.0  $16.8   129.2% $60.1 $11.7 $48.4 415.0%
% of segment net sales  9.7%  8.7%         11.5% 8.7%     

 

Net sales increased $158.7$386.5 million, or 106.6%288.8%, for the ninesix months ended JanuaryOctober 1, 2022 compared to the same period last year. The increase was primarily due to twosix months of Dodge sales in fiscal 20222023 and strong performance across our industrial markets. Excluding Dodge sales, net sales increased $48.7$16.8 million, or 32.7%12.5%, period over period. Sales to distribution and the aftermarket increased 182.6%601.0% over last year, and 28.3%6.1% on an organic basis. The overall segment increase, excluding the addition of Dodge, was driven by performance in semiconductor, energy, mining, and the general industrial markets.

Gross margin for the nine months ended January 1, 2022 was 34.8% of net sales, compared to 33.4% in the comparable period in fiscal 2021. The gross margin for the first nine months of fiscal 2022 included the unfavorable impact of $7.0 million of inventory purchase accounting adjustments associated with the Dodge acquisition. Gross margin for the first nine months of fiscal 2021 was impacted by approximately $2.8 million in inventory rationalization costs associated with the consolidation of certain manufacturing facilities..


 

Gross margin for the six months ended October 1, 2022 was 40.9% of net sales, compared to 38.1% in the same period in fiscal 2022. The increase in gross margin is driven by price increases and the fact that gross margin for the first six months of fiscal 2022 included the unfavorable impact of $0.9 million of restructuring costs associated with consolidation efforts at one of our domestic facilities.

 

Corporate

 

  Three Months Ended 
  January 1,
2022
  December 26,
2020
  $
Change
  %
Change
 
             
SG&A $17.9  $14.2  $3.7   25.9%
% of total net sales  6.7%  9.8%        

  Three Months Ended 
  

October 1,

2022

  

October 2,

2021

  

$

Change

  

%

Change

 
             
SG&A $20.0  $27.0  $(7.0)  (26.2)%
% of total net sales  5.4%  16.8%        

Corporate SG&A was $17.9$20.0 million, or 6.7%5.4% of sales for the thirdsecond quarter of fiscal 20222023 compared to $14.2$27.0 million, or 9.8%16.8% of sales for the same period last year. The year over year increasedecrease was primarily due to an increasea decrease in stock compensation expense, partially offset by increases in other personnel costs and professional fees during the period.fees.

  Nine months Ended 
  January 1,
2022
  December 26,
2020
  $
Change
  %
Change
 
             
SG&A $51.2  $44.1  $7.1   16.1%
% of total net sales  8.8%  9.8%        

  Six Months Ended 
  

October 1,

2022

  

October 2,

2021

  

$

Change

  

%

Change

 
             
SG&A $38.3  $45.2  $(6.9)  (15.3)%
% of total net sales  5.3%  14.3%        

Corporate SG&A increased $7.1decreased $6.9 million for the ninesix months ended JanuaryOctober 1, 2022 compared to the same period last year due to an increasea decrease in stock compensation expense, partially offset by increases in other personnel costs and professional fees, and travel related costs.fees.

Liquidity and Capital Resources

(dollars in millions in tables)

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, including the Dodge acquisition completed on November 1, 2021. 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 Revolving Credit Facility and Foreign Revolver will provide adequate resources to fund internal growth initiatives for the foreseeable future. For further discussion regarding the funding of the Dodge acquisition, refer to Part I, Item 1 – Notes 5, 10 andNote 13.

Our ability to meet future working capital, capital expendituresexpenditure 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 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, relocate, 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 JanuaryOctober 1, 2022, we had cash and cash equivalents of $255.5$88.5 million of which approximately $29.4$25.2 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 subsidiaries.


