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 June 27, 2020

 

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: 333-124824

 

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

  

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

  

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

 

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

 

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

   

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

 

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

 

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

 

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

  

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

 

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

 

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

 

As of July 31, 2020, RBC Bearings Incorporated had 25,071,591 shares of Common Stock outstanding.

  

 

 

 

 

 

TABLE OF CONTENTS

 

Part I - FINANCIAL INFORMATION 1
     
ITEM 1. Consolidated Financial Statements 1
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 27
ITEM 4. Controls and Procedures 27
  Changes in Internal Control over Financial Reporting 27
     
Part II - OTHER INFORMATION 28
     
ITEM 1. Legal Proceedings 28
ITEM 1A. Risk Factors 28
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
ITEM 3. Defaults Upon Senior Securities 29
ITEM 4. Mine Safety Disclosures 29
ITEM 5. Other Information 29
ITEM 6. Exhibits 30

 

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)

 

   June 27,
2020
   March 28,
2020
 
  (Unaudited)     
ASSETS        
Current assets:        
Cash and cash equivalents  $143,615   $103,255 
Accounts receivable, net of allowance for doubtful accounts of $1,642 at June 27, 2020 and $1,627 at March 28, 2020   113,184    128,995 
Inventory   371,009    367,494 
Prepaid expenses and other current assets   11,041    12,262 
Total current assets   638,849    612,006 
Property, plant and equipment, net   218,128    219,846 
Operating lease assets, net   30,530    28,953 
Goodwill   277,455    277,776 
Intangible assets, net of accumulated amortization of $58,242 at June 27, 2020 and $55,732 at March 28, 2020   161,060    162,747 
Other assets   23,187    20,584 
Total assets  $1,349,209   $1,321,912 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $51,812   $51,038 
Accrued expenses and other current liabilities   36,098    40,580 
Current operating lease liabilities   5,891    5,708 
Current portion of long-term debt   6,489    6,429 
Total current liabilities   100,290    103,755 
Deferred income taxes   19,425    16,560 
Long-term debt, less current portion   16,635    16,583 
Long-term operating lease liabilities   24,857    23,396 
Other non-current liabilities   45,367    43,619 
Total liabilities   206,574    203,913 
           
Stockholders’ equity:          
Preferred stock, $.01 par value; authorized shares: 10,000,000 at June 27, 2020 and March 28, 2020, respectively; none issued or outstanding   
    
 
Common stock, $.01 par value; authorized shares: 60,000,000 at June 27, 2020 and March 28, 2020, respectively; issued shares: 25,941,772 and 25,881,415 at June 27, 2020 and March 28, 2020, respectively   259    259 
Additional paid-in capital   418,069    412,400 
Accumulated other comprehensive loss   (6,229)   (6,898)
Retained earnings   791,908    769,219 
Treasury stock, at cost, 870,161 shares and 838,982 shares at June 27, 2020 and March 28, 2020, respectively   (61,372)   (56,981)
Total stockholders’ equity   1,142,635    1,117,999 
Total liabilities and stockholders’ equity  $1,349,209   $1,321,912 

 

See accompanying notes.

 

1

 

 

RBC Bearings Incorporated

Consolidated Statements of Operations

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

(Unaudited)

   

   Three Months Ended 
   June 27,
2020
   June 29,
2019
 
Net sales  $156,493   $182,690 
Cost of sales   97,040    111,996 
Gross margin   59,453    70,694 
Operating expenses:          
Selling, general and administrative   26,829    30,087 
Other, net   3,810    2,117 
Total operating expenses   30,639    32,204 
Operating income   28,814    38,490 
Interest expense, net   425    547 
Other non-operating expense   42    169 
Income before income taxes   28,347    37,774 
Provision for income taxes   5,658    7,275 
Net income  $22,689   $30,499 
Net income per common share:          
Basic  $0.92   $1.24 
Diluted  $0.91   $1.23 
Weighted average common shares:          
Basic   24,763,903    24,501,707 
Diluted   24,933,941    24,807,307 

  

See accompanying notes.

