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 December 30, 2017October 2, 2021

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: 333-124824001-40840

 

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

Delaware
95-4372080

(State or other jurisdiction of
incorporation or organization)

95-4372080

(I.R.S. Employer
Identification No.)

One Tribology Center

Oxford, CT

06478

(Address of principal executive offices)

06478

(Zip Code)

(203) 267-7001

(203) 267-7001

(Registrant’s telephone number, including area code)

 

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

Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareROLLNasdaq NMS
5.00% Series A Mandatory Convertible Preferred Stock, par value $0.01 per shareROLLPNasdaq NMS

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

 

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

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer           ☐(Do not check if a smaller reporting company)Smaller reporting company
Emerging growth company 

 

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

 

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

 

As of January 26, 2018,November 5, 2021, RBC Bearings Incorporated had 24,289,48128,870,241 shares of Common Stock and 4,600,000 shares of Preferred Stock outstanding.

 

 

 

TABLE OF CONTENTS

 

Part I -FINANCIAL INFORMATION31
  
ITEM 1.Consolidated Financial Statements31
ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1618
ITEM 3.Quantitative and Qualitative Disclosures About Market Risk3133
ITEM 4.Controls and Procedures32
Changes in Internal Control over Financial Reporting3233
   
Part II -OTHER INFORMATION3234
   
ITEM 1.Legal Proceedings3234
ITEM 1A.Risk Factors3234
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds3237
ITEM 3.Defaults Upon Senior Securities3337
ITEM 4.Mine Safety Disclosures3337
ITEM 5.Other Information3337
ITEM 6.Exhibits3438

 

i

Part I. FINANCIAL INFORMATION

Item 1.Consolidated Financial Statements

 

RBC Bearings Incorporated

Consolidated Balance Sheets

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

 

  December 30,
2017
  

April 1,

2017

 
       
ASSETS (Unaudited)    
Current assets:        
Cash and cash equivalents $43,822  $38,923 
Accounts receivable, net of allowance for doubtful accounts of  $1,476 at December 30, 2017 and $1,213 at April 1, 2017  109,923   109,700 
Inventory  303,013   289,594 
Prepaid expenses and other current assets  13,304   9,743 
Total current assets  470,062   447,960 
Property, plant and equipment, net  190,313   183,625 
Goodwill  268,123   268,042 
Intangible assets, net of accumulated amortization of $36,606 at December 30, 2017 and $30,191 at April 1, 2017  185,923   196,801 
Other assets  14,729   12,419 
Total assets $1,129,150  $1,108,847 
  

October 2,

2021

  

April 3,

2021

 
ASSETS (Unaudited)    
Current assets:      
Cash and cash equivalents $1,348,611  $151,086 
Marketable securities     90,249 
Accounts receivable, net of allowance for doubtful accounts of $1,912 as of October 2, 2021 and $1,792 as of April 3, 2021  109,650   110,472 
Inventory  370,745   364,147 
Prepaid expenses and other current assets  30,875   12,248 
Total current assets  1,859,881   728,202 
Property, plant and equipment, net  203,166   208,264 
Operating lease assets, net  34,124   35,664 
Goodwill  277,758   277,536 
Intangible assets, net  150,952   154,399 
Other noncurrent assets  41,916   30,195 
Total assets $2,567,797  $1,434,260 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $47,594  $36,336 
Accrued expenses and other current liabilities  58,392   43,564 
Current operating lease liabilities  5,805   5,726 
Current portion of long-term debt  500   2,612 
Total current liabilities  112,291   88,238 
Long-term debt, less current portion  7,105   13,495 
Long-term operating lease liabilities  28,756   29,982 
Deferred income taxes  20,202   17,178 
Other noncurrent liabilities  62,346   55,416 
Total liabilities  230,700   204,309 
         
Stockholders’ equity:        
Preferred stock, $.01 par value; authorized shares: 10,000,000 as of October 2, 2021 and April 3, 2021, respectively; issued shares: 4,600,000 and 0 as of October 2, 2021 and April 3, 2021, respectively  46    
Common stock, $.01 par value; authorized shares: 60,000,000 as of  October 2, 2021 and  April 3, 2021, respectively; issued shares: 29,787,162 and 26,110,320 as of October 2, 2021 and  April 3, 2021, respectively  298   261 
Additional paid-in capital  1,524,928   445,073 
Accumulated other comprehensive loss  (9,263)  (10,409)
Retained earnings  891,270   858,852 
Treasury stock, at cost, 916,679 shares and 884,701 shares as of October 2, 2021 and April 3, 2021, respectively  (70,182)  (63,826)
Total stockholders’ equity  2,337,097   1,229,951 
Total liabilities and stockholders’ equity $2,567,797  $1,434,260 

       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $43,643  $34,392 
Accrued expenses and other current liabilities  39,521   44,532 
Current portion of long-term debt  17,976   14,214 
Total current liabilities  101,140   93,138 
Deferred income taxes  10,827   12,036 
Long-term debt, less current portion  179,977   255,586 
Other non-current liabilities  38,662   31,043 
Total liabilities  330,606   391,803 
         
Stockholders’ equity:        
Preferred stock, $.01 par value; authorized shares: 10,000,000 at December 30, 2017 and April 1, 2017; none issued and outstanding      
Common stock, $.01 par value; authorized shares: 60,000,000 at December 30, 2017 and April 1, 2017; issued and outstanding shares: 25,000,672 at December 30, 2017 and 24,757,803 at April 1, 2017  250   248 
Additional paid-in capital  331,819   312,474 
Accumulated other comprehensive loss  (4,345)  (9,823)
Retained earnings  510,301   448,693 
Treasury stock, at cost, 713,201 shares at December 30, 2017 and 667,931 shares at April 1, 2017  (39,481)  (34,548)
Total stockholders’ equity  798,544   717,044 
Total liabilities and stockholders’ equity $1,129,150  $1,108,847 

 

See accompanying notes.

 


 

 

RBC Bearings Incorporated

Consolidated Statements of Operations

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

(Unaudited)

 

  

Three Months Ended 

  

Nine Months Ended 

 
  

December 30,
2017 

  

December 31,

2016

  

December 30,
2017 

  

December 31,

2016 

 
Net sales $166,858  $146,656  $495,072  $455,178 
Cost of sales  102,193   94,271   306,687   288,811 
Gross margin  64,665   52,385   188,385   166,367 
Operating expenses:                
      Selling, general and administrative  28,162   25,712   83,535   76,696 
      Other, net  3,380   6,144   14,649   10,367 
Total operating expenses  31,542   31,856   98,184   87,063 
Operating income  33,123   20,529   90,201   79,304 
Interest expense, net  1,761   2,111   5,704   6,659 
Other non-operating expense  26   (216)  462   51 
Income before income taxes  31,336   18,634   84,035   72,594 
Provision for income taxes  7,504   5,864   23,571   23,556 
Net income $23,832  $12,770  $60,464  $49,038 
Net income per common share:                
Basic $0.99  $0.54  $2.53  $2.09 
Diluted $0.97  $0.54  $2.49  $2.07 
Weighted average common shares:                
Basic  23,985,925   23,581,921   23,912,474   23,457,717 
Diluted  24,446,115   23,813,780   24,322,165   23,719,121 
  Three Months Ended  Six Months Ended 
  October 2,
2021
  September 26,
2020
  October 2,
2021
  September 26,
2020
 
Net sales $160,900  $146,335  $317,105  $302,828 
Cost of sales  98,436   89,739   190,868   186,779 
Gross margin  62,464   56,596   126,237   116,049 
Operating expenses:                
Selling, general and administrative  29,674   26,023   59,476   52,852 
Other, net  5,667   4,210   8,915   8,020 
Total operating expenses  35,341   30,233   68,391   60,872 
Operating income  27,123   26,363   57,846   55,177 
Interest expense, net  15,770   343   16,089   768 
Other non-operating (income)/expense  (291)  211   (756)  253 
Income before income taxes  11,644   25,809   42,513   54,156 
Provision for income taxes  4,715   5,388   9,585   11,046 
Net income  6,929   20,421   32,928   43,110 
Preferred stock dividends  510     510   
Net income available to common stockholders $6,419  $20,421  $32,418  $43,110 
                 
Net income per share available to common stockholders:                
Basic $0.25  $0.82  $1.28  $1.74 
Diluted $0.25  $0.82  $1.27  $1.73 
Weighted average common shares:                
Basic  25,500,393   24,823,658   25,260,728   24,793,245 
Diluted  25,775,794   24,957,158   25,544,088   24,944,608 

 

See accompanying notes.

 


 

 

RBC Bearings Incorporated

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(Unaudited)

 

  

Three Months Ended 

  

Nine Months Ended 

 
  

December 30,
2017 

  

December 31,

2016

  

December 30,
2017 

  

December 31,

2016 

 
Net income $23,832  $12,770  $60,464  $49,038 
Pension and postretirement liability adjustments, net of taxes  196   234   588   701 
Foreign currency translation adjustments  470   (3,954)  4,890   (5,759)
Total comprehensive income $24,498  $9,050  $65,942  $43,980 
  Three Months Ended  Six Months Ended 
  October 2,
2021
  September 26,
2020
  October 2,
2021
  September 26,
2020
 
Net income $6,929  $20,421  $32,928  $43,110 
Pension and postretirement liability adjustments, net of taxes (1)
  318   259   636   519 
Foreign currency translation adjustments  (1,409)  1,377   510   1,786 
Total comprehensive income $5,838  $22,057  $34,074  $45,415 

 

(1)These adjustments were net of tax expense of $82 and $79 for the three-month periods ended October 2, 2021 and September 26, 2020, respectively and $165 and $158 for the six-month periods ended October 2, 2021 and September 26, 2020, 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’
 
  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 
Net income                    25,999         25,999 
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 

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’
 
  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 
Net income              22,689         22,689 
Share-based compensation        5,438               5,438 
Repurchase of common stock                 (31,179)  (4,391)  (4,391)
Exercise of equity awards  4,200      231               231 
Change in net prior service cost and actuarial losses, net of taxes of $79           260            260 
Issuance of restricted stock, net of forfeitures  56,157                      
Currency translation adjustments           409            409 
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 
Share-based compensation        5,231               5,231 
Repurchase of common stock                 (62)  (8)  (8)
Exercise of equity awards  31,200   1   2,188               2,189 
Change in net prior service cost and actuarial losses, net of taxes of $79           259            259 
Issuance of restricted stock, net of forfeitures  (2,299)                     
Currency translation adjustments           1,377            1,377 
Balance at September 26, 2020  25,970,673  $260  $425,488  $(4,593) $812,329   (870,223) $(61,380) $1,172,104 

See accompanying notes.


RBC Bearings Incorporated

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

 

  

Nine Months Ended 

 
  

December 30, 

2017

  

December 31,

2016

 
Cash flows from operating activities:        
Net income $60,464  $49,038 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation  14,155   13,557 
Excess tax benefits from stock-based compensation     (4,870)
Deferred income taxes  (321)  3,717 
Amortization of intangible assets  7,041   6,921 
Amortization of deferred financing costs  1,068   1,068 
Stock-based compensation  9,897   8,914 
(Gain) loss on disposal of fixed assets  (1)  2,457 
Gain on acquisition     (293)
Impairment charges  5,577   1,443 
Changes in operating assets and liabilities, net of acquisitions:        
Accounts receivable  701   3,954 
Inventory  (12,035)  (7,293)
Prepaid expenses and other current assets  (4,555)  (5,238)
Other non-current assets  (3,308)  (2,282)
Accounts payable  9,040   1,466 
Accrued expenses and other current liabilities  (3,340)  2,123 
Other non-current liabilities  8,113   (107)
Net cash provided by operating activities  92,496   74,575 
         
Cash flows from investing activities:        
Purchase of property, plant and equipment  (20,542)  (14,415)
Proceeds from sale of assets  33   107 
Business acquisition     (651)
Net cash used in investing activities  (20,509)  (14,959)
         
Cash flows from financing activities:        
Repayments of revolving credit facility  (62,750)  (61,500)
Repayments of term loans  (10,000)  (7,500)
Payments of notes payable  (359)  (353)
Exercise of stock options  9,450   11,567 
Excess tax benefits from stock-based compensation     4,870 
Repurchase of common stock  (4,933)  (4,750)
Net cash used in financing activities  (68,592)  (57,666)
         
Effect of exchange rate changes on cash  1,504   (1,686)
         
Cash and cash equivalents:        
Increase during the period  4,899   264 
Cash, at beginning of period  38,923   39,208 
Cash, at end of period $43,822  $39,472 
  Six Months Ended 
  

October 2,

2021

  

September 26,

2020

 
Cash flows from operating activities:      
Net income $32,928  $43,110 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation  11,448   11,744 
Deferred income taxes  2,993   4,051 
Amortization of intangible assets  5,409   5,089 
Amortization of deferred financing costs  15,682   259 
Share-based compensation  11,996   10,669 
Loss/(gain) on disposition of assets  75   588 
Consolidation, restructuring, and other noncash charges  2,378   2,416 
Changes in operating assets and liabilities, net of acquisitions:        
Accounts receivable  642   21,267 
Inventory  (7,173)  (4,981)
Prepaid expenses and other current assets  (12,059)  (2,812)
Other noncurrent assets  (1,310)  (6,885)
Accounts payable  11,248   (11,554)
Accrued expenses and other current liabilities  14,000   (4,137)
Other noncurrent liabilities  5,217   5,655 
Net cash provided by operating activities  93,474   74,479 
         
Cash flows from investing activities:        
Purchase of property, plant and equipment  (6,882)  (6,008)
Proceeds from sale of assets  10   10 
Purchase of marketable securities  (29,982)  - 
Proceeds from sale of marketable securities  120,483   - 
Acquisition of business  -   245 
Net cash provided by/(used in) investing activities  83,629   (5,753)
         
Cash flows from financing activities:        
Proceeds received from issuance of common stock  605,677   - 
Proceeds received from issuance of preferred stock  445,453   - 
Finance fees paid in connection with credit facilities and term loans  (32,208)  - 
Repayments of term loans  (8,866)  (3,287)
Repayments of notes payable  (254)  (249)
Exercise of stock options  16,812   2,420 
Repurchase of common stock  (6,356)  (4,399)
Net cash provided by/(used in) financing activities  1,020,258   (5,515)
         
Effect of exchange rate changes on cash  164   (114)
         
Cash and cash equivalents:        
Increase during the period  1,197,525   63,097 
Cash and cash equivalents, at beginning of period  151,086   103,255 
Cash and cash equivalents, at end of period $1,348,611  $166,352 
         
Supplemental disclosures of cash flow information:        
Cash paid for:        
Income taxes $10,777  $6,559 
Interest  416   516 

 

See accompanying notes.