 

Domestic Credit Facility

The

On November 1, 2021 RBC Bearings Incorporated, our top holding company, and our Roller Bearing Company of America, Inc. subsidiary (“RBCA”) entered into the Newa Credit Agreement (the “New Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer and the other lenders party thereto, on November 1, 2021 and terminated the Company’s prior Credit Agreement, which was entered into with Wells Fargo in 2015 (the “2015 Credit Agreement.Agreement”). The New Credit Agreement provides the Company with (a) thea $1,300.0 million Termterm loan facility (the “Term Loan Facility,Facility”), which was used to fund a portion of the cash purchase price for the acquisition of Dodge and to pay related fees and expenses, and (b) thea $500.0 million Revolvingrevolving credit facility (the “Revolving Credit Facility.Facility” and together with the Term Loan Facility, the “Facilities”). Debt issuance costs associated with the New Credit Agreement totaled $14.9 million and will be amortized over the life of the New Credit Agreement. When the 2015 Credit Agreement was terminated the Company wrote off $890 of previously unamortized debt issuance costs relating to the 2015 Credit Agreement.

Amounts outstanding under the Facilities generally bear interest at either, at the Company’s option, (a) a base rate determined by reference to the higher of (i) Wells Fargo’s prime lending rate, (ii) the federal funds effective rate plus 1/2 of 1.00% and (iii) the one-month LIBOR rate plus 1.00% or (b) the LIBOR rate plus a specified margin, depending on the type of borrowing being made. The applicable margin is based on the Company'sCompany’s consolidated ratio of total net debt to consolidated EBITDA from time to time. Currently, the Company'sCompany’s margin is 0.75%0.50% for base rate loans and 1.75%1.50% for LIBOR rate loans. The Facilities are subject to a “LIBOR” floor of 0.00% and contain “hard-wired” LIBOR replacement provisions as set forth in the New Credit Agreement. As of JanuaryOctober 1, 2022, the Company’s commitment fee rate is 0.25%0.20% and the letter of credit fee rate is 1.75%was 1.50%.

The Term Loan Facility and the Revolving Credit Facility will mature on November 2, 2026.2026 and amortizes in quarterly installments with the balance payable on the Maturity Date. The Company can elect to prepay some or all of the outstanding balance from time to time without penalty. Commencing one full fiscal quarter after the execution of the New Credit Agreement,penalty, which will offset future quarterly amortization installments. The required future principal payments on the Term Loan Facility are $0 for the remainder of fiscal 2023, $0 for fiscal 2024, and $0 for fiscal 2025, due to prepayments previously made, and approximately $87.5 million for fiscal 2026, and $942.5 million for fiscal 2027. The Revolving Credit Facility will amortize in quarterly installments as set forth in Part I, Item 1 – Note 10, withmature on November 2, 2026, at which time all amounts outstanding under the balance payable on the Maturity Date unless otherwise extended in accordance with the terms of the Term Loan Facility.Revolving Credit Facility will be payable.

The New Credit Agreement requires the Company to comply with various covenants, including the following financial covenants beginning with the test period ending December 31, 2021:covenants: (a) a maximum Total Net Leverage Ratio of 5.50:1.00, which maximum Total Net Leverage Ratio shall decrease during certain subsequent test periods as set forth in the New Credit Agreement (provided that, no more than once during the term of the Facilities, such maximum ratio applicable at such time may be increased by the BorrowerCompany by 0.50:1.00 for a period of twelve (12)12 months after the consummation of a material acquisition), and (b) a minimum Interest Coverage Ratio of 2.00:1.00. As of October 1, 2022, the Company was in compliance with all debt covenants.

The New Credit Agreement allows the Company to, among other things, make distributions to shareholders,stockholders, 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 New Credit Agreement.

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

As of JanuaryOctober 1, 2022, $1,300.0$1,030.0 million was outstanding under the Term Loan Facility and noneapproximately $3.7 million of the Revolving Credit Facility was being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs, and the Company had the ability to borrow up to an additional $496.5$496.3 million under the Revolving Credit Facility.


Senior Notes

On October 7, 2021, RBCA issued $500.0 million aggregate principal amount of the4.375% Senior Notes and used the approximately $492.0 million ofdue 2029 (the “Senior Notes”). The net proceeds from the issuance (afterof the Senior Notes were approximately $492.0 million after deducting initial purchasers’ discounts and commissions and offering expenses)expenses. On November 1, 2021, the Company used the proceeds to fund a portion of the cash purchase price for the acquisition of Dodge.