  

2

 

 

RBC Bearings Incorporated

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(Unaudited)

 

   Three Months Ended 
   June 27,
2020
   June 29,
2019
 
Net income  $22,689   $30,499 
Pension and postretirement liability adjustments, net of taxes (1)
   260    178 
Foreign currency translation adjustments   409    2,542 
Total comprehensive income  $23,358   $33,219 

 

(1)These adjustments were net of tax expense of $79 and $54 for the three-month periods ended June 27, 2020 and June 29, 2019, respectively.

  

See accompanying notes.

  

3

 

 

RBC Bearings Incorporated

Consolidated Statements of Stockholders’ Equity

(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 tax expense of $79               260                260 
Issuance of restricted stock   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 

 

See accompanying notes.

 

4

 

 

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 30, 2019   25,607,196   $256   $378,655   $(7,467)  $641,894    (752,913)  $(44,772)  $968,566 
Net income                   30,499            30,499 
Share-based compensation           4,802                    4,802 
Repurchase of common stock                       (69,877)   (9,514)   (9,514)
Exercise of equity awards   4,356    1    275                    276 
Change in net prior service cost and actuarial losses, net of tax expense of $54               178                178 
Issuance of restricted stock   86,490                             
Impact from adoption of ASU 2018-02               (1,289)   1,289             
Currency translation adjustments               2,542                2,542 
Balance at June 29, 2019   25,698,042   $257   $383,732   $(6,036)  $673,682    (822,790)  $(54,286)  $997,349 

  

See accompanying notes.

 

5

 

 

RBC Bearings Incorporated

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

  

   Three Months Ended 
   June 27,
2020
   June 29,
2019
 
Cash flows from operating activities:        
Net income  $22,689   $30,499 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation   5,892    5,236 
Deferred income taxes   2,865    1,153 
Amortization of intangible assets   2,504    2,284 
Amortization of deferred financing costs   141    99 
Share-based compensation   5,438    4,802 
Other non-cash charges   3    (11)
Changes in operating assets and liabilities, net of acquisitions:          
Accounts receivable   15,848    815 
Inventory   (3,294)   (7,423)
Prepaid expenses and other current assets   1,240    (1,052)
Other non-current assets   (4,678)   (1,041)
Accounts payable   739    1,986 
Accrued expenses and other current liabilities   (4,180)   2,773 
Other non-current liabilities   3,152    16 
Net cash provided by operating activities   48,359    40,136 
           
Cash flows from investing activities:          
Purchase of property, plant and equipment   (3,875)   (12,040)
Proceeds from sale of assets   5    2 
Acquisition of business   245    - 
Net cash used in investing activities   (3,625)   (12,038)
           
Cash flows from financing activities:          
Repayments of revolving credit facilities   -    (17,000)
Repayments of notes payable   (122)   (117)
Exercise of stock options   231    276 
Repurchase of common stock   (4,391)   (9,514)
Net cash used in financing activities   (4,282)   (26,355)
           
Effect of exchange rate changes on cash   (92)   1,086 
           
Cash and cash equivalents:          
Increase during the period   40,360    2,829 
Cash, at beginning of period   103,255    29,884 
Cash, at end of period  $143,615   $32,713 
           
Supplemental disclosures of cash flow information:          
Cash paid for:          
Income taxes  $899   $489 
Interest   267    408 

 

See accompanying notes.

  

6

 

 

RBC Bearings Incorporated

Notes to Unaudited Interim Consolidated Financial Statements

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

  

1. Basis of Presentation

 

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

 

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

 

The results of operations for the three-month period ended June 27, 2020 are not necessarily indicative of the operating results for the entire fiscal year ending April 3, 2021. The three-month periods ended June 27, 2020 and June 29, 2019 each include 13 weeks. The amounts shown are in thousands, unless otherwise indicated.