 


 

 

RBC Bearings Incorporated

Notes to Unaudited Interim Consolidated Financial Statements

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

 

1. Basis of Presentation

 

The interim consolidated financial statements included herein have been prepared by RBC Bearings Incorporated, a Delaware corporation (collectively with its subsidiaries, the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The interim financial statements included with this report have been prepared on a consistent basis with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 1, 2017.3, 2021. 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”,“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, whichthat are, in the opinion of management, necessary for the fair presentation of the consolidated financial condition and consolidated results of operations for the interim periods presented. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Annual Report on Form 10-K.

 

The results of operations for the three month periodthree- and six-month periods ended December 30, 2017October 2, 2021 are not necessarily indicative of the operating results for the entire fiscal year ending March 31, 2018.April 2, 2022. The three monththree- and six-month periods ended December 30, 2017October 2, 2021 and December 31, 2016September 26, 2020 each include 13 weeks.weeks and 26 weeks, respectively. The amounts shown are in thousands, unless otherwise indicated.

 

Critical2. Significant Accounting Policies

 

Revenue Recognition.In accordance with SEC StaffThe Company’s significant accounting policies are detailed in “Note 2 - Summary of Significant Accounting Bulletin 101 “Revenue Recognition in Financial StatementsPolicies” of our Annual Report on Form 10-K for the year ended April 3, 2021. Significant changes to our accounting policies as amended by Staff Accounting Bulletin 104,” we recognize revenues principally from the salea result of products at the point of passage of title, which is at the time of shipment, except for certain customers for which it occurs when the products reach their destination.adopting new accounting standards are discussed below.

 

We also recognize revenue on a Ship-In-Place basis for three customers who have required that we hold the product after final production is complete. In this case, a written agreement has been executed (at the customer’s request) whereby the customer accepts the risk of loss for product that is invoiced under the Ship-In-Place arrangement. For each transaction for which revenue is recognized under a Ship-In-Place arrangement, all final manufacturing inspections have been completed and customer acceptance has been obtained. In the three months ended December 30, 2017, 1.8% of the Company’s total net sales were recognized under Ship-In-Place transactions.

Recent Accounting PronouncementsStandards Adopted

 

In May 2017,December 2019, the Financial Accounting Standards Board (“FASB”)(FASB) issued Accounting Standards Update (“ASU”)(ASU) No. 2017-09, “Compensation – Stock Compensation2019-12, Income Taxes (Topic 718)740): Scope of Modification Accounting”, in an effort to reduce diversity in practice as it relates to applying modification accounting for changes to the terms and conditions of share-based payment awards. This ASU is effective for public companies for the financial statements issued for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, in an effort to improve the presentation of these costs within the income statement. Under current GAAP, all components of both net periodic pension cost and net periodic postretirement cost are included within selling, general and administrative costs on the income statement. This ASU would require entities to include only the service cost component within selling, general and administrative costs whereas all other components would be included within other non-operating expense. In addition, only the service cost component would be eligible for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset). The amendments in this Update should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. This ASU is effective for public companies for the financial statements issued for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company has not determined the effect that the adoption of the pronouncement may have on its financial position and/or results of operations.


In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the TestAccounting for Goodwill Impairment”Income Taxes. The objective of this standard update is to simplify the subsequent measurementaccounting for income taxes by removing certain exceptions to the general principles in Topic 740. This ASU also attempts to improve consistent application of goodwill, eliminating Step 2 from the goodwill impairment test. Under this ASU, an entity should perform its annual goodwill impairment testand simplify U.S. GAAP for other areas of Topic 740 by comparing the fair value of a reporting unit with its carrying amount. An entity would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, assuming the loss recognized does not exceed the total amount of goodwill for the reporting unit. Theclarifying and amending existing guidance. This standard update is effective for fiscal years beginning after December 15, 2019.2020, 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 isdid 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.

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


3. Revenue from Contracts with Customers

Disaggregation of Revenue

The Company operates in four business segments with similar economic characteristics, including nature of the products and production processes, distribution patterns and classes of customers. Revenue is disaggregated within these business segments by our two principal end markets: aerospace and industrial. Comparative information of the Company’s consolidated financial statements.overall revenues for the three- and six-month periods ended October 2, 2021 and September 26, 2020 are as follows:

 

InPrincipal End Markets

  Three Months Ended 
  October 2, 2021  September 26, 2020 
  Aerospace  Industrial  Total  Aerospace  Industrial  Total 
Plain $49,503  $24,576  $74,079  $51,040  $20,013  $71,053 
Roller  8,892   18,417   27,309   10,674   10,905   21,579 
Ball  8,027   16,404   24,431   7,311   13,788   21,099 
Engineered Products  16,860   18,221   35,081   18,116   14,488   32,604 
  $83,282  $77,618  $160,900  $87,141  $59,194  $146,335 

  Six Months Ended 
  October 2, 2021  September 26, 2020 
  Aerospace  Industrial  Total  Aerospace  Industrial  Total 
Plain $98,471  $48,929  $147,400  $110,392  $39,536  $149,928 
Roller  17,679   34,877   52,556   23,904   20,575   44,479 
Ball  15,237   32,322   47,559   14,333   25,606   39,939 
Engineered Products  32,788   36,802   69,590   37,494   30,988   68,482 
  $164,175  $152,930  $317,105  $186,123  $116,705  $302,828 


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 $302,874 at October 2016,2, 2021. The Company expects to recognize revenue on approximately 55% and 87% of the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740)”,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 October 2, 2021 and April 3, 2021, current contract assets were $6,743 and $5,584, respectively, and included within prepaid expenses and other current assets on the consolidated balance sheets. The increase in an effortcontract assets was primarily due to improve the accounting for the income tax consequences of intra-equity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This ASU establishes the requirement that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This ASU is effective for public companies for the financial statements issued for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual reporting period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company has not determined the effect that the adoption of the pronouncement may have on its financial position and/or results of operations.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU is effective for public companies for the financial statements issued for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual reporting period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company has not determined the effect that the adoption of the pronouncement may have on its statements of cash flows.

In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” which amends ASC Topic 718, Compensation - Stock Compensation. This ASU includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The Company adopted this standard on April 2, 2017. As a result of the adoption, the Company began recording the tax effects associated with stock-based compensation through the income statement on a prospective basis which resulted in a tax benefit of $3.9 million for the first nine months of fiscal 2018. Prior to adoption, these amounts would have been recorded as an increase to additional paid-in capital. This change may create volatility in the Company’s effective tax rate. The adoption of this standard also resulted in a cumulative effect change to opening retained earnings of $1.1 million for previously unrecognized excess tax benefits.

In addition, the Company will prospectively classify all tax-related cash flows resulting from share-based payments, including the excess tax benefitsrevenue related to the settlementsatisfaction or partial satisfaction of stock-based awards, as cash flows from operating activities in the statement of cash flows. Prior to the adoption of this standard, these were shown as cash inflows from financing activities and cash outflows from operating activities.


The adoption of the ASU also resulted in the Company removing the excess tax benefits from the assumed proceeds available to repurchase shares when calculating diluted earnings per share on a prospective basis. The revised calculation increased the diluted weighted average common shares outstanding by approximately 0.1 million shares in the period of adoption. The Company also made an accounting policy election to continue to estimate forfeitures as it didperformance obligations prior to adoption.

In February 2016,billing partially offset by amounts billed to customers during the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The core principalperiod. As of ASU 2016-02 is that an entity should recognize on its balance sheet assetsOctober 2, 2021 and liabilities arising from a lease. In accordance with that principle, ASU 2016-02 requires that a lessee recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to useApril 3, 2021, the underlying leased asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on the lease classification as a finance or operating lease. This new accounting guidance is effective for public companies for fiscal years beginning after December 15, 2018 under a modified retrospective approach and early adoption is permitted. The Company is currently evaluating the impact this adoption will have on its consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” This update requires the company to measure inventory using the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU applies to companies measuring inventory using methods other than the last-in, first-out (LIFO) and retail inventory methods, including but not limited to the first-in, first-out (FIFO) or average costing methods. The Company adopted this ASU on a prospective basis on April 2, 2017 and it did not have a material impactany contract assets classified as noncurrent on the consolidated balance sheets. There were $77 of impairment losses related to the Company’s consolidated financial statements.contract assets during the three and six months ended October 2, 2021.

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”.Contract Liabilities (Deferred Revenue) - The objective of this standard update isCompany may receive a customer advance or deposit, or have an unconditional right to remove inconsistent practices with regardsreceive a customer advance, prior to revenue recognition between U.S. GAAP and IFRS. The standard intendsbeing recognized. Since the performance obligations related to improve comparabilitysuch advances may not have been satisfied, a contract liability is established. Advance payments are not considered a significant financing component as the timing of revenue recognition practices across entities, industries, jurisdictions and capital markets. The provisionsthe transfer of ASU No. 2014-09 will be effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted for annual periods beginning after December 15, 2016.the related goods or services is at the discretion of the customer.

 

As of October 2, 2021 and April 3, 2021, current contract liabilities were $15,368 and $16,998, respectively, and included within accrued expenses and other current liabilities on the consolidated balance sheets. The guidance permits use of either a retrospective or cumulative effect transition method. Based upon the FASB’s decision to approve a one-year delaydecrease in implementation, the new standard is now effective for the Company in fiscal 2019, with early adoption permitted, but not earlier than fiscal 2018. The Company has concluded it will utilize the modified retrospective method upon adopting this standard.

The Company has substantially completed their assessment of the impact of the new standard on its business which has identified potential differences that would result from applying the requirements of the new standard to its revenue contracts. Upon adoption, the Company expects certain revenue streams currently accounted for using a point-in-time model will utilize an over-time modelcurrent contract liabilities was primarily due to the continuous transferamount of controladvanced payments received and reclassifications between current and noncurrent contract liabilities based on anticipated timing of performance obligations and revenue recognized during the period. For the three and six months ended October 2, 2021, the Company recognized revenues related to customers. Thecontract liabilities of $2,129 and $6,779, respectively. For the 3 and six months ended September 26, 2020, the Company is in the processrecognized revenues related to contract liabilities of drafting updated accounting policies$1,944 and disclosures under the new guidance. The Company has not finalized the impact of reported revenues and earnings of adopting the new standard but expects to do so by the end of the fourth quarter of fiscal 2018.$7,765, respectively.

 

As of October 2, 2021 and April 3, 2021, noncurrent contract liabilities were $8,935 and $3,754, respectively, and included within other noncurrent liabilities on the consolidated balance sheets. The increase in noncurrent contract liabilities was primarily due to the amount of advanced payments received and reclassifications between current and noncurrent contract liabilities based on anticipated timing of performance obligations and revenue recognized during the period.

 

1.Accounts Receivable - As of October 2, 2021 and April 3, 2021, accounts receivable with customers, net, were $109,650 and $110,472, respectively.


4. Accumulated Other Comprehensive Income (Loss)

 

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

 


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

 

  

Currency

Translation

  

Pension and

Postretirement

Liability

  Total 
Balance at April 3, 2021 $445  $(10,854) $(10,409)
Other comprehensive income (loss) before reclassifications  510      510 
Amounts recorded in/reclassified from accumulated other comprehensive income (loss)     636   636 
Net current period other comprehensive income (loss)  510   636   1,146 
Balance at October 2, 2021 $955  $(10,218) $(9,263)

 

  

Currency

Translation

  

Pension and

Postretirement

Liability

  Total 
Balance at April 1, 2017 $(3,942) $(5,881) $(9,823)
Other comprehensive income before reclassifications  4,890      4,890 
Amounts reclassified from accumulated other comprehensive income     588   588 
Net current period other comprehensive income  4,890   588   5,478 
Balance at December 30, 2017 $948  $(5,293) $(4,345)

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 MCPS has a liquidation preference of $100 per share. The trading symbol for the MCPS is “ROLLP.” The net proceeds from the MCPS offering were approximately $445,453 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 (“ABB”).

As of October 2, 2021, the MCPS had an aggregate liquidation preference of $460,510.

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 second quarter of fiscal 2022, the Company had accrued dividends of $510.

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.


2.

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. 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. The common stock is junior to the MCPS in terms of liquidation preference.

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 $605,677 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 Income Per Share Available to Common ShareStockholders

 

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

 

Diluted net income per share available to common sharestockholders is computed by dividing net income 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.options and conversion common stock shares of MCPS.

 

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 income per share available to common stockholders by adjusting net income in the numerator for the effect of the cumulative MCPS dividends for the respective period.

For the three- and six-month periods ended October 2, 2021, 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 income was reduced by cumulative MCPS dividends, as presented in our consolidated statement of operations, for purposes of calculating net income available to common stockholders.

For the three 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. 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. For the three months ended September 26, 2020, 502,861 employee stock options and 115,185 restricted shares were excluded from the calculation of diluted earnings per share available to common stockholders. For the six months ended September 26, 2020, 502,909 employee stock options and 65,325 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.