The Senior Notes were issued pursuant to the Indenturean indenture with Wilmington Trust, National Association, as trustee.trustee (the “Indenture”). The Indenture contains covenants limiting the ability of the Company to (i) incur additional indebtedness or guarantee indebtedness, (ii) declare or pay dividends, redeem stock or make other distributions to stockholders, (iii) make investments, (iv) create liens or use assets as security in other transactions, (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of its assets, (vi) enter into transactions with affiliates, and (vii) sell or transfer certain assets. These covenants contain various exceptions, limitations and qualifications. At any time that the Senior Notes are rated investment grade, certain of these covenants will be suspended.

The Senior Notes are guaranteed jointly and severally on a senior unsecured basis by RBC Bearings and certain of RBCA’s existing and future wholly-ownedwholly owned domestic subsidiaries that also guarantee the New Credit Agreement.

Interest on the Senior Notes accrues from October 7, 2021 at a rate of 4.375% and will beis payable semi–annually in cash in arrears on April 15 and October 15 of each year commencing April 15, 2022.


The Senior Notes will mature on October 15, 2029. The Company may redeem some or all of the Senior Notes at any time on or after October 15, 2024 at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Company may also redeem up to 40% of the Senior Notes using the proceeds of certain equity offerings completed before October 15, 2024, at a redemption price equal to 104.375% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to October 15, 2024, the Company may redeem some or all of the Senior Notes at a price equal to 100% of the principal amount, plus a “make–whole” premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. If the Company sells certain of its assets or experiences specific kinds of changes in control, the Company must offer to purchase the Senior Notes.

Foreign Term Loan and Revolving Credit Facility

Our Foreign

On August 15, 2019, one of our foreign subsidiaries, Schaublin SA (“Schaublin”), entered into two separate credit agreements (the “Foreign Credit AgreementsAgreements”) with Credit Suisse (Switzerland) Ltd. provided us with financing to acquire(i) finance the acquisition of Swiss Tool, in 2019 and (ii) provide future working capital for Schaublin, our foreign subsidiary.capital. The Foreign Credit Agreements provide (a) the Foreign Term Loan,provided Schaublin with a CHF 15.0 million (approximately $15.4 million) term loan (the “Foreign Term Loan”), which expires on July 31, 2024,was extinguished in February 2022 and (b) the Foreign Revolver, a CHF 15.0 million (approximately $15.4 million) revolving credit facility (the “Foreign Revolver”), which continues in effect untilwas 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 are being amortized throughout the lifeas of the Foreign Credit Agreements. As of JanuaryOctober 1, 2022, approximately $0.1 million in unamortized debt issuance costs remain.2022.

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 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 January 1, 2022, 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 January 1, 2022, there was approximately $2.1 million outstanding under the Foreign Term Loan and no amounts outstanding under the Foreign Revolver. Schaublin has the ability to borrow up to an additional $16.1 million under the Foreign Revolver as of January 1, 2022. Schaublin’s required future principal payments are approximately $0 for the remainder of fiscal 2022, $0 for fiscal 2023 and fiscal 2024 and $2.1 million for fiscal 2025.

Cash Flows

Nine-monthSix-month Period Ended JanuaryOctober 1, 2022 Compared to the Nine-monthSix-month Period Ended December 26, 2020October 2, 2021

The following table summarizes our cash flow activities:

  FY22  FY21  

 

$ Change

 
Net cash provided by (used in):         
Operating activities $133.4  $110.6  $22.8 
Investing activities  (2,839.5)  (83.6)  (2,755.9)
Financing activities  2,810.3   (4.6)  2,814.9 
Effect of exchange rate changes on cash  0.2   0.5   (0.3)
Increase in cash and cash equivalents $104.4  $22.9  $81.5 

  FY23  FY22  $
Change
 
Net cash provided by/(used in):      
Operating activities .. $88.4  $93.5  $(5.1)
Investing activities  0.4   83.6   (83.2)
Financing activities  (179.9)  1,020.3   (1,200.2)
Effect of exchange rate changes on cash  (3.3)  0.1   (3.4)
Increase/(decrease) in cash and cash equivalents $(94.4) $1,197.5  $(1,291.9)