 

2. Significant Accounting Policies

 

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

 

Recent Accounting Standards Adopted

 

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

 

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

 

7

 

 

Recent Accounting Standards Yet to Be Adopted

 

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

 

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

 

3. Revenue from Contracts with Customers

 

Disaggregation of Revenue

 

The Company operates 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 overall revenues for the three-month periods ended June 27, 2020 and June 29, 2019 are as follows:

 

Principal End Markets

  

   Three Months Ended 
   June 27, 2020   June 29, 2019 
   Aerospace   Industrial   Total   Aerospace   Industrial   Total 
Plain  $59,352   $19,523   $78,875   $67,306   $20,183   $87,489 
Roller   13,230    9,670    22,900    19,313    17,546    36,859 
Ball   7,022    11,818    18,840    5,430    12,280    17,710 
Engineered Products   19,378    16,500    35,878    24,270    16,362    40,632 
   $98,982   $57,511   $156,493   $116,319   $66,371   $182,690 

 

Remaining Performance Obligations

 

Remaining performance obligations represent the transaction price of orders meeting the definition of a contract under Accounting Standards Codification (ASC) 606 for which work has not been performed or has been partially performed and excludes unexercised contract options. The duration of many of our contracts, as defined by ASC 606, is less than one year. The Company has elected to apply the practical expedient that allows companies to exclude remaining performance obligations with an original expected duration of one year or less. Performance obligations having a duration of more than one year are concentrated in contracts for certain products and services provided to the U.S. government or its contractors. The aggregate amount of the transaction price allocated to remaining performance obligations for such contracts with a duration of more than one year was approximately $274,688 at June 27, 2020. The Company expects to recognize revenue on approximately 65% and 88% of the remaining performance obligations over the next 12 and 24 months, respectively, with the remainder recognized thereafter. Excluded from these remaining performance obligations are orders received from customers for which the delivery date has not yet been agreed to.

 

8

 

 

Contract Balances

 

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

 

Contract Assets (Unbilled Receivables) - Pursuant to the over-time revenue recognition model, revenue may be recognized prior to the customer being invoiced. An unbilled receivable is recorded to reflect revenue that is recognized when (1) the cost-to-cost method is applied and (2) such revenue exceeds the amount invoiced to the customer.

 

Contract Liabilities (Deferred Revenue) - The Company may receive a customer advance or deposit, or have an unconditional right to receive a customer advance, prior to revenue being recognized. Since the performance obligations related to such advances may not have been satisfied, a contract liability is established. Advance payments are not considered a significant financing component as the timing of the transfer of the related goods or services is at the discretion of the customer.

 

These assets and liabilities are reported on the consolidated balance sheets on an individual contract basis at the end of each reporting period. As of June 27, 2020 and March 28, 2020, accounts receivable with customers, net, were $113,184 and $128,995, respectively. The tables below represent a roll-forward of contract assets and contract liabilities for the three-month period ended June 27, 2020:

 

Contract Assets - Current (1)    
     
Balance at March 28, 2020  $2,604 
Additional revenue recognized in excess of billings   670 
Less: amounts billed to customers   (1,429)
Balance at June 27, 2020  $1,845 

 

(1)Included within prepaid expenses and other current assets on the consolidated balance sheets.

  

Contract Liabilities – Current (2)    
     
Balance at March 28, 2020  $11,116 
Payments received prior to revenue being recognized   634 
Revenue recognized   (6,310)
Reclassification (to)/from noncurrent   727 
Balance at June 27, 2020  $6,167 

 

(2)Included within accrued expenses and other current liabilities on the consolidated balance sheets. During the first three months of fiscal 2021, the Company recognized revenues of $5,821 that were included in the contract liability balance at March 28, 2020.

 

Contract Liabilities – Noncurrent (3)    
     
Balance at March 28, 2020  $2,427 
Payments received prior to revenue being recognized   
 
Reclassification (to)/from current   (727)
Balance at June 27, 2020  $1,700 

 

(3)Included within other non-current liabilities on the consolidated balance sheets.

 

As of June 27, 2020, the Company did not have any contract assets classified as noncurrent on the consolidated balance sheet.