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

  Three Months Ended  Nine Months Ended 
  

December 30,

2017

  

December 31,

2016

  

December 30,

2017

  

December 31,

2016

 
             
Net income $23,832  $12,770  $60,464  $49,038 
                 
Denominator for basic net income per common share—weighted-average shares outstanding  23,985,925   23,581,921   23,912,474   23,457,717 
Effect of dilution due to employee stock awards  460,190   231,859   409,691   261,404 
Denominator for diluted net income per common share—weighted-average shares outstanding  24,446,115   23,813,780   24,322,165   23,719,121 
                 
Basic net income per common share $0.99  $0.54  $2.53  $2.09 
                 
Diluted net income per common share $0.97  $0.54  $2.49  $2.07 


At December 30, 2017, no employee stock options have been excluded from the calculation of diluted earnings per share. At December 31, 2016, 449,500 employee stock options have been excluded from the calculation of diluted earnings per share. The inclusion of these employee stock options would be anti-dilutive.stockholders:

 


  Three Months Ended  Six Months Ended 
  

October 2,

2021

  

September 26,

2020

  

October 2,

2021

  

September 26,

2020

 
             
Net income $6,929  $20,421  $32,928  $43,110 
Preferred stock dividends  510     510   
Net income available to common stockholders $6,419  $20,421  $32,418  $43,110 
                 
Denominator for basic net income  per share available to common stockholders — weighted-average shares outstanding  25,500,393   24,823,658   25,260,728   24,793,245 
                 
Effect of dilution due to employee stock awards  275,401   133,500   283,360   151,363 
Effect of dilution due to MCPS            
Denominator for diluted net income per share available to common stockholders — weighted-average shares outstanding  25,775,794   24,957,158   25,544,088   24,944,608 
                 
Basic net income per share available to common stockholders $0.25  $0.82  $1.28  $1.74 
                 
Diluted net income per share available to common stockholders $0.25  $0.82  $1.27  $1.73 

3.

7. Cash and Cash Equivalents

 

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains its cash accounts primarily with Bank of America, N.A., Credit Suisse Group AG and Wells Fargo & Company. The domestic balances are insured by the Federal Deposit Insurance Company up to $250. The Company has not experienced any losses in such accounts.

 

Short-term investments, if any, are comprisedDuring the second quarter of equityfiscal 2022, the Company sold all of its remaining short-term marketable securities and are measured at fair value by using quoted prices in active markets and are classified as Level 1to fund a portion of the valuation hierarchy.cash purchase price for the acquisition of Dodge, to pay acquisition-related fees and expenses, and for other general corporate purposes. The resulting gain on sale was immaterial.

4.8. Inventory

 

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

 

  

December 30,

2017

  

April 1,

2017

 
Raw materials $38,324  $35,364 
Work in process  79,921   79,048 
Finished goods  184,768   175,182 
  $303,013  $289,594 
  

October 2,

2021

  

April 3,

2021

 
Raw materials $57,493  $57,764 
Work in process  93,197   86,183 
Finished goods  220,055   220,200 
  $370,745  $364,147 

 

5.   Goodwill and Intangible Assets9. Debt

 

Goodwill

  Roller  Plain  Ball  Engineered Products  Total 
April 1, 2017 $16,007  $79,597  $5,623  $166,815  $268,042 
Translation adjustments           81   81 
December 30, 2017 $16,007  $79,597  $5,623  $166,896  $268,123 

Intangible Assets

     December 30, 2017  April 1, 2017 
  Weighted Average Useful Lives  Gross Carrying Amount  

Accumulated Amortization

  Gross Carrying Amount  

Accumulated Amortization

 
Product approvals  24  $50,878  $7,823  $53,869  $6,465 
Customer relationships and lists  24   106,583   15,426   107,864   12,308 
Trade names  10   18,734   6,300   19,923   5,137 
Distributor agreements  5   722   722   722   722 
Patents and trademarks  16   9,610   4,661   8,803   4,130 
Domain names  10   437   419   437   386 
Other  6   1,365   1,255   1,174   1,043 
       188,329   36,606   192,792   30,191 
Non-amortizable repair station certifications  n/a   34,200      34,200    
Total     $222,529  $36,606  $226,992  $30,191 

Amortization expense for definite-lived intangible assets for the nine month periods ended December 30, 2017 and December 31, 2016 was $7,041 and $6,921, respectively. Estimated amortization expense for the remaining three months of fiscal 2018, the five succeeding fiscal years and thereafter is as follows:

2018 $2,435 
2019  8,855 
2020  8,747 
2021  8,696 
2022  8,579 
2023  8,496 
2024 and thereafter  105,915 

6.   Debt

The balances payable under all borrowing facilities are as follows:

 

  

December 30,

2017

  

April 1,

2017

 
Revolver and term loan facilities $194,250  $267,000 
Debt issuance costs  (3,324)  (4,392)
Other  7,027   7,192 
Total debt  197,953   269,800 
Less: current portion  17,976   14,214 
Long-term debt $179,977  $255,586 
  

October 2,

2021

  

April 3,

2021

 
Revolver and term loan facilities $3,115  $11,657 
Debt issuance costs  (1,005)  (1,216)
Other  5,495   5,666 
Total debt  7,605   16,107 
Less: current portion  500   2,612 
Long-term debt $7,105  $13,495 

 

The current portion of long-term debt as of both December 30, 2017 and April 1, 2017 includesOctober 2, 2021 included the current portion of the Schaublin mortgage andmortgage. The current portion of long-term debt as of April 3, 2021 included the current portion of the Foreign Term Loan Facilities.and the Schaublin mortgage.


Domestic Credit Facility

 

In connection with the Sargent Aerospace & Defense (“Sargent”) acquisition on April 24, 2015, the Company entered into a newThe Company’s credit agreement (the “Credit Agreement”) and related Guarantee, Pledge Agreement and Security 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 “2015 Credit Agreement”) provides the JP Morgan Credit Agreement. The Credit Agreement provides RBCA, as Borrower,Company with (a) a $200,000 Term Loan and (b) a $350,000 Revolver and together with the Term Loan$250,000 revolving credit facility (the “Facilities”“Revolver”). The Facilities expire, which expires on April 24, 2020.January 31, 2024. As of October 2, 2021, $923 in unamortized debt issuance costs remained.

 

Amounts outstanding under the FacilitiesRevolver generally bear interest at (a) a base rate determined by reference to the higher of (1) Wells Fargo’s prime lending rate, (2) the federal funds effective rate plus 1/2 of 1% and (3) the one-month LIBOR rate plus 1%, or (b) LIBOR rate plus a specified margin, depending on the type of borrowing being made. The applicable margin is based on the Company’s consolidated ratio of total net debt to consolidated EBITDA from time to time. Currently,at each measurement date. As of October 2, 2021, the Company’s margin iswas 0.00% for base rate loans and 1.00%0.75% for LIBOR rate loans. As of December 30, 2017, there was $21,750 outstanding under the Revolver and $172,500 outstanding under the Term Loan, offset by $3,324 in debt issuance costs (original amount was $7,122).

 

The 2015 Credit Agreement requires the Company to comply with various covenants including, among other things, a financial covenantscovenant to maintain the following: (1) a ratio of consolidated net debt to adjusted EBITDA not to exceedgreater than 3.50 to 1; and (2) a consolidated interest coverage ratio not to be less than 2.75 to 1. The 2015 Credit Agreement allows the Company to, among other things, make distributions to shareholders, repurchase its stock, incur other debt or liens, or acquire or dispose of assets provided that the Company complies with certain requirements and limitations of the agreement.2015 Credit Agreement. As of December 30, 2017,October 2, 2021, the Company was in compliance with all such covenants.

 


The Company’s domestic subsidiaries have guaranteed the Company’s obligations under the 2015 Credit Agreement, and the Company’s obligations and the domestic subsidiaries’ guaranty are secured as well as providing forby a pledge of substantially all of the Company’s and RBCA’s assets. Thedomestic assets of the Company and certain of its subsidiaries have also entered into a Guarantee to guarantee RBCA’s obligations under the Credit Agreement.domestic subsidiaries.

 

Approximately $3,990As of October 2, 2021, approximately $3,550 of the Revolver iswas being utilized to provide letters of credit to secure RBCA’sthe Company’s obligations relating to certain insurance programs. As of December 30, 2017, RBCA hasprograms, and the Company had the ability to borrow up to an additional $324,260$246,450 under the Revolver as of October 2, 2021. On November 1, 2021, the 2015 Credit Agreement was terminated and replaced with the new credit agreement referred to in Note 12 below.

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, 2024 and a CHF 15,000 (approximately $15,383) revolving credit facility (the “Foreign Revolver”), which continues in effect until terminated by either Schaublin or Credit Suisse. Debt issuance costs associated with the Foreign Credit Agreements totaled CHF 270 (approximately $277) and will be amortized throughout the life of the Foreign Credit Agreements. As of October 2, 2021, approximately $82 in unamortized debt issuance costs remain.

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

The Foreign Credit Agreements require Schaublin to comply with various covenants, which are tested annually on March 31. These covenants include, among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 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 October 2, 2021, 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 October 2, 2021, there was approximately $3,115 outstanding under the Foreign Term Loan and no amounts outstanding under the Foreign Revolver, and Schaublin had the ability to borrow up to an additional $16,114 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 $3,115 for fiscal 2025.

Other Notes Payable

 

On October 1,In 2012 Schaublin purchased the land and building whichthat it occupied and had been leasing,occupies for 14,067 CHF (approximately $14,910).approximately $14,910. Schaublin obtained a 20 year fixed rate20-year fixed-rate mortgage of 9,300 CHF (approximately $9,857)approximately $9,857 at an interest rate of 2.9%. The balance of the purchase price of 4,767 CHF (approximately $5,053)approximately $5,053 was paid from cash on hand. The balance on this mortgage as of December 30, 2017October 2, 2021 was 6,859 CHF, or $7,027.approximately $5,495 and has been classified as Level 2 of the valuation hierarchy.

 

7.The Company’s required future principal payments are approximately $250 for the remainder of fiscal 2022, $500 for each year from fiscal 2023 through fiscal 2026 and $3,245 thereafter.

10. Income Taxes

 

The Company files income tax returns in thenumerous U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longerjurisdictions, with returns subject to state or foreign income tax examinations by tax authoritiesexamination for yearsvarying periods, but generally back to and including the year ending before April 2, 2005. The Company is no longer subject to U.S. federal tax examination by the Internal Revenue Service for years ending before March 29, 2014. A U.S. federal tax examination by the Internal Revenue Service for the year ended March 30, 2013 was effectively settled in fiscal 2016.31, 2018.

 

The effective income tax rates for the three monththree-month periods ended December 30, 2017October 2, 2021 and December 31, 2016September 26, 2020 were 23.9%40.5% and 31.5%20.9%, respectively. During the third quarter, Congress passed and the President signed the Tax Cuts and Jobs Act (“TCJA”) of 2017 into law. The new law includes a number of changes in existing tax law impacting businesses including a permanent reduction in the corporate income tax rate from 35.0% to 21.0%. As a result, the blended statutory rate applied for the current fiscal year is 31.5%. As of December 30, 2017, we have not completed our accounting for the tax effects associated with the TCJA. The impacts recorded, as detailed below, represent our estimate of the impact during the current fiscal year. In addition to discrete items, the effective income tax rates for these periods are different from the U.S. statutory rates due to a special U.S. manufacturing deduction, the foreign-derived intangible income provision and U.S. credit for increasing research activities, and foreign income taxed at lower rates which decrease the rate, and state income taxes, which increase the rate.

 

The effective income tax rate for the three monththree-month period ended December 30, 2017October 2, 2021 of 23.9% was impacted by one-time adjustments40.5% includes $91 of tax benefits associated with share-based compensation offset by the enactmentestablishment of the TCJA. Included in these adjustments was an estimated charge of $9,491 associated with the repatriation transition taxa $1,853 valuation allowance for capital loss carryforwards we do not expect to recognize and an estimated benefit of $8,708 associated with the revaluation of our deferred tax liabilities. The TCJA also impacted the third quarter provision with a benefit from the lower blended statutory tax rate of 31.5%. The third quarter provision was also impacted by approximately $1,238 of benefit associated with the adoption of ASU 2016-09Compensation - Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accountingand $45$100 of other discrete expense related to federal and state tax filing positions.items. The effective income tax rate without discrete items for the three monththree-month period ended December 30, 2017October 2, 2021 would have been 25.3%24.5%. The effective income tax rate for the three monththree-month period ended December 31, 2016September 26, 2020 of 31.5%20.9% includes immaterial discrete items$364 of $56.tax benefits associated with share-based compensation. The effective income tax rate without discrete items for the three monththree-month period ended December 31, 2016September 26, 2020 would have been 31.8%22.0%. The Company believes it is reasonably possible that some of its unrecognized tax positions may be effectively settled within the next twelve months due to the closing of audits and the statute of limitations expiring in varying jurisdictions. The decrease in the Company’s unrecognized tax positions, pertaining primarily to federal and state credits and state tax, is estimated to be approximately $531.$1,429.

 

Income tax expense for the six-month period ended October 2, 2021 was $9,585 compared to $11,046 for the six-month period ended September 26, 2020. Our effective income tax rate for the six-month period ended October 2, 2021 was 22.5% compared to 20.4% for the six-month period ended September 26, 2020. The effective income tax rate for the six-month period ended October 2, 2021 of 22.5% includes $2,231 of tax benefits associated with share-based compensation and $60 of other items offset by the establishment of a $1,853 valuation allowance for capital loss carryforwards we don’t expect to recognize. The effective income tax rate without these benefits and other items for the six-month period ended October 2, 2021 would have been 23.6%. The effective income tax rate for the six-month period ended September 26, 2020 of 20.4% included $679 of tax benefits associated with share-based compensation. The effective income tax rate without these benefits and other items for the six-month period ended September 26, 2020 would have been 21.6%.


8.

11. Reportable Segments

 

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

 

The Company has four4 reportable business segments;segments, Plain Bearings, Roller Bearings, Ball Bearings and Engineered Products, which are described below.