During the first ninesix months of fiscal 2022,2023, we generated cash of $133.4$88.4 million from operating activities compared to $110.6$93.5 million of cash generated during the same period of fiscal 2021.2022. The increasedecrease of $22.8$5.1 million for fiscal 20222023 was mainly a result of the favorableunfavorable impact of a net change in operating assets and liabilities of $24.4$66.9 million, andpartially offset by a favorable change in non-cash chargesactivity of $30.2$3.2 million offset by a decreaseand an increase in net income of $31.8$58.6 million. It is important to note that our net income was affected by approximately $21.6 million of non-recurring costs related to the Dodge acquisition. Further, cash flows from operating activities only include two months of cash flow activity from Dodge. The favorableunfavorable change in operating assets and liabilities is detailed in the table below, while the increase in non-cash charges resulted from $17.2a $40.2 million increase in depreciation and amortization, partially offset by unfavorable changes of $15.8 million of share-based compensation charges, $11.3 million of amortization of deferred financing costs, $2.2 million of share-based compensation charges, $12.6 million of depreciation and amortization and $0.9 million of costs related to the extinguishment of debt partially offset by unfavorable changes of $1.8$7.8 million in deferred taxes, and $0.9$2.1 million of loss on disposition of assets.consolidation, restructuring, and other noncash charges.


The following chart summarizes the favorableunfavorable change in operating assets and liabilities of $24.4$66.9 million for fiscal 2023 versus fiscal 2022 and the favorable change of $14.0 million for fiscal 2022 versus fiscal 2021 and the favorable change of $19.1 million for fiscal 2021 versus fiscal 2020.2021.

 

 FY22 FY21  FY23  FY22 
Cash provided by (used in):     
Cash provided by/(used in):     
Accounts receivable $(29.2) $13.0  $8.6  $(20.6)
Inventory  (3.8)  16.0   (38.0)  (2.2)
Prepaid expenses and other current assets  (10.1)  1.8   (0.9)  (9.3)
Other noncurrent assets  11.5   (5.3)  6.5   5.6 
Accounts payable  45.6   (11.4)  (19.9)  22.8 
Accrued expenses and other current liabilities  10.6   (0.5)  (11.6)  18.1 
Other noncurrent liabilities  (0.2)  5.5   (11.6)  (0.4)
Total change in operating assets and liabilities: $24.4  $19.1  $(66.9) $14.0 

During the first ninesix months of fiscal 2022,2023, we used $2,839.5generated $0.4 million forin investing activities as compared to generating $83.6 million used during the first ninesix months of fiscal 2021.2022. This increasedecrease in cash usedgenerated was attributable to the acquisition$120.5 million less in proceeds from sale of Dodge for $2,908.2 millionmarketable securities and an increase in capital expenditures of $13.0$16.2 million, partially offset by a $30.0 million decrease in purchases of marketable securities, $0.5 million increase in proceeds from the sale of $120.5 millionassets and Dodge acquisition purchase price adjustments of highly liquid marketable securities during the current period and $45.1 million less in purchase of marketable securities compared to the same period in the prior year. The prior year also included $0.3 million of purchase accounting adjustments related to the acquisition of Swiss Tool.$23.0 million.

During the first ninesix months of fiscal 2022,2023, we generated $2,810.3used $179.9 million fromin financing activities compared to $4.6$1,020.3 million usedgenerated during the first ninesix months of fiscal 2021.2022. This increase indecrease from cash generated to cash used was primarily attributable to $1,286.2$605.7 million of net proceeds received from the Term Loan Facility, $494.2 million of net proceeds received from the Senior Notes, $605.5 million of net proceeds received from the issuance of common stock during

the current period, $445.3first six months of fiscal 2022, $445.5 million of net proceeds received from the issuance of preferred stock during the current period, and $11.6 million more exercisesfirst six months of share-based awards partially offset by $20.0 million of finance fees paid in connection with credit facilities and senior notes in the current period, $5.8fiscal 2022, $161.1 million more payments made on outstanding debt, $1.4$11.5 million more treasurycash dividends paid on preferred stock, purchases$6.8 million fewer exercises of share-based awards, and $0.7$2.2 million in principal payments made on finance lease obligations during the current fiscal year.year, partially offset by $32.2 million less in finance fees paid in connection with credit facilities and term loans and $0.4 million fewer repurchases of common stock.