 

9

 

 

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 March 28, 2020  $(582)  $(6,316)  $(6,898)
Other comprehensive income before reclassifications   409        409 
Amounts reclassified from accumulated other comprehensive income       260    260 
Net current period other comprehensive income   409    260    669 
Balance at June 27, 2020  $(173)  $(6,056)  $(6,229)

 

5. Net Income Per Common Share

 

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

 

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

 

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

  

   Three Months Ended 
   June 27,
2020
   June 29,
2019
 
         
Net income  $22,689   $30,499 
           
Denominator for basic net income  per common share—weighted-average shares outstanding   24,763,903    24,501,707 
Effect of dilution due to employee stock awards   170,038    305,600 
Denominator for diluted net income per common share — weighted-average shares outstanding   24,933,941    24,807,307 
           
Basic net income per common share  $0.92   $1.24 
           
Diluted net income per common share  $0.91   $1.23 

  

At June 27, 2020, 504,768 employee stock options and 61,025 restricted shares have been excluded from the calculation of diluted earnings per share. At June 29, 2019, 373,840 employee stock options and 86,040 restricted shares have been excluded from the calculation of diluted earnings per share. The inclusion of these employee stock options and restricted shares would be anti-dilutive.

 

10

 

 

6. 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.

 

Short-term investments, if any, are comprised of equity securities and are measured at fair value by using quoted prices in active markets and are classified as Level 1 of the valuation hierarchy.

 

7. Inventory

 

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

 

   June 27,
2020
   March 28,
2020
 
Raw materials  $52,310   $51,362 
Work in process   93,496    97,286 
Finished goods   225,203    218,846 
   $371,009   $367,494 

 

8. Goodwill and Intangible Assets

 

Goodwill

 

   Roller   Plain   Ball   Engineered
Products
   Total 
March 28, 2020  $16,007   $79,597   $5,623   $176,549   $277,776 
Translation adjustments   
    
    
    62    62 
Acquisition (1)   
    
    
    (383)   (383)
June 27, 2020  $16,007   $79,597   $5,623   $176,228   $277,455 

 

(1)Includes a reduction of goodwill recognized due to opening balance sheet adjustments made during the measurement period of the Company’s acquisition of Vianel Holding AG (“Swiss Tool”) on August 15, 2019.

 

11

 

  

Intangible Assets

 

      June 27, 2020   March 28, 2020 
   Weighted
Average
Useful
Lives
  Gross
Carrying
Amount
   Accumulated
Amortization
   Gross
Carrying
Amount
   Accumulated Amortization 
Product approvals  24  $50,878   $13,125   $50,878   $12,597 
Customer relationships and lists  23   109,696    24,731    109,645    23,557 
Trade names  10   16,331    9,278    16,330    8,906 
Distributor agreements  5   722    722    722    722 
Patents and trademarks  16   11,775    6,167    11,553    6,045 
Domain names  10   437    437    437    437 
Other  3   5,182    3,782    4,633    3,468 
       195,021    58,242    194,198    55,732 
Non-amortizable repair station certifications  n/a   24,281    
    24,281    
 
Total  21  $219,302   $58,242   $218,479   $55,732 

 

Amortization expense for definite-lived intangible assets for the three-month period ended June 27, 2020 was $2,504, compared to $2,284 for the three-month period ended June 29, 2019. Estimated amortization expense for the remaining nine months of fiscal 2021, the five succeeding fiscal years and thereafter is as follows:

 

2021  $7,240 
2022   9,538 
2023   9,456 
2024   9,327 
2025   8,679 
2026   7,218 
2027 and thereafter   85,321 

 

9. Debt

 

The balances payable under all borrowing facilities are as follows:

 

   June 27,
2020
   March 28,
2020
 
Revolver and term loan facilities  $18,664   $18,593 
Debt issuance costs   (1,546)   (1,687)
Other   6,006    6,106 
Total debt   23,124   $23,012 
Less: current portion   6,489   $6,429 
Long-term debt  $16,635   $16,583 

 

The current portion of long-term debt as of June 27, 2020 includes the current portion of the foreign term loan, foreign revolving facility and the Schaublin mortgage, all of which are discussed below in further detail.