 

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

 

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

 

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

 

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

 

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


  Three Months Ended  Nine Months Ended 
  

December 30,

2017

  

December 31,

2016

  

December 30,

2017

  

December 31,

2016

 
Net External Sales                
Plain $69,764  $65,822  $214,809  $205,107 
Roller  32,485   26,157   96,215   80,786 
Ball  16,496   13,700   48,756   41,979 
Engineered Products  48,113   40,977   135,292   127,306 
  $166,858  $146,656  $495,072  $455,178 
Gross Margin                
Plain $26,615  $26,814  $82,719  $79,971 
Roller  14,425   6,397   40,077   30,182 
Ball  7,021   5,336   19,936   15,823 
Engineered Products  16,604   13,838   45,653   40,391 
  $64,665 ��$52,385  $188,385  $166,367 
Selling, General & Administrative Expenses                
Plain $6,371  $6,192  $19,143  $18,007 
Roller  1,553   1,517   4,765   4,484 
Ball  1,707   1,384   5,002   4,163 
Engineered Products  5,338   4,534   15,737   13,840 
Corporate  13,193   12,085   38,888   36,202 
  $28,162  $25,712  $83,535  $76,696 
Operating Income                
Plain $19,134  $18,065  $60,957  $57,695 
Roller  12,872   2,761   35,291   23,955 
Ball  5,237   3,814   14,752   11,252 
Engineered Products  8,817   7,831   17,839   22,564 
Corporate  (12,937)  (11,942)  (38,638)  (36,162)
  $33,123  $20,529  $90,201  $79,304 
 Geographic External Sales                
Domestic $145,565  $129,212  $433,588  $399,629 
Foreign  21,293   17,444   61,484   55,549 
  $166,858  $146,656  $495,072  $455,178 
Intersegment Sales                
Plain $1,240  $1,146  $3,793  $3,248 
Roller  3,438   3,264   9,731   11,512 
Ball  606   370   1,758   1,211 
Engineered Products  7,785   6,767   23,806   21,183 
  $13,069  $11,547  $39,088  $37,154 

 

  Three Months Ended  Six Months Ended 
  

October 2,

2021

  

September 26,

2020

  

October 2,

2021

  

September 26,

2020

 
Net External Sales            
Plain $74,079  $71,053  $147,400  $149,928 
Roller  27,309   21,579   52,556   44,479 
Ball  24,431   21,099   47,559   39,939 
Engineered Products  35,081   32,604   69,590   68,482 
  $160,900  $146,335  $317,105  $302,828 
Gross Margin                
Plain $27,956  $29,750  $59,480  $61,827 
Roller  10,128   6,236   19,246   14,643 
Ball  11,090   9,129   21,782   17,056 
Engineered Products  13,290   11,481   25,729   22,523 
  $62,464  $56,596  $126,237  $116,049 
Selling, General & Administrative Expenses                
Plain $5,948  $5,276  $11,833  $10,547 
Roller  1,465   1,162   2,823   2,401 
Ball  1,610   1,289   3,251   2,635 
Engineered Products  4,226   3,838   8,475   7,650 
Corporate  16,425   14,458   33,094   29,619 
  $29,674  $26,023  $59,476  $52,852 
Operating Income                
Plain $20,213  $23,472  $45,043  $48,873 
Roller  8,662   4,481   15,955   11,580 
Ball  9,457   7,803   18,473   14,354 
Engineered Products  7,849   6,112   15,452   12,093 
Corporate  (19,058)  (15,505)  (37,077)  (31,723)
  $27,123  $26,363  $57,846  $55,177 
Intersegment Sales                
Plain $1,687  $1,212  $3,254  $2,774 
Roller  2,552   2,171   4,806   5,549 
Ball  1,318   464   2,335   1,131 
Engineered Products  12,955   6,832   23,437   17,481 
  $18,512  $10,679  $33,832  $26,935 

All intersegment sales are eliminated in consolidation.

 


9. Integration and Restructuring of Operations

12. Subsequent Events

 

On November 1, 2021, the Company completed the acquisition of Dodge for approximately $2,900,000, net of cash acquired and subject to certain adjustments. In the secondacquisition, the Company purchased 100% of the capital stock of certain entities, including Dodge Mechanical Power Transmission Company Inc., and certain other assets relating to ABB’s mechanical power transmission business.

With headquarters in Greenville, South Carolina, Dodge is a leading manufacturer of mounted bearings 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, which was replaced prior to the closing of the acquisition by the equity offerings described in Note 5 above and the debt financings described below. The remainder of the purchase price was funded with cash on hand.

On October 7, 2021, Roller Bearing Company of America, Inc. (“RBCA”), a wholly-owned subsidiary of our top holding company RBC Bearings Incorporated, issued $500,000 aggregate principal amount of 4.375% Senior Notes due 2029 (the “Notes”). The Notes were offered and sold only to “qualified institutional buyers” in the United States pursuant to Rule 144A of the Securities Act, and outside the United States to persons other than “U.S. persons” in compliance with Regulation S under the Securities Act.

On November 1, 2021 RBC Bearings and RBCA entered into a Credit Agreement (the “New Credit Agreement”) with Wells Fargo, as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer and the other lenders party thereto, and terminated 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”), approximately $3,550 of which is being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs, leaving the Company with the ability to borrow up to an additional $496,450 under the Revolving Credit Facility as of November 1, 2021. Amounts outstanding under the Facilities generally bear interest at either, at RBCA’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’s consolidated ratio of total net debt to consolidated EBITDA from time to time. Currently, the Company’s margin is 0.75% for base rate loans and 1.75% 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. The Term Loan Facility and the Revolving Credit Facility will mature on November 2, 2026 (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 Facility will amortize in quarterly installments as set forth below with the balance payable on the Maturity Date unless otherwise extended in accordance with the terms of the Term Loan Facility:

DateTerm Loan Facility
Repayment Amount
March 31, 20221.25%
June 30, 20221.25%
September 30, 20221.25%
December 31, 20221.25%
March 31, 20231.25%
June 30, 20231.25%
September 30, 20231.25%
December 31, 20231.25%
March 31, 20241.875%
June 30, 20241.875%
September 30, 20241.875%
December 31, 20241.875%
March 31, 20252.50%
June 30, 20252.50%
September 30, 20252.50%
December 31, 20252.50%
March 31, 20263.125%
June 30, 20263.125%
September 30, 20263.125%
November 2, 2026Remaining outstanding amounts

At November 1, 2021, the Company had $1,300,000 outstanding under the Term Loan Facility and $0 had been drawn down from the Revolving Credit Facility.


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: (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 Borrower by 0.50:1.00 for a period of twelve (12) months after the consummation of a material acquisition), and (b) a minimum Interest Coverage Ratio of 2.00:1.00.

The New Credit Agreement allows the Company to, among other things, make distributions to shareholders, repurchase its stock, incur other debt or liens, or acquire or dispose of assets provided that the Company complies with certain requirements and limitations of the New Credit Agreement.

The Company is currently performing procedures to determine the Dodge purchase price allocation and estimating the fair value of tangible and intangible assets acquired and liabilities assumed in connection with the Dodge acquisition. The initial fair value estimates will be recorded in the third quarter of fiscal 2018, the Company reached a decision to restructure its manufacturing operation in Montreal, Canada. After completing its obligations, the Company expects to close its RBC Canada location2022.

Acquisition and consolidate certain residual assets into other locations by the end of this fiscal year. As a result, the Company recorded an after-tax charge of $5,577 associated with the restructuringfinancing costs incurred in the second quarter of fiscal 2018 attributable to the Engineered Products segment. The $5,577 charge includes2022 totaled $80,762. Of this amount, (a) $47,121 was recorded as a $1,337 impairmentreduction of fixed assets and a $5,157 impairment of intangible assets offset by a $917 tax benefit. The impairment charges were recognized within the “Other, net” line item withinadditional paid in capital on the consolidated statementbalance sheets in connection with the common stock and MCPS offerings, (b) $22,294 was recorded as deferred financing fees associated with a bridge loan financing commitment obtained in connection with the Dodge acquisition and included within prepaid expenses and other current assets on the consolidated balance sheets, of operations. The Company determined thatwhich, $15,470 was amortized during the market approach was the most appropriate method to estimate the fair value of the fixed assets using comparable sales dataquarter and actual quotes from potential buyersincluded within interest expense in the market place. The fixed assets are comprised of land, a building, machinery and equipment. The Company assessed the fair value of the intangible assets in accordance with ASC 360-10, which are comprised of customer relationships, product approvals, tradenames and trademarks. In the third quarter of fiscal 2018, the Company incurred restructuring charges of $1,091 comprised primarily of employee termination costs. These costs were recorded within the “Other, net” line item within the consolidated statement of operations, and are all attributable to the Engineered Products segment. The cumulative restructuring charges(c) $9,913 was recorded as of the end of the third quarter of fiscal 2018, net of taxes, were $6,668. The total impact of this restructuring is expected to be between $7,000 and $7,500 in after-tax charges, all attributable to the Engineered Products segment, and is expected to conclude in the third quarter of fiscal 2019.

In the third quarter of fiscal 2017, the Company reached a decision to integrate and restructure its industrial manufacturing operation in South Carolina. The Company exited a few smaller product offerings and consolidated two manufacturing facilities into one. These restructuring efforts will better align our manufacturing capacity and market focus. As a result, the Company recorded a charge of $7,060deferred financing fees associated with the restructuring in the third quarter of fiscal 2017 attributable to the Roller Bearings segment. The $7,060 charge includes $3,215 of inventory rationalization costs, $261 in impairment of intangibles, $2,402 loss on fixed assets disposals, and $1,182 exit obligation associated with a building operating lease. The inventory rationalization costs were recorded in Cost of Sales in the income statement. All other costs were recorded under operating expenses in the “Other, net” category of the income statement. The pre-tax charge of $7,060 was offset with a tax benefit of approximately $2,222. The Company determined that the market approach was the most appropriate method to estimate the fair valuepermanent financing for the inventory, intangibleDodge acquisition and included within other assets equipmenton the consolidated balance sheets, and building operating lease using comparable sales data(d) $1,433 was recorded as period expenses and actual quotes from potential buyers inincluded within other, net within the market place.consolidated statements of operations.


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

Cautionary Statement As Toas 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; (d)(e) future reductions or changes in U.S. government spending could negatively affect our business; (e)(f) fluctuating or interruption to supply and availabilitycosts of subcomponents, raw materials components and energy resources, or the imposition of import tariffs, could materially increase our costs or reduce our revenues, cash flow from operationsflows and profitability; (f)(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; (g) restrictions in(i) the retirement of commercial aircraft could reduce our indebtedness agreements could limit our growthrevenues, cash flows and our ability to respond to changing conditions; (h)profitability; (j) work stoppages and other labor problems could materially reduce our ability to operate our business; (i) our business is capital intensive and may consume cash in excess of cash flow from our operations; (j)(k) unexpected equipment failures, catastrophic events or capacity constraints maycould increase our costs and reduce our sales due to production curtailments or shutdowns; (k)(l) we may not be able to continue to make the acquisitions necessary for us to realize our growth strategy; (l)(m) businesses that we have acquired (such as Dodge) or that we may acquire in the costsfuture may have liabilities that are not known to us; (n) goodwill and difficultiesindefinite-lived intangibles comprise a significant portion of integrating acquired businesses could impede our total assets, and if we determine that goodwill and indefinite-lived intangibles have become impaired in the future, growth; (m)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; (n)(p) our international operations are subject to risks inherent in such activities; (o)(q) currency translation risks may have a material impact on our results of operations; (p)(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; (q)(t) we may incur material losses for product liability and recall relatedrecall-related claims; (r)(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; (s)(v) our intellectual property and other proprietary rightsinformation 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; (t)(w) cancellation of orders in our backlog of orders could negatively impact our revenues; (u)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; (v) provisions in our charter documents may prevent or hinder efforts to acquire a controlling interest in us; (w) health care reform(y) litigation could adversely affect our operatingfinancial condition; (z) changes in accounting standards or changes in the interpretations of existing standards could affect our financial results; (x)(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 pay cash dividendsbe able to efficiently integrate Dodge into our operations; and (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 foreseeable future; (y) retirementDodge acquisition, which could constrain our business and exposes us to the risk of commercial aircraftdefaults under our debt instruments; and (ff) increases in interest rates would increase the cost of servicing Term Loan Facility and could reduce our revenues, and (z) we may not achieve satisfactory operating results in the integration of acquired companies.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-K for the year ended April 1, 2017.3, 2021. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. We do not intend, and undertake no obligation, to update or alter any forward-looking statement. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appears elsewhere in this Quarterly Report.


 

Overview

We are a well-known international manufacturer and maker of highly engineered precision bearings and components. Our precision solutions are integral to the manufacture and operation of most machines and mechanical systems, reduce wear to moving parts, facilitate proper power transmission, and reduce damage and energy loss caused by friction. While we manufacture products in all major bearings categories, we focus primarily on the higher end of the bearing and engineered component markets where we believe our value addedvalue-added manufacturing and engineering capabilities enable us to differentiate ourselves from our competitors and enhance profitability. We believe our unique expertise has enabled us to garner leading positions in many of the product markets in which we primarily compete. With 4542 facilities in 7 countries, of which 3630 are manufacturing facilities, in six countries, we have been able to significantly broaden our end markets, products, customer base and geographic reach. We currently operate under four reportable business segments: Plain Bearings;Bearings, Roller Bearings;Bearings, Ball Bearings;Bearings, and Engineered Products. The following further describes these reportable segments:

 

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

 

17 

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

 

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

 

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

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

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

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

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

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


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

Outlook

Our net sales for the three monththree-month period ended December 30, 2017October 2, 2021 increased 13.8%10.0% compared to the same period last fiscal year. OurThe increase in net sales was a result of a 31.1% increase in our industrial markets increased 23.1% whileoffset by a 4.4% decrease in our aerospace markets. The increase in industrial sales was driven by increases in the mining, energy, marine and general industrial markets. The decrease in aerospace markets increased 8.9%.sales was experienced primarily in our commercial OEM markets. Our backlog, as of December 30, 2017,October 2, 2021, was $392.5$456.7 million compared to $349.1$394.8 million as of December 31, 2016.April 3, 2021.

 

Management believesOur sales to industrial markets experienced growth of 31.1% in the second quarter of fiscal 2022 as compared to the same three-month period last year. This continued the growth we experienced in the first quarter of fiscal 2022. Sales to industrial markets were up 31.0% as compared to the same six-month period last year. We have experienced growth across most of our industrial products both to OEM and distribution customers. The general economic environment, both domestic and international, has led to sustained strength in our industrial order book which we expect to continue through the remainder of fiscal 2022.

The COVID-19 health crisis continues to impact our commercial aerospace sales in fiscal 2022 as a result of build rate changes within the industry. The commercial aerospace OEM market and aftermarket have been impacted by reduced air travel and changes in production rates but are expected to improve in the fourth quarter of the fiscal year.