Capital Expenditures

 

Our capital expenditures were $14.9$15.2 million and $21.8$23.1 million for the three- and nine-monthsix-month periods ended JanuaryOctober 1, 2022, respectively. We expect to make additional capital expenditures of $7.0$15.0 million to $12.0$20.0 million during the remainder of fiscal 20222023 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.


Obligations and Commitments

The Company’s fixed contractual obligations and commitments are primarily comprised of our debt obligations disclosed in Part I, Item 1- Note 10 of this report. We also have lease obligations which are materially consistent with what we disclosed in our Form 10-K10-K/A for the fiscal year ended April 3, 2021 with the exception of what we’ve disclosed within Note 10 included in Part I, Item 1 of this report and additional lease obligations resulting from the acquisition of Dodge. The Company’s total lease obligations are $3.0 million for the remainder of fiscal 2022, $11.9 million for fiscal 2023, $10.1 million for fiscal 2024, $8.6 million for fiscal 2025, $8.0 million for fiscal 2026, $8.2 million for fiscal 2027 and $71.1 million thereafter.2, 2022.

 

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,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 20212022 Annual Report on Form 10-K10-K/A describe the significant accounting estimates and policies used in preparation of the Consolidated Financial Statements.our 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 ninesix months of fiscal 2022 other than the following:2023.

 

Valuation of Business Combinations

We allocate the amounts we pay for each acquisition to the assets we acquire and liabilities we assume based on their fair values at the date of acquisition, including identifiable intangible assets, which either arise from a contractual or legal right or are separable from goodwill. We base the fair value of identifiable intangible assets acquired in a business combination on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. We allocate to goodwill any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired. Transaction costs associated with these acquisitions are expensed as incurred through other, net on the consolidated statements of operations.


Off-Balance Sheet Arrangements

 

As of JanuaryOctober 1, 2022, we had no significant off-balance sheet arrangements other than $3.6$3.7 million of outstanding standby letters of credit, all of which were under the Revolving Credit Facility.

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.the Term Loan Facility. 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. As discussed in Note 14 in Part I, Item I of this report, we entered into an interest rate swap on October 28, 2022.

Foreign Currency Exchange Rates. Our operations in the following countries utilize the following currencies as their functional currency:

 Australia – Australian dollarIndia – rupee
 Canada – Canadian dollarMexico – peso
 China – Chinese yuanPoland – zloty
 France – euroSwitzerland – Swiss franc
 Germany – euro

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 12% and 11% of our net sales were impacted by foreign currency fluctuations for both the three- and nine-monthsix-month periods ended JanuaryOctober 1, 2022, respectively, compared to 11% and 10%9% for both the three- and nine-monthsix-month periods ended December 26, 2020, respectively.October 2, 2021. 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 JanuaryOctober 1, 2022, we had no derivatives. As discussed in Note 14 in Part I, Item I of this report, we entered into an interest rate swap on October 28, 2022.

 


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”))1934) as of JanuaryOctober 1, 2022. BasedThis evaluation excluded the Dodge business acquired on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that,November 1, 2021 as we are currently in the process of January 1, 2022, our disclosureintegrating the internal controls and procedures were (1) designedof Dodge into our internal controls over financial reporting. As provided under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations of the SEC, we will include the internal controls and procedures of Dodge in our annual assessment of the effectiveness of internal control over financial reporting for our 2023 fiscal year.

Remediation of Material Weakness

To address the previously reported material weakness in internal control over financial reporting described in Part I, Item 4 of the Company’s Form 10-Q for the quarterly period ended July 2, 2022, the Company enhanced and revised the design of existing controls and procedures to properly review employment agreements involving equity awards 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 statementsare accounted for external purposes in accordance with generally acceptedthe latest accounting principles.pronouncements. The Company’s internal audit department will test the operating effectiveness of management’s controls during the fiscal year.