 

12

 

 

Domestic Credit Facility

 

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

 

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

 

The Credit Agreement requires the Company to comply with various covenants, including among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.50 to 1. The Credit Agreement allows the Company to, among other things, make distributions to shareholders, repurchase its stock, incur other debt or liens, or acquire or dispose of assets provided that the Company complies with certain requirements and limitations of the Credit Agreement. As of June 27, 2020, the Company was in compliance with all such covenants.

 

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

 

Approximately $3,700 of the Revolver is being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs. As of June 27, 2020, $1,418 in unamortized debt issuance costs remain. The Company has the ability to borrow up to an additional $246,300 under the Revolver as of June 27, 2020.

 

Foreign Term Loan and Revolving Credit Facility

 

On August 15, 2019, one of our foreign subsidiaries, Schaublin SA (“Schaublin”), entered into two separate credit agreements (the “Foreign Credit Agreements”) with Credit Suisse (Switzerland) Ltd. to finance the acquisition of Swiss Tool and provide future working capital. The Schaublin 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.

 

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

 

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

 

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

 

13

 

 

As of June 27, 2020, there was approximately $2,847 outstanding under the Foreign Revolver and approximately $15,817 outstanding under the Foreign Term Loan. These borrowings have been classified as Level 2 of the valuation hierarchy. As of June 27, 2020, approximately $128 in unamortized debt issuance costs remain. Schaublin has the ability to borrow up to an additional $12,970 under the Foreign Revolver as of June 27, 2020.

 

Schaublin’s required future annual principal payments for the next five years and thereafter are approximately $5,999 for fiscal 2021, approximately $3,163 for each year from fiscal 2022 through fiscal 2024 and approximately $3,176 for fiscal 2025.

 

Other Notes Payable

 

On October 1, 2012, Schaublin purchased the land and building that it occupied and had been leasing for approximately $14,910. Schaublin obtained a 20-year fixed-rate mortgage of approximately $9,857 at an interest rate of 2.9%. The balance of the purchase price of approximately $5,053 was paid from cash on hand. The balance on this mortgage as of June 27, 2020 was approximately $6,006 and has been classified as Level 2 of the valuation hierarchy.

 

The Company’s required future annual principal payments for the next five years are approximately $490 for each year from fiscal 2021 through fiscal 2025 and $3,556 thereafter.

 

10. Income Taxes

 

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

 

The effective income tax rates for the three-month periods ended June 27, 2020 and June 29, 2019, were 20.0% and 19.3%, respectively. In addition to discrete items, the effective income tax rates for these periods are different from the U.S. statutory rates due to the foreign-derived intangible income provision and U.S. credit for increasing research activities, which decrease the rate, and state income taxes that increase the rate.

 

The effective income tax rate for the three-month period ended June 27, 2020 of 20.0% includes $315 of tax benefit associated with share-based compensation, along with $75 of tax benefit for the release of unrecognized tax positions associated with a statute of limitations expiration. The effective income tax rate without discrete items for the three-month period ended June 27, 2020 would have been 21.3%. The effective income tax rate for the three-month period ended June 29, 2019 of 19.3% includes discrete items of $510 of tax benefit associated with share-based compensation and $241 of tax benefit associated with other permanent adjustments from filing the Company’s fiscal 2018 foreign tax returns. The effective income tax rate without discrete items for the three-month period ended June 29, 2019 would have been 21.2%. The Company believes it is reasonably possible that some of its unrecognized tax positions may be effectively settled within the next 12 months due to the closing of audits and the statute of limitations expiring in varying jurisdictions. The decrease in the Company’s unrecognized tax positions, pertaining primarily to federal and state credits and state tax, is estimated to be approximately $1,524.

  

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 are aggregated as reportable segments as they have similar economic characteristics, including nature of the products and production processes, distribution patterns and classes of customers.