On November 1, 2021, subsequent to the end of the quarter, RBC completed the acquisition of Dodge. The results of this business will be reflected in our results starting in the third quarter of fiscal 2022. Dodge operates in the industrial market, with a significant amount of their sales directed to customers in industrial distribution. Including the positive impact of this acquisition, the Company expects net sales to be approximately $245.0 million to $255.0 million in the third quarter of fiscal 2022.

We experienced strong cash flow generation during the second quarter of fiscal 2022 (as discussed in the section “Liquidity and Capital Resources” below). With the addition of Dodge, we 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 credit facilitiesRevolving Credit Facility and Foreign Revolver will provide adequate resources to fund internal and external growth initiatives for the foreseeable future.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 and 12. As of December 30, 2017,October 2, 2021, we had cash and cash equivalents of $43.8$1,348.6 million of which approximately $40.5$9.6 million was cash held by our foreign operations. We expect that our undistributed foreign earnings will be re-invested indefinitelyAs discussed within Part I, Item 1 – Note 12, approximately $1,100.0 million of this was used for working capital, internal growth and acquisitions for and by our foreign entities.

the acquisition of Dodge on November 1, 2021.


Results of Operations

(dollars in millions)

  Three Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
Total net sales $166.9  $146.7  $20.2   13.8%
                 
Net income $23.8  $12.8  $11.0   86.6%
                 
Net income per common share: diluted $0.97  $0.54         
Weighted average common shares: diluted  24,446,115   23,813,780         

  Three Months Ended 
  

October 2,

2021

  

September 26,

2020

  $
Change
  %
Change
 
Total net sales $160.9  $146.3  $14.6   10.0%
                 
Net income $6.9  $20.4  $(13.5)  (66.1)%
                 
Net income per share available to common stockholders: diluted $0.25  $0.82         
Weighted average common shares: diluted  25,775,794   24,957,158         


 

Our net sales for the three monththree-month period ended December 30, 2017October 2, 2021 increased 13.8%10.0% compared to the same period last fiscal year. The overall increase in net sales was a result of a 23.1%31.1% increase in our industrial markets and an 8.9% increasepartially offset by a 4.4% decrease in our aerospace markets. The increase in industrial sales was a result of strong performance indriven by the mining, energy, marine mining, semicon, energy, and general industrial activity.markets. The increasedecrease in aerospace sales was driven mainlyprimarily due to the commercial OEM markets, which decreased by commercial OEM.7.7% as compared to the same three-month period last year.

 

Net income for the thirdsecond quarter of fiscal 20182022 was $23.8$6.9 million compared to $12.8$20.4 million for the same period last year. Net income of $23.8 million infor the thirdsecond quarter of fiscal 20182022 was affected by approximately $13.0 million of after-tax costs associated with the acquisition of Dodge, $1.5 million of after-tax restructuring costs primarily associated with consolidation efforts at one of $1.1our domestic manufacturing facilities, and $2.0 million of discrete tax expense primarily associated with establishing a valuation allowance on a prior loss carryforward. These costs were partially offset by a $1.2$0.1 million of tax benefit related to the adoption of ASU 2016-09 and the impact of the new tax legislation signed during the third quarter.benefits associated with share-based compensation. Net income for the thirdsecond quarter of fiscal 20172021 was affected by $2.8 million of after-tax restructuring costs and related items primarily associated with the consolidation of $4.9two manufacturing facilities, and $0.1 million of losses on foreign exchange partially offset by $0.3$0.4 million of tax benefits associated with share-based compensation and $0.1 million of other discrete tax benefit and foreign currency gains.benefits.

 

  Nine Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%
Change

 
Total net sales $495.1  $455.2  $39.9   8.8%
                 
Net income $60.5  $49.0  $11.5   23.3%
                 
Net income per common share: diluted $2.49  $2.07         
Weighted average common shares: diluted  24,322,165   23,719,121         
  Six Months Ended 
  

October 2,

2021

  

September 26,

2020

  $
Change
  %
Change
 
Total net sales $317.1  $302.8  $14.3   4.7%
                 
Net income $32.9  $43.1  $(10.2)  (23.6)%
                 
Net income per share available to common stockholders: diluted $1.27  $1.73         
Weighted average common shares: diluted  25,544,088   24,944,608         

Net sales increased $39.9$14.3 million, or 8.8%4.7% for the nine monthsix-month period ended December 30, 2017October 2, 2021 over the same period last year. The increase in net sales was mainly the result of a 19.2%31.0% increase in industrial sales andpartially offset by an increase of 3.4%11.8% decrease in aerospace sales. The increase in industrial sales was mostly attributableprimarily due to an increase in marine, mining, semicon, energy, and general industrial activity.markets. The increasedecrease in aerospace sales was primarily driven by aerospace OEM,realized in both our commercial and defense and commercial.markets over the six-month period.

 

Net income for the ninesix months ended December 30, 2017October 2, 2021 was $60.5$32.9 million compared to $49.0$43.1 million for the same period last year. The netNet income of $60.5 millionfor the six-month period in fiscal 20182022 was affected by approximately $13.0 million of after-tax costs associated with the acquisition of Dodge, $2.0 million of after-tax restructuring costs, and integration$2.0 million of discrete tax expense primarily associated with establishing a valuation allowance on a prior loss carryforward. These costs were partially offset by $2.2 million of $6.7 million, a $3.9 million tax benefit related to the adoption of ASU 2016-09, the impact of the new tax legislation signed during the third quarterbenefits associated with share-based compensation and $0.2 million of other discrete tax benefits. Net income for the first nine months of $43.1 million in fiscal 20172021 was affected by $0.3$3.7 million of after-tax restructuring costs and related items, and $0.2 million of losses on foreign exchange partially offset by $0.7 million of tax benefits associated with share-based compensation, and $0.1 million of other discrete tax benefits.

Gross Margin

  Three Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Gross Margin $62.5  $56.6  $5.9   10.4%
% of net sales  38.8%  38.7%        


Gross margin was 38.8% of net sales for the second quarter of fiscal 2022 compared to 38.7% for the second quarter of fiscal 2021. Gross margin for the second quarter of fiscal 2022 was impacted by approximately $0.9 million of restructuring costs associated with consolidation efforts at one of our domestic facilities. Gross margin for the second quarter of fiscal 2022 included $2.0 million in inventory rationalization costs associated with the Sargent acquisition and $4.9 million in costs related to restructuring offset by $0.2 millionconsolidation of discrete tax benefit and $0.2 million of foreign exchange gain.

two manufacturing facilities.

19 

  Six Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Gross Margin $126.2  $116.0  $10.2   8.8%
% of net sales  39.8%  38.3%        

Gross Margin

  Three Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
Gross Margin $64.7  $52.4  $12.3   23.4%
Gross Margin %  38.8%  35.7%        

Gross margin increased $12.3 million, or 23.4%, in the third quarterwas 39.8% of fiscal 2018 compared to the third quarter of fiscal 2017. The three months ended December 31, 2016 was affected by a restructuring charge of $3.2 million. The increase in gross margin was mainly driven by highernet sales and cost efficiencies achieved during the current period.

  Nine Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
Gross Margin $188.4  $166.4  $22.0   13.2%
Gross Margin %  38.1%  36.5%        

Gross margin increased $22.0 million or 13.2% for the first ninesix months of fiscal 20182022 compared to 38.3% for the same period last year. Gross margin for the first nine monthssix-month period of fiscal 20172022 was affectedimpacted by the unfavorable impact of $3.2approximately $0.9 million of restructuring charges and $0.4costs associated with consolidation efforts at one of our domestic facilities. Gross margin for the six-month period of fiscal 2021 was impacted by $0.8 million of capacity inefficiencies driven by the decrease in volume and $2.0 million in inventory purchase accountingrationalization costs associated with the Sargent acquisition.consolidation of two manufacturing facilities. The increase in gross margin year over year iswas primarily athe result of higher sales and cost efficiencies achieved.achieved through recent restructuring and consolidation efforts made throughout the Company.

Selling, General and Administrative

 

  Three Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
SG&A $28.2  $25.7  $2.5   9.5%
% of net sales  16.9%  17.5%        
  Three Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
SG&A $29.7  $26.0  $3.7   14.0%
% of net sales  18.4%  17.8%        

SG&A expenses increased by $2.5 million to $28.2 million for the thirdsecond quarter of fiscal 20182022 was $29.7 million, or 18.4% of net sales, as compared to $25.7$26.0 million, or 17.8% of net sales, for the third quartersame period of fiscal 2017.2021. This increase was mainly driven by $1.7 million of personnel related expenses, $0.3due to $2.4 million of additional stock compensation expense, $0.2personnel costs, $1.0 million of professional feesadditional share-based compensation, and $0.3 million of other costs. As a percentage of sales, SG&A was 16.9% for the third quarter of fiscal 2018 compared to 17.5% for the same period last year.items.

  Six Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
SG&A $59.5  $52.9  $6.6   12.5%
% of net sales  18.8%  17.5%        

 

  Nine Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
SG&A $83.5  $76.7  $6.8   8.9%
% of net sales  16.9%  16.8%        

SG&A expenses increased by $6.8$6.6 million to $83.5$59.5 million for the first ninesix months of fiscal 20182022 compared to $76.7$52.9 million for the same period last year. This increase is primarilywas due to $5.0 million of personnel related expenses, $1.0$4.8 million of additional stockpersonnel costs, $1.3 million additional share-based compensation, and $0.8$0.5 million of other costs.items.

 

20 


 

 

Other, Net

 

  Three Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
Other, net $3.4  $6.1  $(2.7)  (45.0)%
% of net sales  2.0%  4.2%        
  Three Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Other, net $5.7  $4.2  $1.5   34.6%
% of net sales  3.5%  2.9%        

 

Other operating expenses for the thirdsecond quarter of fiscal 20182022 totaled $3.4$5.7 million compared to $6.1$4.2 million for the same period last year. For the thirdsecond quarter of fiscal 2018,2022, other operating expenses were comprised mainly ofincluded $1.1 million of restructuring costs and $2.3related items, $2.8 million of amortization of intangible assets.assets, $1.4 million of costs associated with the acquisition of Dodge and $0.4 million of other costs. For the thirdsecond quarter of fiscal 2017,2021, other operating expenses were comprised of $3.8included $1.5 million of restructuring costs and $2.3 million of amortization of intangible assets.

  Nine Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
Other, net $14.7  $10.4  $4.3   41.3%
% of net sales  3.0%  2.3%        

Other operating expenses for the first nine months of fiscal 2018 totaled $14.7 million compared to $10.4 million for the same period last year. For the first nine months of fiscal 2018, other operating expenses were comprised mainly of $7.6 million of restructuring costs, $7.0related items, $2.6 million of amortization of intangible assets and $0.1 million of other costs.

  Six Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Other, net $8.9  $8.0  $0.9   11.2%
% of net sales  2.8%  2.6%        

Other operating expenses for the first six months of fiscal 2022 totaled $8.9 million compared to $8.0 million for the same period last year. For the first ninesix months of fiscal 2017,2022, other operating expenses were comprised mostlymainly of $4.0$5.4 million in amortization of intangibles, $1.6 million of restructuring costs and $6.9related items, $1.4 million of amortizationcosts associated with the acquisition of intangible assets offset byDodge, and $0.5 million of other revenue.items. For the first six months of fiscal 2021, other operating expenses were comprised mainly of $5.1 million in amortization of intangibles, $2.6 million of restructuring and related items and $0.3 million of other items.

 

Interest Expense, Net

 

  Three Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
Interest expense, net $1.8  $2.1  $(0.3)  (16.6)%
% of net sales  1.1%  1.4%        
  Three Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Interest expense, net $15.8  $0.3  $15.5   

4,497.7

%
% of net sales  9.8%  0.2%        

Interest expense, net, generally consists of interest charged on our credit facilitiesthe Company’s debt agreements and amortization of deferred financing fees, offset by interest income (see “Liquidity and Capital Resources – Liquidity”,Resources” below). Interest expense, net, was $1.8$15.8 million for the thirdsecond quarter of fiscal 20182022 compared to $2.1$0.3 million for the same period last year. TheDuring the second quarter, the Company had total debt of $198.0incurred approximately $15.5 million at December 30, 2017 compared to $294.9 million at December 31, 2016.


  Nine Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
Interest expense, net $5.7  $6.7  $(1.0)  (14.3)%
% of net sales  1.2%  1.5%        

Interest expense, net, generally consists of interest charged on our credit facilities andin costs associated with the amortization of deferredfees for a bridge financing fees, offset by interest income (see “Liquiditycommitment established in association with the Dodge acquisition. Subsequent to the end of the quarter, this commitment was replaced with the permanent financings discussed in Notes 5 and Capital Resources – Liquidity”, below). 12 of Part 1, Item 1 above.


  Six Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Interest expense, net $16.1  $0.8  $15.3   

1,994.9

%
% of net sales  5.1%  0.3%        

Interest expense, net was $5.7$16.1 million for the first ninesix months of fiscal 20182022 compared to $6.7$0.8 million for the first ninesix months of fiscal 2017.2021. During the six months ended October 2, 2021 the Company incurred approximately $15.5 million in costs associated with the amortization of fees for a bridge financing commitment established in association with the Dodge acquisition. Subsequent to the end of the second quarter, this commitment was replaced with the permanent financings discussed in Notes 5 and 12 of Part 1, Item 1 above.

 

Other Non-operating Expense

  Three Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Other non-operating expense $(0.3) $0.2  $(0.5)  (237.9)%
% of net sales  (0.2)%  0.1%        

Other non-operating expenses were $(0.3) million for the second quarter of fiscal 2022 compared to $0.2 million for the same period in the prior year. For the second quarter of fiscal 2022, other non-operating expenses were comprised of $0.5 million of income associated with short-term marketable securities partially offset by $0.1 million of foreign exchange loss and $0.1 million of other items. For the second quarter of fiscal 2021, other non-operating expenses were comprised of $0.1 million of foreign exchange loss and $0.1 million of other items.