Changes in Internal Control over Financial Reporting

 

NoExcept for the changes related to the Company's remediation efforts described above, there has been no change in ourthe Company’s internal control over financial reporting that occurred during the three-month period ended January 1, 2022second quarter of fiscal 2023 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 Securities Exchange Act)Act of 1934).

As discussed withinin Note 13 included withinin Part I, Item 1 of this report, we acquired Dodge on November 1, 2021. We are currently in the process of integrating the internal controls and procedures of Dodge into our internal controls over financial reporting. As provided under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations of the Securities and Exchange Commission,SEC, we will include the internal controls and procedures of Dodge in our annual assessment of the effectiveness of our internal control over financial reporting for our 2023 fiscal year. 

 


 

 

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, besides those noted below.10-K/A filed with the SEC on August 5, 2022. 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-K10-K/A for the fiscal year ended April 3, 2021.2, 2022.

Quarterly performance can be affected by the timing of government product inspections and approvals.

A portion of our quarterly revenue is associated with contracts with the U.S. government that require onsite inspection and approval of the products by government personnel before we may ship the products, and we have no control over the timing of those inspections and approvals. If products scheduled for delivery in one quarter are not inspected or approved until the following quarter, the delay would adversely affect our sales and profitability for the quarter in which the shipments were scheduled.

We may fail to realize some or all of the anticipated benefits of the Dodge acquisition or those benefits may take longer to realize than expected.

We believe that there are significant benefits and synergies to be realized through leveraging the products, scale and combined enterprise customer bases of RBC and Dodge. However, the efforts to realize these benefits and synergies will be a complex process and may disrupt both companies’ existing operations if not implemented in a timely and efficient manner. The full benefits of the Dodge acquisition, including any anticipated sales or growth opportunities, may not be realized as expected or may not be achieved within the time frames we anticipate, or at all. Any data on the expected synergies from the Dodge acquisition included in the unaudited pro forma condensed combined financial information that was included in our Current Report on Form 8-K filed with the SEC on September 20, 2021 is based on various adjustments, assumptions and preliminary estimates. Such data have not been prepared, reviewed or analyzed by a third-party and may not be an accurate indication of the actual synergies we will realize, if any, from the Dodge acquisition and the integration of Dodge into our business. Failure to achieve the anticipated benefits of the acquisition could adversely affect our results of operations or cash flows.

We may not be able to efficiently integrate Dodge into our operations.

The future success of the Dodge acquisition, including its anticipated benefits and cost savings, depends, in part, on our ability to optimize our operations and integrate Dodge, its systems, operations and personnel into our existing business. These activities will require time and involve dedication of various resources of the Company that would otherwise be dedicated to our existing operations. These integration efforts may accordingly adversely affect our other operations to the extent such efforts take resources or attention away from our other operations. If we experience difficulties in the integration process, the anticipated benefits of the Dodge acquisition may not be realized fully or at all, or may take longer to realize than expected, which could have an adverse effect on us for an undetermined period. There can be no assurance that we will realize the operational or financial gains from the Dodge acquisition that we anticipated when originally determining to acquire Dodge.

Additional challenges, risks and uncertainties we may encounter as part of the integration process include the following:

we may face significant costs of integration and compliance with any laws or regulations applicable to Dodge or our combined company;

we may experience delays in the integration of management teams, strategies, operations, products and services;

there may be differences in business backgrounds, corporate cultures and management philosophies that may delay the successful integration of Dodge’s management personnel into our operations;

we may be unable to retain key Dodge employees;

we may not be able to create and enforce uniform standards, controls, procedures, policies and information systems across our combined company;


we may face challenges in integrating complex systems, technology, networks and other assets of Dodge into our operations in a seamless manner that minimizes any adverse impact on customers, suppliers, employees and other constituencies;

there may be potential unknown liabilities and unforeseen increased expenses associated with the Dodge acquisition, including costs to integrate Dodge beyond current estimates; and

we may experience disruptions of, or the loss of momentum in, our or Dodge’s ongoing businesses or inconsistencies in standards, controls, procedures and policies.