 

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

 

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

 

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

 

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

 

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

 

14

 

 

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 
   June 27,
2020
   June 29,
2019
 
Net External Sales        
Plain  $78,875   $87,489 
Roller   22,900    36,859 
Ball   18,840    17,710 
Engineered Products   35,878    40,632 
   $156,493   $182,690 
Gross Margin          
Plain  $32,077   $34,114 
Roller   8,407    14,524 
Ball   7,927    7,799 
Engineered Products   11,042    14,257 
   $59,453   $70,694 
Selling, General & Administrative Expenses          
Plain  $5,271   $6,514 
Roller   1,239    1,614 
Ball   1,346    1,633 
Engineered Products   3,812    4,303 
Corporate   15,161    16,023 
   $26,829   $30,087 
Operating Income          
Plain  $25,401   $26,825 
Roller   7,099    12,570 
Ball   6,551    6,137 
Engineered Products   5,981    9,002 
Corporate   (16,218)   (16,044)
   $28,814   $38,490 
Intersegment Sales          
Plain  $1,562   $1,847 
Roller   3,378    3,201 
Ball   667    669 
Engineered Products   10,649    10,822 
   $16,256   $16,539 

  

All intersegment sales are eliminated in consolidation.

  

12. Acquisition

 

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

 

15

 

 

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

Cautionary Statement as to Forward-Looking Information

 

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

 

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

 

16

 

 

Overview

 

We are a well-known international manufacturer and maker of highly engineered precision bearings and components. Our precision solutions are integral to the manufacture and operation of most machines and mechanical systems, reduce wear to moving parts, facilitate proper power transmission, and reduce damage and energy loss caused by friction. While we manufacture products in all major bearings categories, we focus primarily on the higher end of the bearing and engineered component markets where we believe our value-added manufacturing and engineering capabilities enable us to differentiate ourselves from our competitors and enhance profitability. We believe our unique expertise has enabled us to garner leading positions in many of the product markets in which we primarily compete. With 42 facilities in 7 countries, of which 33 are manufacturing facilities, we have been able to significantly broaden our end markets, products, customer base and geographic reach. We currently operate under four reportable business segments: Plain Bearings, Roller Bearings, Ball Bearings, and Engineered Products. The following further describes these reportable segments:

 

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

 

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

 

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

 

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

 

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

 

17

 

 

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

 

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

 

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

 

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

 

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

 

Outlook

 

Our net sales for the three-month period ended June 27, 2020 decreased 14.3% compared to the same period last fiscal year. The decrease in net sales was a result of a 14.9% decrease in our aerospace markets and a 13.3% decrease in our industrial markets. The decrease in aerospace sales was primarily due to the commercial markets, both OEM and aftermarket, offset by increases in our defense business. The decrease in industrial sales was driven by decreases in the mining, energy, and general industrial markets. Excluding $2.2 million of sales associated with Swiss Tool, which was acquired in fiscal 2020, overall net sales decreased 15.5% year over year. Our backlog, as of June 27, 2020, was $431.9 million compared to $459.4 million as of June 29, 2019.

 

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

 

Our business is operating as an essential business, and as such, our facilities have remained open, with the exception of a few temporary closures at some of our locations. The COVID-19 pandemic impacted our commercial aerospace and industrial sales in the first quarter of fiscal 2021. During this period, our commercial aerospace sales continued to face headwinds associated with build rate changes within the industry.

 

Our production and sales in the first quarter of fiscal 2021 have been negatively affected by the economic implications of the pandemic. We expect that commercial aerospace OEM and aftermarket, which make up approximately half of our sales annually, will continue to be impacted by the year-over-year decline in air travel and changes in production rates. Conversely, our sales to aerospace defense markets are expected to grow throughout fiscal 2021. Sales in these markets grew 11.9% during the first quarter of fiscal 2021 as compared to the same period last year. Our sales to industrial markets will continue to be adversely affected in the next quarter of fiscal 2021 due to the slowdown of economic activity. Management is continuously evaluating the status of our orders and operations, and restructuring efforts are being implemented where necessary to align our cost structure to the new demand levels we experience in the marketplace.