  Six Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Other non-operating expense $(0.8) $0.3  $(1.1)  (398.8)%
% of net sales  (0.2)%  0.1%        

Other non-operating expenses were $(0.8) million for the first six months of fiscal 2022 compared to $0.3 million for the same period in the prior year. For the first six months of fiscal 2022, other non-operating expenses were comprised of $1.2 million of income associated with short-term marketable securities partially offset by $0.1 million of foreign exchange loss and $0.3 million of other items. For the first six months of fiscal 2021, other non-operating expenses were comprised of $0.2 million of foreign exchange loss and $0.1 million of other items.

Income Taxes

 

  Three Months Ended 
  

December 30,

2017

  

December 31,

2016

 
       
Income tax expense $7.5  $5.9 
Effective tax rate  23.9%  31.5%
  Three Months Ended 
  October 2,
2021
  September 26,
2020
 
       
Income tax expense $4.7  $5.4 
Effective tax rate  40.5%  20.9%


 

Income tax expense for the three monththree-month period ended December 30, 2017October 2, 2021 was $7.5$4.7 million compared to $5.9$5.4 million for the three monththree-month period ended December 31, 2016.September 26, 2020. Our effective income tax rate for the three monththree-month period ended December 30, 2017October 2, 2021 was 23.9%40.5% compared to 31.5%20.9% for the three monththree-month period ended December 31, 2016.September 26, 2020. The effective income tax rate for the three monththree-month period ended December 30, 2017October 2, 2021 of 23.9% was impacted by adjustments made in relation to the recently enacted Tax Cuts and Jobs Act (TCJA). These were mainly comprised40.5% included $2.0 million of a charge of $9.5 million for the repatriation transitiondiscrete tax and a benefit of $8.7 millionexpense primarily associated with the revaluationestablishing a valuation allowance on a prior loss carryforward partially offset by $0.1 million of our deferred tax liabilities. The third quarter provision also benefited from a lower blended statutory tax rate of 31.5% as a result of the enactment of TCJA and a $1.2 million benefitbenefits associated with ASU 2016-09Compensation - Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. Theshare-based compensation; the effective income tax rate without discretethese items for the three month period ended December 30, 2017 would have been 25.3%24.5%. The effective income tax rate for the three monththree-month period ended December 31, 2016 was 31.5%, whichSeptember 26, 2020 of 20.9% included approximately $0.1$0.4 million of immaterial discrete expense items. Thetax benefits associated with share-based compensation; the effective income tax rate without discrete items for the three month period ended December 31, 2016these benefits would have been 31.8%22.0%.

 

  Nine Months Ended 
  

December 30,

2017

  

December 31,

2016

 
       
Income tax expense $23.6  $23.6 
Effective tax rate  28.0%  32.5%
  Six Months Ended 
  October 2,
2021
  September 26,
2020
 
       
Income tax expense $9.6  $11.0 
Effective tax rate  22.5%  20.4%

Income tax expense for the nine monthsix-month period ended December 30, 2017October 2, 2021 was $23.6$9.6 million compared to $23.6$11.0 million for the nine monthsix-month period ended December 31, 2016.September 26, 2020. Our effective income tax rate for the nine monthsix-month period ended December 30, 2017October 2, 2021 was 28.0%22.5% compared to 32.5%20.4% for the nine monthsix-month period ended December 31, 2016.September 26, 2020. The effective income tax rate for the nine monthsix-month period ended December 30, 2017October 2, 2021 of 28.0% was impacted by adjustments made in relation to the recently enacted Tax Cuts and Jobs Act (TCJA). These were mainly comprised22.5% included $2.2 million of a charge of $9.5 million for the repatriation transition tax and a benefit of $8.7 millionbenefits associated with the revaluation of our deferred tax liabilities. The effective tax rate also benefited from a lower blended statutory rate of 31.5% as a result of the enactment of TCJA, $3.9share-based compensation partially offset by $2.0 million of benefitdiscrete tax expense primarily associated with ASU 2016-09Compensation - Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting, $0.9 million of benefit associated with restructuring and integration activities, and $0.2 million of other discrete benefits. Theestablishing a valuation allowance on a loss carryforward; the effective income tax rate without discrete items for the nine month period ended December 30, 2017these benefits would have been 33.0%23.6%. The effective income tax rate for the nine monthsix-month period ended December 31, 2016 was 32.5%, whichSeptember 26, 2020 of 20.4% included immaterial discrete benefit$0.7 million of $0.2 million. Thetax benefits associated with share-based compensation; the effective income tax rate without discrete items for the nine month period ended December 31, 2016these benefits would have been 32.8%21.6%. Based on our initial reviews and subject to further regulatory guidance issued in connection with TCJA, we estimate the fourth quarter of fiscal 2018 effective tax rate will be approximately 25.0% to 27.0% and we estimate the full year fiscal 2019 effective tax rate will be approximately 20.0% to 22.0%.


Integration and Restructuring of Operations

In the second quarter of fiscal 2018, the Company reached a decision to restructure its manufacturing operation in Montreal, Canada. After completing its obligations, the Company expects to close its RBC Canada location and consolidate certain residual assets into other locations by the end of this fiscal year. As a result, the Company recorded an after-tax charge of $5.6 million associated with the restructuring in the second quarter of fiscal 2018 attributable to the Engineered Products segment. The $5.6 million charge includes a $1.3 million impairment of fixed assets and a $5.2 million impairment of intangible assets offset by a $0.9 million tax benefit. The impairment charges were recognized within the “Other, net” line item within the consolidated statement of operations. The Company determined that the market approach was the most appropriate method to estimate the fair value of the fixed assets using comparable sales data and actual quotes from potential buyers in the market place. The fixed assets are comprised of land, a building, machinery and equipment. The Company assessed the fair value of the intangible assets in accordance with ASC 360-10, which are comprised of customer relationships, product approvals, tradenames and trademarks. In the third quarter of fiscal 2018, the Company incurred restructuring charges of $1.1 million comprised primarily of employee termination costs. These costs were recorded within the “Other, net” line item within the consolidated statement of operations and are all attributable to the Engineered Products segment. The cumulative restructuring charges as of the end of the third quarter of fiscal 2018, net of taxes, were $6.7 million. The total impact of this restructuring is expected to be between $7.0 million and $7.5 million in after-tax charges, all attributable to the Engineered Products segment, and is expected to conclude in the third quarter of fiscal 2019. The Company anticipates a positive cash flow result of approximately $5.2 million from this transaction.

Segment Information

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

 

Plain Bearing Segment:Bearings Segment

 

  Three Months Ended 
  

December 30,

2017

  

December 31,

2016

  

$

Change

  

%

Change

 
             
Total net sales $69.8  $65.8  $4.0   6.0%
                 
Gross margin $26.6  $26.8  $(0.2)  (0.7)%
Gross margin %  38.2%  40.7%        
                 
SG&A $6.4  $6.2  $0.2   2.9%
% of segment net sales  9.1%  9.4%        


  Three Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Total net sales $74.1  $71.1  $3.0   4.3%
                 
Gross margin $28.0  $29.8  $(1.8)  (6.0)%
% of segment net sales  37.7%  41.9%        
                 
SG&A $5.9  $5.3  $0.6   12.7%
% of segment net sales  8.0%  7.4%        

Net sales increased $4.0$3.0 million, or 6.0%4.3%, for the three months ended December 30, 2017October 2, 2021 compared to the same period last year. The 6.0%4.3% increase was primarily driven by ana 22.8% increase in the industrial markets partially offset by a decrease of 23.4%3.0% in our aerospace markets. The increase in industrial net sales was mostly driven by the general industrial markets to both OEM and distribution customers. The decrease in aerospace net sales was due to the commercial aerospace OEM market and aftermarket.


Gross margin as a 0.9% increasepercentage of segment net sales was 37.7% for the second quarter of fiscal 2022 compared to 41.9% for the same period last year. Gross margin for the three-month period ended October 2, 2021 was impacted by approximately $0.9 million of inventory rationalization costs as part of a restructuring effort at one of our domestic facilities. The decrease in gross margin as a percentage of net sales was also impacted by product mix.

  Six Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Total net sales $147.4  $149.9  $(2.5)  (1.7)%
                 
Gross margin $59.5  $61.8  $(2.3)  (3.8)%
% of segment net sales  40.4%  41.2%        
                 
SG&A $11.8  $10.5  $1.3   12.2%
% of segment net sales  8.0%  7.0%        

Net sales decreased $2.5 million, or 1.7%, for the six months ended October 2, 2021 compared to the same period last year. The 1.7% decrease was primarily driven by a decrease of 10.8% in our aerospace markets offset by a 23.8% increase in the industrial markets. The decrease in aerospace was primarily due to both the commercial and defense markets. The increase in industrial sales was mostly driven by the general industrial markets to both OEM while the increase in aerospace sales was due to the commercial aerospace OEM.and distribution customers.

Gross margin as a percentage of net sales decreased to 38.2%40.4% for the thirdfirst six months of fiscal 2022 compared to 41.2% for the same period last year. Gross margin for the six-month period ended October 2, 2021 was impacted by approximately $0.9 million of inventory rationalization costs as part of a restructuring effort at one of our domestic facilities.

Roller Bearings Segment

  Three Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Total net sales $27.3  $21.6  $5.7   26.6%
                 
Gross margin $10.1  $6.2  $3.9   62.4%
% of segment net sales  37.1%  28.9%        
                 
SG&A $1.5  $1.2  $0.3   26.1%
% of segment net sales  5.4%  5.4%        

Net sales increased $5.7 million, or 26.6%, for the three months ended October 2, 2021 compared to the same period last year. Our industrial markets increased by 68.9% while our aerospace markets decreased 16.7%. The increase in industrial net sales was primarily due to the mining, class 8 truck, energy, and general industrial markets. The decrease in aerospace was driven by the commercial and defense OEM and aftermarkets.


Gross margin for the three months ended October 2, 2021 was 37.1% of net sales, compared to 28.9% in the comparable period in fiscal 2021. This increase in the gross margin as a percentage of net sales was primarily due to $2.0 million in inventory rationalization costs incurred in fiscal 2021 associated with the consolidation of two manufacturing facilities and decreased volumes during the period.

  Six Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Total net sales $52.6  $44.5  $8.1   18.2%
                 
Gross margin $19.2  $14.6  $4.6   31.4%
% of segment net sales  36.6%  32.9%        
                 
SG&A $2.8  $2.4  $0.4   17.6%
% of segment net sales  5.4%  5.4%        

Net sales increased $8.1 million, or 18.2%, for the six months ended October 2, 2021 compared to the same period last year. Our industrial markets increased 69.5% while our aerospace markets decreased by 26.0%. The increase in industrial sales was primarily due to mining, energy, class 8 truck and general industrial market activity while the decrease in aerospace was driven by the commercial OEM and commercial and defense aftermarkets.

Gross margin for the six months ended October 2, 2021 was 36.6% of net sales, compared to 32.9% in the comparable period in fiscal 2021. This increase in the gross margin as a percentage of net sales was primarily due to $2.0 million in inventory rationalization costs incurred in fiscal 2021 associated with the consolidation of two manufacturing facilities and decreased volumes during the period. During the first six months of fiscal 2021, gross margin was also impacted by approximately $0.3 million of capacity inefficiencies driven by the impact of the COVID-19 pandemic.

Ball Bearings Segment

  Three Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Total net sales $24.4  $21.1  $3.3   15.8%
                 
Gross margin $11.1  $9.1  $2.0   21.5%
% of segment net sales  45.4%  43.3%        
                 
SG&A $1.6  $1.3  $0.3   24.9%
% of segment net sales  6.6%  6.1%        

Net sales increased by $3.3 million for the second quarter of fiscal 20182022 compared to 40.7%the same period last year. Our aerospace markets increased 9.8% while our industrial sales increased 19.0%. The increase in aerospace net sales was primarily driven by the defense markets. The increase in industrial was primarily due to the general industrial markets.


Gross margin as a percentage of net sales was 45.4% for the second quarter of fiscal 2022 as compared to 43.3% for the same period last year. The increase in gross margin year over year is a result of product mix during the period.

  Six Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Total net sales $47.6  $39.9  $7.7   19.1%
                 
Gross margin $21.8  $17.1  $4.7   27.7%
% of segment net sales  45.8%  42.7%        
                 
SG&A $3.3  $2.6  $0.7   23.4%
% of segment net sales  6.8%  6.6%        

Net sales increased $7.7 million, or 19.1% for the six months ended October 2, 2021 compared to the same period last year. Our industrial market sales increased 26.2% while sales to our aerospace markets increased 6.3%. The increase in industrial was primarily due to the general industrial market to both distribution and OEM customers. The increase in aerospace net sales was primarily driven by the defense markets.

Gross margin as a percentage of net sales increased to 45.8% for the six months ended October 2, 2021 compared to 42.7% for the same period last year. The decrease was primarily due to product mix.increased sales during the period.

  

Nine Months Ended

 
  

December 30,

2017

  

December 31,

2016

  

$

Change

  

%

Change

 
             
Total net sales $214.8  $205.1  $9.7   4.7%
                 
Gross margin $82.7  $80.0  $2.7   3.4%
Gross margin %  38.5%  39.0%        
                 
SG&A $19.1  $18.0  $1.1   6.3%
% of segment net sales  8.9%  8.8%        

Engineered Products Segment

  Three Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Total net sales $35.1  $32.6  $2.5   7.6%
                 
Gross margin $13.3  $11.5  $1.8   15.8%
% of segment net sales  37.9%  35.2%        
                 
SG&A $4.2  $3.8  $0.4   10.1%
% of segment net sales  12.0%  11.8%        

Net sales increased $9.7$2.5 million, or 4.7%7.6%, for the nine months ended December 30, 2017 compared to the same period last year. The 4.7% increase was primarily driven by an increase of 10.0% in the industrial markets and 3.1% in the aerospace markets. The increase in industrial sales was mostly driven by general industrial OEM. The increase in aerospace sales was mainly due to the commercial aerospace OEM and aftermarket.

Gross margin as a percentage of sales decreased to 38.5% for the first nine monthssecond quarter of fiscal 2018 compared to 39.0% for the same period last year. The decrease was primarily due to product mix.

