| Debt | 10.
Debt Domestic
Credit Facility In
fiscal 2022, RBC Bearings Incorporated, our top holding company, and our Roller Bearing Company of America, Inc. subsidiary (“RBCA”)
entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”),
as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer, and the other lenders party thereto. The Credit
Agreement provides the Company with (a) a $1,300.0 term loan (the “Term Loan”), which was used to fund a portion of the cash
purchase price for the acquisition of Dodge Industrial, Inc. (“Dodge”) and to pay related fees and expenses, and (b) a $500.0
revolving credit facility (the “Revolving Credit Facility” and together with the Term Loan, the “Facilities”).
Debt issuance costs associated with the Credit Agreement totaled $14.9 and are being amortized over the life of the Credit Agreement. Initially,
amounts outstanding under the Facilities generally bore interest at either, at the Company’s option, (a) a base rate determined
by reference to the higher of (i) Wells Fargo’s prime lending rate, (ii) the federal funds effective rate plus 1/2 of 1.00% and
(iii) the one-month LIBOR rate plus 1.00% or (b) the LIBOR rate plus a specified margin, depending on the type of borrowing being made.
The applicable margin was based on the Company’s consolidated ratio of total net debt to consolidated EBITDA (as defined within
the Credit Agreement) from time to time. In December 2022, the Credit Agreement was amended to replace LIBOR with the secured overnight
financing rate administered by the Federal Reserve Bank of New York (“SOFR”) so that borrowings under the Facilities denominated
in U.S. dollars bear interest at a rate per annum equal to Term SOFR (as defined in the Credit Agreement) plus a credit spread adjustment
of 0.10% plus a margin ranging from 0.75% to 2.00% depending on the Company’s consolidated ratio of total net debt to consolidated
EBITDA. The Facilities are subject to a SOFR floor of 0.00%. As of June 29, 2024, the Company’s margin was 1.00% for SOFR loans,
the commitment fee rate was 0.175%, and the letter of credit fee rate was 1.00%. A portion of the Term Loan is subject to a fixed-rate
interest swap as discussed in Note 13. The
Term Loan matures in November 2026 and amortizes in quarterly installments with the balance payable on the maturity date. The Company
can elect to prepay some or all of the outstanding balance from time to time without penalty, which will offset future quarterly amortization
installments. Due to prepayments previously made, the required future principal payments on the Term Loan are $0 for fiscal 2025, $0
for fiscal 2026, and $615.0 for fiscal 2027. The Revolving Credit Facility expires in November 2026, at which time all amounts outstanding
under the Revolving Credit Facility will be payable. The
Credit Agreement requires the Company to comply with various covenants, including the following financial covenants: (a) a maximum Total
Net Leverage Ratio (as defined within the Credit Agreement) of 5.00:1.00, which maximum Total Net Leverage Ratio shall decrease during
certain subsequent test periods as set forth in the 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 Company 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. As of June 29, 2024 the Company was
in compliance with all debt covenants. The
Credit Agreement allows the Company to, among other things, make distributions to stockholders, repurchase its stock, incur other debt
or liens, or acquire or dispose of assets provided that the Company complies with certain requirements and limitations of the Credit
Agreement. The
Company’s domestic subsidiaries have guaranteed the Company’s obligations under the Credit Agreement, and the Company’s
obligations and the domestic subsidiaries’ guaranty are secured by a pledge of substantially all of the assets of the Company and
its domestic subsidiaries. As
of June 29, 2024, $615.0 was outstanding under the Term Loan, $3.7 of the Revolving Credit Facility was being utilized to provide letters
of credit to secure the Company’s obligations relating to certain insurance programs, and $18.0 of the Revolving Credit Facility
had been used to fund the purchase of the business assets of Specline, Inc. in fiscal 2024. The Company had the ability to borrow an additional $478.3 under the Revolving Credit Facility as of June 29, 2024. Senior
Notes In
fiscal 2022, RBCA issued $500.0 aggregate principal amount of 4.375% Senior Notes due 2029 (the “Senior Notes”). The net
proceeds from the issuance of the Senior Notes were approximately $492.0, after deducting initial purchasers’ discounts and commissions
and offering expenses, and were used to fund a portion of the purchase price for the acquisition of Dodge. The
Senior Notes were issued pursuant to an indenture with Wilmington Trust, National Association, as trustee (the “Indenture”).
The Indenture contains covenants limiting the ability of the Company to (i) incur additional indebtedness or guarantee indebtedness,
(ii) declare or pay dividends, redeem stock or make other distributions to stockholders, (iii) make investments, (iv) create liens or
use assets as security in other transactions, (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of its
assets, (vi) enter into transactions with affiliates, and (vii) sell or transfer certain assets. These covenants contain various exceptions,
limitations and qualifications. At any time that the Senior Notes are rated investment grade, certain of these covenants will be suspended. The
Senior Notes are guaranteed jointly and severally on a senior unsecured basis by RBC Bearings and RBCA’s domestic subsidiaries
that also guarantee the Credit Agreement. Interest
on the Senior Notes accrues at a rate of 4.375% and is payable semi–annually in cash in arrears on April 15 and October 15 of each
year. The
Senior Notes will mature on October 15, 2029. The Company may redeem some or all of the Senior Notes at any time on or after October
15, 2024 at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption
date. The Company may also redeem up to 40% of the Senior Notes using the proceeds of certain equity offerings completed before October
15, 2024, at a redemption price equal to 104.375% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but
excluding, the redemption date. In addition, at any time prior to October 15, 2024, the Company may redeem some or all of the Senior
Notes at a price equal to 100% of the principal amount, plus a “make–whole” premium, plus accrued and unpaid interest,
if any, to, but excluding, the redemption date. If the Company sells certain of its assets or experiences specific kinds of changes in
control, the Company must offer to purchase the Senior Notes. Foreign
Borrowing Arrangements One
of our foreign subsidiaries, Schaublin SA, has a CHF 5.0 (approximately $5.8 USD) credit line (the “Foreign Credit Line”)
with Credit Suisse (Switzerland) Ltd. to provide future working capital, if necessary. As of June 29, 2024, $2.2 had been borrowed from
the Foreign Credit Line and $0.1 was being utilized to provide a bank guarantee. Fees associated with the Foreign Credit Line are nominal. The
balances payable under all our borrowing facilities are as follows:
June
29, March
30,
Revolver
and term loan facilities $ 635.2 $ 695.2
Senior
notes 500.0 500.0
Debt
issuance costs (10.1 ) (10.7 )
Other 6.3 7.4
Total
debt 1,131.4 1,191.9
Less:
current portion 3.8 3.8
Long-term
debt $ 1,127.6 $ 1,188.1 |