 

We experienced strong cash flow generation during the first quarter of fiscal 2021 (as discussed in the section “Liquidity and Capital Resources”, below). Management believes that these operating cash flows and available credit under all credit agreements will provide adequate resources to fund internal and external growth initiatives for the foreseeable future, including at least the next twelve months. As of June 27, 2020, we had cash and cash equivalents of $143.6 million of which approximately $15.3 million was cash held by our foreign operations.

 

18

 

 

The Company expects net sales to be approximately $148.0 million to $152.0 million in the second quarter of fiscal 2021.

 

Results of Operations

(dollars in millions)

 

   Three Months Ended 
  

June 27,
2020

  

June 29,
2019

   $
Change
   %
Change
 
                 
Total net sales   $156.5   $182.7   $(26.2)   (14.3)%
                     
Net income   $22.7   $30.5   $(7.8)   (25.6)%
                     
Net income per common share: diluted  $0.91   $1.23           
Weighted average common shares: diluted   24,933,941    24,807,307           

 

Our net sales for the three-month period ended June 27, 2020 decreased 14.3% compared to the same period last fiscal year. The decrease in net sales was a result of a 14.9% decrease in our aerospace markets and a 13.3% decrease in our industrial markets. The decrease in aerospace sales was primarily due to the commercial markets, both OEM and aftermarket, which were down 21.4%, offset by increases in our defense business of 11.9%. The decrease in industrial sales was driven by decreases in the mining, energy, and general industrial markets. Excluding $2.2 million of sales associated with Swiss Tool, which was acquired in fiscal 2020, overall net sales decreased 15.5% year over year.

 

Net income for the first quarter of fiscal 2021 was $22.7 million compared to $30.5 million for the same period last year. Net income for the first quarter of fiscal 2021 was affected by $0.9 million of after tax restructuring costs and related items and $0.1 million of losses on foreign exchange offset by $0.1 million of discrete tax benefit. Net income for the first quarter of fiscal 2020 was affected by $0.3 million of after tax costs associated with losses on foreign exchange offset by $0.2 million of discrete tax benefit.

 

Gross Margin

 

   Three Months Ended 
  

June 27,
2020

  

June 29,
2019

  

$
Change

  

%

Change

 
                 
Gross Margin   $59.5   $70.7   $(11.2)   (15.9)%
Gross Margin %    38.0%   38.7%          

 

Gross margin was 38.0% of net sales for the first quarter of fiscal 2021 compared to 38.7% for the first quarter of fiscal 2020. The decrease was primarily the result of lower sales volumes during the period in our aerospace and industrial markets. During the first quarter of fiscal 2021, gross margin was also impacted by approximately $0.8 million of capacity inefficiencies driven by the decrease in volume.

 

19

 

  

Selling, General and Administrative

 

   Three Months Ended 
  

June 27,

2020

  

June 29,

2019

  

$

Change

  

%

Change

 
                 
SG&A   $26.8   $30.1   $(3.3)   (10.8)%
% of net sales    17.1%   16.5%          

 

SG&A for the first quarter of fiscal 2021 was $26.8 million, or 17.1% of net sales, as compared to $30.1 million, or 16.5% of net sales, for the same period of fiscal 2020. Increases in professional fees of $0.8 million and shared-based compensation of $0.6 million were offset by decreases in personnel costs of $4.1 million and other cost reductions of $0.6 million.

 

Other, Net

 

   Three Months Ended 
  

June 27,

2020

  

June 29,

2019

  

$

Change

  

%

Change

 
                 
Other, net   $3.8   $2.1   $1.7    80.0%
% of net sales    2.4%   1.2%          

 

Other operating expenses for the first quarter of fiscal 2021 totaled $3.8 million compared to $2.1 million for the same period last year. For the first quarter of fiscal 2021, other operating expenses were comprised mainly of $1.1 million of restructuring costs and related items, $2.5 million of amortization of intangible assets and $0.2 million of other costs. Other operating expenses last year were comprised mainly of $2.3 million of amortization of intangible assets offset by $0.2 million of other income.