Roller Bearing Segment:

  Three Months Ended 
  

December 30,

2017

  

December 31,

2016

  

$

Change

  

%

Change

 
             
Total net sales $32.5  $26.2  $6.3   24.2%
                 
Gross margin $14.4  $6.4  $8.0   125.5%
Gross margin %  44.4%  24.5%        
                 
SG&A $1.5  $1.5  $0.0   2.4%
% of segment net sales  4.8%  5.8%        

Net sales increased $6.3 million, or 24.2%, for the three months ended December 30, 20172022 compared to the same period last year. Our industrial markets increased 37.8%25.8% while our aerospace markets increased 13.8%decreased 6.9%. The increase in our industrial net sales was driven by the marine, machine tools and general industrial markets. The decrease in aerospace net sales was primarily due to energy, miningdriven by the commercial and general industrial markets while the increases in aerospace were due to increases in defense and commercial OEM.OEM markets.


 

Gross margin as a percentage of net sales was 37.9% for the three months ended December 30, 2017 was $14.4 million, or 44.4%second quarter of sales,fiscal 2022 compared to $6.4 million, or 24.5% of sales, in the comparable period in fiscal 2017. The gross margin35.2% for the three months ended December 31, 2016 was affected by $3.2 million of restructuring costs. Thesame period last year. This increase, in gross marginperiod over period, was primarily dueattributable to higher salesproduct mix and cost efficiencies achieved during the period.realization of benefit from recent consolidation and restructuring efforts.


  

Nine Months Ended

 
  

December 30,

2017

  

December 31,

2016

  

$

Change

  

%

Change

 
             
Total net sales $96.2  $80.8  $15.4   19.1%
                 
Gross margin $40.1  $30.2  $9.9   32.8%
Gross margin %  41.7%  37.4%        
                 
SG&A $4.8  $4.5  $0.3   6.3%
% of segment net sales  5.0%  5.6%        

  Six Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
Total net sales $69.6  $68.5  $1.1   1.6%
                 
Gross margin $25.7  $22.5  $3.2   14.2%
% of segment net sales  37.0%  32.9%        
                 
SG&A $8.5  $7.7  $0.8   10.8%
% of segment net sales  12.2%  11.2%        

Net sales increased $15.4$1.1 million, or 19.1%1.6%, for the ninesix months ended December 30, 2017October 2, 2021 compared to the same period last year. Our industrial marketssales increased 36.4%18.8% while our aerospace markets increased by 5.6%sales decreased 12.6%. The increase in industrial sales was primarily due to energy, mining and general industrial activity while the increase in aerospace was driven by defense OEM sales partially offset by the commercial OEM market.

Gross margin for the nine months ended December 30, 2017 was $40.1 million, or 41.7% of sales, compared to $30.2 million, or 37.4%, in the comparable period in fiscal 2017. The gross margin for the nine months ended December 31, 2016 was affected by $3.2 million of restructuring costs.

Ball Bearing Segment:

  

Three Months Ended

 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
Total net sales $16.5  $13.7  $2.8   20.4%
                 
Gross margin $7.0  $5.3  $1.7   31.6%
Gross margin %  42.6%  38.9%        
                 
SG&A $1.7  $1.4  $0.3   23.3%
% of segment net sales  10.3%  10.1%        

Net sales increased $2.8 million, or 20.4%, for the third quarter of fiscal 2018 compared to the same period last year. Our industrial markets increased 13.8% while our aerospace markets increased 38.8% during the period. The increase in industrial sales was a result of semiconductor, energy, and general industrial markets. The increase in aerospace sales was driven by aerospace OEM market activity.

Gross margin as a percentage of sales increased to 42.6% for the third quarter of fiscal 2018 compared to 38.9% for the same period last year. The increase was primarily due to higher sales and product mix.


  Nine Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
Total net sales $48.8  $42.0  $6.8   16.1%
                 
Gross margin $19.9  $15.8  $4.1   26.0%
Gross margin %  40.9%  37.7%        
                 
SG&A $5.0  $4.2  $0.8   20.2%
% of segment net sales  10.3%  9.9%        

Net sales increased $6.8 million, or 16.1%, for the nine months ended December 30, 2017 compared to the same period last year. Our industrial markets increased 24.0% while our aerospace markets decreased 1.9% during the period. The increase in industrial sales was a result of semiconductor, energy,machine tools and general industrial markets. The decrease in aerospace sales was primarily driven by the aerospacecommercial and defense OEM market.markets.

Gross margin as a percentage of net sales increased to 40.9%37.0% for the ninesix months ended December 30, 2017October 2, 2021 compared to 37.7% for the same period last year. The increase was primarily due to higher sales and cost efficiencies achieved during the period.

Engineered Products Segment:

  Three Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
Total net sales $48.1  $41.0  $7.1   17.4%
                 
Gross margin $16.6  $13.8  $2.8   20.0%
Gross margin %  34.5%  33.8%        
                 
SG&A $5.3  $4.5  $0.8   17.7%
% of segment net sales  11.1%  11.1%        

Net sales increased $7.1 million, or 17.4% for the third quarter of fiscal 2018 compared to the same period last year. Our aerospace markets increased 17.3% while our industrial markets increased 17.6%. The increase in aerospace sales was mainly due to our commercial and defense aerospace OEM markets. The increase in industrial sales was driven by marine and our European markets.

Gross margin as a percentage of sales increased to 34.5% for the third quarter of fiscal 2018 compared to 33.8%32.9% for the same period last year. This increase iswas primarily dueattributable to product mix andthe realization of cost efficiencies achieved duringthrough recent consolidation and restructuring efforts. During the period.first half of fiscal 2021, gross margin was also impacted by approximately $0.5 million of capacity inefficiencies driven by the impact of the COVID-19 pandemic.


  Nine Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
Total net sales $135.3  $127.3  $8.0   6.3%
                 
Gross margin $45.7  $40.4  $5.3   13.0%
Gross margin %  33.7%  31.7%        
                 
SG&A $15.7  $13.8  $1.9   13.7%
% of segment net sales  11.6%  10.9%        

Net salesCorporate

  Three Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
SG&A $16.4  $14.5  $1.9   13.6%
% of total net sales  10.2%  9.9%        

Corporate SG&A increased $8.0$1.9 million, or 6.3%13.6%, for the nine months ended December 30, 2017second quarter of fiscal 2022 compared to the same period last year. Our industrial markets increased 12.1% while our aerospace markets increased 3.5%. The increase in industrial sales was driven by marine and European collets activity. The increase in aerospace sales was mainly due to the commercial and defense OEM markets.

Gross margin as a percentage of sales increased to 33.7% for the nine months ended December 30, 2017 compared to 31.7% for the same period last year. Gross margin for the first nine months of fiscal 2017 was affected by $0.3 million of acquisition related costs. This year over year increase was primarily attributable to volume, product mix and cost efficiencies achieved during the period.

Corporate:

  Three Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
SG&A $13.2  $12.1  $1.1   9.2%
% of total net sales  7.9%  8.2%        

  Nine Months Ended 
  

December 30,

2017

  

December 31,

2016

  $
Change
  

%

Change

 
             
SG&A $38.9  $36.2  $2.7   7.4%
% of total net sales  7.9%  8.0%        

Corporate SG&A increased for both the third quarter and first nine months of fiscal 2018 compared to the same periods last year. This was primarily due to an increase of $1.0 million in stockpersonnel costs and $1.0 million of share-based compensation expenses, partially offset by $0.1 million of other items. 

  Six Months Ended 
  October 2,
2021
  September 26,
2020
  $
Change
  %
Change
 
             
SG&A $33.1  $29.6  $3.5   11.7%
% of total net sales  10.4%  9.8%        

Corporate SG&A increased $3.5 million for the six months ended October 2, 2021 compared to the same period last year due to an increase of $2.0 million in personnel costs, $1.3 million of share-based compensation expenses, and personnel related costs.$0.2 million of other items.


 

Liquidity and Capital Resources

(dollars in millions in tables)

Our business is capital intensive.capital-intensive. Our capital requirements include manufacturing equipment and materials. In addition, we have historically fueled our growth, in part, through acquisitions. We have historically met our working capital, capital expenditure requirements and acquisition funding needs through our net cash flows provided by operations, various debt arrangements and sale of equity to investors. We believe that operating cash flows and available credit under the FacilitiesRevolving Credit Facility and Foreign Revolver will provide adequate resources to fund internal and external growth initiatives for the foreseeable future. For further discussion regarding the funding of the Dodge acquisition, refer to Part I, Item 1 – Notes 5 and 12.


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

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

Liquidity

As of December 30, 2017,October 2, 2021, we had cash and cash equivalents of $43.8$1,348.6 million, of which, approximately $40.5$9.6 million was cash held by our foreign operations. As discussed within Part I, Item 1 – Note 12, approximately $1,100.0 million of this was used for the acquisition of Dodge on November 1, 2021. We expect that our undistributed foreign earnings will be re-invested indefinitely for working capital, internal growth and acquisitions for and by our foreign entities.subsidiaries.

Domestic Credit Facility

In connection with the Sargent Aerospace & Defense (“Sargent”) acquisition on April 24, 2015, the Company entered into a newThe Company’s credit agreement (the “Credit Agreement”) and related Guarantee, Pledge Agreement and Security Agreement with Wells Fargo, Bank, National Association, as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer, and the other lenders party thereto and terminated(the “2015 Credit Agreement”) provides the JP Morgan Credit Agreement. The Credit Agreement provides RBCA, as Borrower,Company with (a) a $200.0$250.0 million Term Loan and (b) a $350.0revolving credit facility (the “Revolver”), which expires on January 31, 2024. As of October 2, 2021, $0.9 million Revolver and together with the Term Loan (the “Facilities”). The Facilities expire on April 24, 2020.in unamortized debt issuance costs remained.

Amounts outstanding under the FacilitiesRevolver generally bear interest at (a) a base rate determined by reference to the higher of (1) Wells Fargo’s prime lending rate, (2) the federal funds effective rate plus 1/2 of 1% and (3) the one-month LIBOR rate plus 1%, or (b) LIBOR plus a specified margin, depending on the type of borrowing being made. The applicable margin is based on the Company’s consolidated ratio of total net debt to consolidated EBITDA at each measurement date. As of October 2, 2021, the Company's margin was 0.00% for base rate loans and 0.75% for LIBOR loans.

The 2015 Credit Agreement requires the Company to comply with various covenants including, among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.50 to 1. The 2015 Credit Agreement allows the Company to, among other things, make distributions to shareholders, repurchase its stock, incur other debt or liens, or acquire or dispose of assets provided that the Company complies with certain requirements and limitations of the 2015 Credit Agreement. As of October 2, 2021, the Company was in compliance with all such covenants.

The Company’s domestic subsidiaries have guaranteed the Company’s obligations under the 2015 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 October 2, 2021, approximately $3.6 million of the Revolver 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 $246.4 million under the Revolver as of October 2, 2021. On November 1, 2021, the 2015 Credit Agreement was terminated and replaced with the New Credit Agreement referred to below.

Our New Credit Agreement with Wells Fargo provides the Company with (a) the Term Loan Facility, a $1,300 million term loan facility that 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) the Revolving Credit Facility, a $500 million revolving credit facility. Amounts outstanding under the Facilities generally bear interest at either, at our 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’s consolidated ratio of total net debt to consolidated EBITDA from time to time. Currently, the Company’s margin is 0.00%0.75% for base rate loans and 1.00%1.75% for LIBOR rate loans. AsThe Facilities are subject to a “LIBOR” floor of December 30, 2017, there was $21.8 million0.00% and contain “hard-wired” LIBOR replacement provisions as set forth in the New Credit Agreement. The Term Loan Facility and the Revolving Credit Facility will mature on November 2, 2026 (the “Maturity Date”). The Company can elect to prepay some or all of the outstanding underbalance from time to time without penalty. Commencing one full fiscal quarter after the Revolver and $172.5 million outstanding underexecution of the New Credit Agreement, the Term Loan offset by $3.3 millionFacility will amortize in debt issuance costs (original amount was $7.1 million).quarterly installments as set forth in the schedule included in Note 12 of Part 1, Item 1, above, with the balance payable on the Maturity Date unless otherwise extended in accordance with the terms of the Term Loan Facility.


 

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: (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 Borrower by 0.50:1.00 for a period of twelve (12) months after the consummation of a material acquisition), and (b) a minimum Interest Coverage Ratio of 2.00:1.00.

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.

Approximately $3.6 million of the Revolving Credit Facility is being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs. The Company has the ability to borrow up to an additional $496.4 million under the Revolving Credit Facility as of November 1, 2021.

Foreign Term Loan and Revolving Credit Facility

Our Foreign Credit Agreements with Credit Suisse (Switzerland) Ltd. provided us with financing to acquire Swiss Tool in 2019 and provide future working capital for Schaublin, our foreign subsidiary. The Foreign Credit Agreements provide (a) the Foreign Term Loan, a CHF 15.0 million (approximately $15.4 million) term loan, which expires on July 31, 2024, and (b) the Foreign Revolver, a CHF 15.0 million (approximately $15.4 million) revolving credit facility, which continues in effect until terminated by either Schaublin or Credit Suisse. Debt issuance costs associated with the Foreign Credit Agreements totaled CHF 0.3 million (approximately $0.3 million) and will be amortized throughout the life of the Foreign Credit Agreements. As of October 2, 2021, approximately $0.1 million in unamortized debt issuance costs remain.

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

The Foreign Credit Agreements require Schaublin to comply with various covenants, which are tested annually on March 31. These covenants include, among other things, a financial covenantscovenant to maintain the following: (1) a ratio of consolidated net debt to adjusted EBITDA not greater than 2.50 to exceed 3.501 as of March 31, 2021 and thereafter. Schaublin is also required to 1; and (2) a consolidated interest coverage ratio not to be less than 2.75 to 1.maintain an economic equity of CHF 20.0 million at all times. The Foreign Credit Agreement allows the CompanyAgreements allow Schaublin to, among other things, make distributions to shareholders, repurchase its stock, incur other debt or liens orand acquire or dispose of assets provided that the CompanySchaublin complies with certain requirements and limitations of the agreement.Foreign Credit Agreements. As of December 30, 2017, the CompanyOctober 2, 2021, Schaublin was in compliance with all such covenants.