Any of these factors could adversely affect our or Dodge’s ability to maintain relationships with customers, suppliers, employees and other constituencies or our ability to achieve the anticipated benefits of the Dodge acquisition, which could reduce earnings or otherwise adversely affect our business and financial results.

We incurred substantial debt in order to complete the Dodge acquisition, which could constrain our business and exposes us to the risk of defaults under our debt instruments.

As of January 1, 2022, we had approximately $1,790.3 million of total debt, net of deferred issuance costs, as a result of the completion of the Dodge acquisition. This debt could or will have important consequences, including, but not limited to:

this debt requires us to make significant interest and principal payments in the future;

a substantial portion of our cash flow from operations will be used to repay the principal and interest on our debt, thereby reducing the funds available to us for other purposes including for strategic acquisitions, working capital, capital expenditures, and general corporate purposes;

our flexibility in planning for and reacting to changes in our business, the competitive landscape and the markets in which we operate may be limited; and

we may be placed at a competitive disadvantage relative to other companies in our industry with less debt or comparable debt on more favorable terms.

Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our financial and operating performance and no assurance can be given that our business will generate sufficient cash flow to service our debt.

Additionally, our ability to comply with the financial and other covenants contained in our debt instruments could be affected by, among other things, changes in our results of operations, the incurrence of additional indebtedness, the pricing of our products, our success at implementing cost reduction initiatives, our ability to successfully implement our overall business strategy, or changes in industry-specific or general economic conditions which are beyond our control. The breach of any of these covenants could result in a default or event of default under the New Credit Agreement and the indenture that governs the Notes, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our prospects, business, financial condition, results of operations and cash flows could be materially and adversely affected and could cause us to become bankrupt or otherwise insolvent. In addition, these covenants may restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our business and stockholders.


Increases in interest rates would increase the cost of servicing Term Loan Facility and could reduce our profitability.

The $1,300.0 million outstanding under the Term Loan Facility bears interest at a variable rate. As a result, increases in interest rates would increase the cost of servicing the Term Loan Facility, and could materially reduce our profitability and cash flows. We have not entered into interest rate cap agreements on the Term Loan Facility. In addition, a transition away from the London Interbank Offered Rate (LIBOR) as a benchmark for establishing the applicable interest rate may affect the cost of servicing the Term Loan Facility. The Financial Conduct Authority of the United Kingdom has announced that it plans to no longer persuade or compel banks to submit rates for the calculation of LIBOR at some point in the future. Although the Term Loan Facility provides for alternative base rates, such alternative base rates may or may not be related to LIBOR, and the consequences of the phase–out of LIBOR cannot be entirely predicted at this time. The Credit Agreement for the Term Loan Facility includes language which would allow us to modify the rate used if and when the LIBOR phase-out occurs. The Company is currently evaluating whether or not to enter into an interest rate swap agreement to hedge our risk.

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 JanuaryOctober 1, 2022 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)
 
07/03/2022 – 07/30/2022    $     $73,069 
07/31/2022 – 08/27/2022  63   236.00   63   73,054 
08/28/2022 – 10/01/2022          $73,054 
Total  63  $236.00   63     

 

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)
 
10/03/2021 – 10/30/2021  171  $226.32   171  $81,184 
10/31/2021 – 11/27/2021           81,184 
11/28/2021 – 01/01/2022  6,490   194.34   6,490  $79,923 
Total  6,661  $195.16   6,661     

During the second quarter of fiscal 2023, we did not issue any common stock that was not registered under the Securities Act of 1933.


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.INSInline XBRL Instance Document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

*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:FebruaryNovember 10, 2022

 By:/s/ Robert M. Sullivan
 Name: Robert M. Sullivan
 Title:Chief Financial Officer
 Date:FebruaryNovember 10, 2022

 


 

 

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.INSInline XBRL Instance Document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*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.

 

 

4037

 

iso4217:USD xbrli:shares