The Company’sSchaublin’s parent company, Schaublin Holding, has guaranteed Schaublin’s obligations under the Foreign Credit AgreementAgreements. Schaublin Holding’s guaranty and the Foreign Credit Agreements are secured as well as providing forby a pledge of substantially allthe capital stock of Schaublin. In addition, the Foreign Term Loan is secured with pledges of the Company’scapital stock of the top company and RBCA’s assets. The Company and certainthe three operating companies in the Swiss Tool System group of its subsidiaries have also entered into a Guarantee to guarantee RBCA’s obligationscompanies.

As of October 2, 2021, there was approximately $3.1 million outstanding under the Credit Agreement.

Approximately $3.9 million ofForeign Term Loan and no amounts outstanding under the Revolver is being utilized to provide letters of credit to secure RBCA’s obligations relating to certain insurance programs. As of December 30, 2017, RBCAForeign Revolver. Schaublin has the ability to borrow up to an additional $324.3$16.1 million under the Revolver.Foreign Revolver as of October 2, 2021.


Schaublin’s required future principal payments are approximately $0 for the remainder of fiscal 2022, $0 for fiscal 2023 and fiscal 2024 and $3.1 million for fiscal 2025.

Other Notes Payable

On October 1,In 2012 Schaublin purchased the land and building whichthat it occupied and had been leasing,occupies for 14.1 million CHF (approximatelyapproximately $14.9 million).million. Schaublin obtained a 20 year fixed rate20-year fixed-rate mortgage of 9.3approximately $9.9 million CHF (approximately $9.9 million) at an interest rate of 2.9%. The balance of the purchase price of 4.8approximately $5.0 million CHF (approximately $5.1 million) was paid from cash on hand. The balance on this mortgage as of December 30, 2017October 2, 2021 was 6.9approximately $5.5 million CHF, or $7.0 million.and has been classified as Level 2 of the valuation hierarchy.

The Company’s required future principal payments are approximately $0.3 million for the remainder of fiscal 2022, $0.5 million for each year from fiscal 2023 through fiscal 2026 and $3.2 million thereafter.

On October 7, 2021, RBCA issued $500.0 million aggregate principal amount of 4.375% Senior Notes due 2029 (the “Notes”). 


 

Cash Flows

Nine month periodSix-month Period Ended December 30, 2017October 2, 2021 Compared to the Nine month periodSix-month Period Ended December 31, 2016September 26, 2020

The following table summarizes our cash flow activities:

  FY18  FY17  $ Change 
Net cash provided by (used in):            
Operating activities $92.5  $74.6  $17.9 
Investing activities  (20.5)  (14.9)  (5.6)
Financing activities  (68.6)  (57.7)  (10.9)
Effect of exchange rate changes on cash  1.5   (1.7)  3.2 
Increase (decrease) in cash and cash equivalents $4.9  $0.3  $4.6 
  FY22  FY21   $
Change
 
Net cash provided by (used in):         
Operating activities $93.5  $74.5  $19.0 
Investing activities  83.6   (5.8)  89.4 
Financing activities  1,020.3   (5.5)  1,025.8 
Effect of exchange rate changes on cash  0.1   (0.1)  0.2 
Increase in cash and cash equivalents $1,197.5  $63.1  $1,134.4 

During the first six months of fiscal 2018,2022, we generated cash of $92.5$93.5 million from operating activities compared to generating$74.5 million of cash generated during the same period of $74.6fiscal 2021. The increase of $19.0 million for fiscal 2017. The increase of $17.9 million for fiscal 20182022 was mainly a result of the favorable impact of an increase in net income of $11.5 million, non-cash charges of $4.4 million, and thea net change in operating assets and liabilities of $2.0$14.0 million and a favorable change in non-cash charges of $15.2 million, offset by a decrease in net income of $10.2 million. The favorable change in operating assets and liabilities was primarily the result of a decrease in the amount of cash being used for working capital items asis detailed in the table below, while the increase in non-cash charges were primarily driven by $4.1resulted from $15.5 million of increased impairment charges, $4.9 million from the adoption of ASU 2016-09, which no longer requires the reclassification of the excess tax impact from stock-based compensation from operating to financing activities, an increase in stock compensation of $0.9 million, increased depreciation of $0.6 million, increased amortization of intangiblesdeferred financing costs, $1.3 million of $0.1 millionshare-based compensation charges, and $0.3 million of acquisition expenses present in fiscal 2017amortization of intangible assets, partially offset by a $4.0unfavorable changes of $1.1 million decrease in deferred taxes, driven by the new tax legislation signed during the quarter$0.3 million of depreciation, and a $2.5$0.5 million of loss on the disposaldisposition of fixed assets included in fiscal 2017.assets.

The following chart summarizes the favorable change in operating assets and liabilities of $2.0$14.0 million for fiscal 20182022 versus fiscal 20172021 and the favorable $2.7change of $20.1 million for fiscal 20172021 versus fiscal 2016.2020.

  FY18  FY17 
Cash provided by (used in):        
Accounts receivable $(3.3) $(6.9)
Inventory  (4.7)  14.0 
Prepaid expenses and other current assets  0.7   (2.2)
Other non-current assets  (1.0)  (1.0)
Accounts payable  7.6   5.0 
Accrued expenses and other current liabilities  (5.5)  1.6 
Other non-current liabilities  8.2   (7.8)
Total change in operating assets and liabilities: $2.0  $2.7 

  FY22  FY21 
Cash provided by (used in):      
Accounts receivable $(20.6) $19.0 
Inventory  (2.2)  8.1 
Prepaid expenses and other current assets  (9.3)  2.8 
Other noncurrent assets  5.6   (5.1)
Accounts payable  22.8   (12.2)
Accrued expenses and other current liabilities  18.1   1.6 
Other noncurrent liabilities  (0.4)  5.9 
Total change in operating assets and liabilities: $14.0  $20.1 

During the first ninesix months of fiscal 2018,2022, we used $20.5generated $83.6 million for investing activities as compared to $14.9$5.8 million forused during the first six months of fiscal 2017. The2021. This increase in cash generated was attributable to anthe sale of $120.5 million of highly liquid marketable securities during the current period, partially offset by the purchase of $29.9 million of highly liquid marketable securities during the current period, a $0.9 million increase of $6.1 million in capital expenditures, and $0.1 million in proceeds from the sale of assets offset by $0.6 million cash used for an acquisitiona purchase price adjustment in fiscal 2017.2021 related to the Swiss Tool acquisition of $0.3 million.

During the first ninesix months of fiscal 2018,2022, we used $68.6generated $1,020.3 million for financing activities compared to using $57.7$5.5 million forused during the first six months of fiscal 2017.2021. This increase in cash used was primarily attributable to $605.7 million proceeds received from the paymentissuance of $62.8 million on the revolving credit facility and $10.0 million on the term loancommon stock during the first nine monthscurrent period, $445.5 million proceeds received from the issuance of fiscal 2018 as compared to $61.5 million and $7.5 million respectivelypreferred stock during the samecurrent period, and $14.4 million more exercises of fiscal 2017.share-based awards offset by $32.2 million of finance fees paid in connection with credit facilities and term loans in the current period, $5.6 million more payments made on outstanding debt and $2.0 million more treasury stock purchases.

Capital Expenditures

Our capital expenditures were $20.5$3.5 million and $6.9 million for the nine month periodthree- and six-month periods ended December 30, 2017. In addition, weOctober 2, 2021, respectively. We expect to make additional capital expenditures of $5.0$10.0 to $10.0$15.0 million during the remainder of fiscal 20182022 in connection with our existing business.business, excluding capital expenditures we may incur related to the acquisition of Dodge. We expect to fund fiscal 2018these capital expenditures principally through existing cash and internally generated funds and debt.funds. We may also make substantial additional capital expenditures in connection with acquisitions.


 

Obligations and Commitments

The contractual obligations presented in the table below represent our estimates of future payments under fixed contractual obligations and commitments. Changes in our business needs, cancellation provisions and interest rates, as well as actions by third parties and other factors, may cause these estimates to change. Because these estimates are necessarily subjective, our actual payments in future periods are likely to vary from those presented in the table. The following table summarizes certain of our contractual obligations and principal and interest payments under our debt instruments and leases as of December 30, 2017:

  Payments Due By Period 

Contractual Obligations(1)

 Total  Less than
1 Year
  1 to
3 Years
  3 to
5 Years
  More than
5 Years
 
  (in thousands) 
Total debt $201,277  $17,976  $177,703  $953  $4,645 
Operating leases  22,982   6,251   7,928   4,788   4,015 
Interest on debt(2)  12,644   5,037   6,635   300   672 
Pension and postretirement benefits  18,944   1,829   3,818   3,869   9,428 
Transition tax on unremitted foreign E&P(3)  9,491   759   2,278   2,183   4,271 
Total contractual cash obligations $265,338  $31,852  $198,362  $12,093  $23,031 
                     

(1)We cannot make a reasonably reliable estimate of when the unrecognized tax liability of $12.2 million, which includes interest and penalties, and is offset by deferred tax assets, will be paid to the respective taxing authorities. These obligations are therefore excluded from the above table.

(2)These amounts represent expected cash payments of interest on our variable rate long-term debt under our Facilities at the prevailing interest rates at December 30, 2017.

(3)As discussed further in Note 7 to the consolidated financial statements, the Tax Cuts and Jobs Acts (“TCJA”), which was enacted in December 2017, includes a transition tax on unremitted foreign earnings and profits (“E&P”). We will elect to pay the estimated amount above over an eight year period.

Other Matters

Critical Accounting Policies and Estimates

Revenue Recognition.See page 7 in Notes to Unaudited Interim Consolidated Financial Statements.

Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We believe the most complex and sensitive judgments, because of their significance to the Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Notes to the Consolidated Financial Statements in our fiscal 20172021 Annual Report incorporated by reference in our fiscal 2017on Form 10-K describe the significant accounting estimates and policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management’s estimates. There have been no significant changes in our critical accounting estimates during the first ninesix months of fiscal 2018.2022 other than the following:

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

We haveAs of October 2, 2021, we had no significant off-balance sheet arrangements.arrangements other than $3.6 million of outstanding standby letters of credit, all of which were under the Revolver.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

Foreign Currency Exchange Rates.Our Swiss operations utilize the Swiss franc as the functional currency, our French and German operations utilize the euro as the functional currency and our Polish operations utilize the Polish zloty as the functional currency. As a result, of our operations in Europe, we are exposed to risk associated with fluctuating currency exchange rates between the U.S. dollar the Euro, the Swiss Franc, the Polish Zloty and the Canadian Dollar. Our Swiss operations utilize the Swiss Franc as the functional currency, our French and German operations utilize the Euro as the functional currency, our Polish operations utilize the Polish Zloty as the functional currency and our Canadian operations utilize the Canadian Dollar as the functional currency.these currencies. Foreign currency transaction gains and losses are included in earnings. Approximately 11%9% of our net sales were impacted by foreign currency fluctuations infor both the first nine months of both fiscal 2018three- and six-month periods ended October 2, 2021 compared to approximately 10%8% for both the same period in fiscal 2017. We expect that this proportion is likely to increase as we seek to increase our penetration of foreign markets, particularly within the aerospacethree- and defense markets.six-month periods ended September 26, 2020. 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 subsidiaries’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, (“AOCI”), and is reclassified into earnings when the hedged transaction affects earnings. As of December 30, 2017,October 2, 2021, we had no derivatives.


ITEM 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of December 30, 2017.October 2, 2021. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 30, 2017,October 2, 2021, our disclosure controls and procedures were (1) designed to ensure that information relating to our Company required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported to our Chief Executive Officer and Chief Financial Officer within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, and (2) effective, in that they provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the nine monththree-month period ended December 30, 2017October 2, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).


 

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

 

From time to time, we are involved in litigation and administrative proceedings, which arise in the ordinary course of our business. We do not believe that any litigation or proceeding in which we are currently involved, including those discussed below, 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 duringsince the three month period ended December 30, 2017.most recent filing of our Form 10-K, besides those noted below. For a discussion of the Risk Factors,risk factors, refer to Part I, Item 2, “Cautionary Statement As Toas to Forward-Looking Information,”Information” contained in this quarterly report and Part I, Item 1A, “Risk Factors,” contained in the Company’s Annual Report on Form 10-K for the periodfiscal year ended April 3, 2021.

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 November 1, 2017.2021, we had approximately $1,800.0 million of total debt 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 by the end of calendar year 2021. 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.


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

 

On February 7, 2013,In 2019, our boardBoard of directorsDirectors authorized us to repurchase up to $50.0$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 Securities and Exchange CommissionSEC 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 December 30, 2017October 2, 2021 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)

 
10/1/2017 – 10/28/2017   3,385  $125.69   3,385  $22,053 
10/29/2017 – 11/25/2017            22,053 
11/26/2017 – 12/30/2017   8,748   131.60   8,748  $20,901 
Total   12,133  $129.95   12,133     
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)
 
07/04/2021 – 07/31/2021    $                    —  $81,315 
08/01/2021 – 08/28/2021  406   226.86   406   81,223 
08/29/2021 – 10/02/2021          $81,223 
Total  406  $226.86   406     

 

ITEM 3.Defaults Upon Senior Securities

ITEM 3. Defaults Upon Senior Securities

 

Not applicable.

 

ITEM 4.Mine Safety Disclosures

ITEM 4. Mine Safety Disclosures

 

Not applicable.

 

ITEM 5.Other Information

ITEM 5. Other Information

 

Not applicable.


ITEM 6. Exhibits

ITEM 6.Exhibit
Number
Exhibits

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

 

 

*              

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


SIGNATURES

 

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

 

 RBC Bearings Incorporated
 

(Registrant)

    
 By:

/s/ Michael J. Hartnett

  Name:Michael J. Hartnett
  Title:Chief Executive Officer
  Date:February 6, 2018November 12, 2021
    
 By:

/s/ Daniel A. Bergeron

Robert M. Sullivan  
  Name:Daniel A. BergeronRobert M. Sullivan
  Title:Chief Financial Officer and Chief Operations Officer
  Date:February 6, 2018November 12, 2021


EXHIBIT INDEX

 

Exhibit

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

*          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.

 

36

*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.

40

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