 

Interest Expense, Net

 

   Three Months Ended 
   June 27,
2020
  

June 29,
2019

  

$
Change

  

%
Change

 
                 
Interest expense, net  $0.4   $0.5   $(0.1)   (22.3)%
% of net sales   0.3%   0.3%          

 

Interest expense, net, generally consists of interest charged on the Revolver and amortization of deferred financing fees, offset by interest income (see “Liquidity and Capital Resources”, below). Interest expense, net, was $0.4 million for the first quarter of fiscal 2021 compared to $0.5 million for the same period last year.

 

Other Non-Operating Expense

 

   Three Months Ended 
   June 27,
2020
   June 29,
2019
   $
Change
   %
Change
 
                 
Other non-operating expense  $0.0   $0.2   $(0.2)   (75.1)%
% of net sales   0.0%   0.1%          

 

20

 

 

Other non-operating expenses were $0.0 million for the first quarter of fiscal 2021 compared to $0.2 million for the same period in the prior year. For the first quarter of fiscal 2021, other non-operating expenses were comprised of $0.1 million of foreign exchange loss offset by $0.1 million of other items. For the first quarter of fiscal 2020, other non-operating expenses were primarily comprised of $0.4 million of foreign exchange loss partially offset by $0.2 million of other items.

 

Income Taxes

 

   Three Months Ended 
   June 27,
2020
   June 29,
2019
 
         
Income tax expense (benefit)  $5.7   $7.3 
Effective tax rate   20.0%   19.3%

 

Income tax expense for the three-month period ended June 27, 2020 was $5.7 million compared to $7.3 million for the three-month period ended June 29, 2019. Our effective income tax rate for the three-month period ended June 27, 2020 was 20.0% compared to 19.3% for the three-month period ended June 29, 2019. The effective income tax rate for the three-month period ended June 27, 2020 of 20.0% included $0.3 million of tax benefit associated with share-based compensation along with $0.1 million of tax benefit associated with the release of unrecognized tax positions associated with the statute of limitations expiration. The effective income tax rate without these benefits and other items for the three-month period ended June 27, 2020 would have been 21.3%. The effective income tax rate for the three-month period ended June 29, 2019 of 19.3% included $0.5 million of tax benefit associated with share-based compensation and $0.2 million of tax benefit associated with other permanent adjustments from filing the Company’s fiscal 2018 foreign tax returns.

 

Segment Information

 

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

 

Plain Bearings Segment

  

   Three Months Ended 
   June 27,
2020
   June 29,
2019
   $
 Change
   %
 Change
 
                 
Total net sales  $78.9   $87.5   $(8.6)   (9.8)%
                     
Gross margin  $32.1   $34.1   $(2.0)   (6.0)%
Gross margin %   40.7%   39.0%          
                     
SG&A  $5.3   $6.5   $(1.2)   (19.1)%
% of segment net sales   6.7%   7.4%          

 

Net sales decreased $8.6 million, or 9.8%, for the three months ended June 27, 2020 compared to the same period last year. The 9.8% decrease was primarily driven by a decrease of 11.8% in our aerospace markets and a 3.3% decrease in the industrial markets. The decrease in aerospace net sales was due to commercial aerospace OEM, partially offset by aftermarket and defense OEM. The decrease in industrial net sales was mostly driven by the mining and energy markets.

 

Gross margin as a percentage of net sales was 40.7% for the first quarter of fiscal 2021 compared to 39.0% for the same period last year. The increase in gross margin as a percentage of sales was due to product mix.

 

21

 

 

Roller Bearings Segment

 

   Three Months Ended 
   June 27,
2020
   June 29,
2019
   $
 Change
   %
 Change
 
                 
Total net sales  $22.9   $36.9   $(14.0)   (37.9)%
                     
Gross margin  $8.4   $14.5   $(6.1)   (42.1)%
Gross margin %   36.7%   39.4%          
                     
SG&A  $1.2   $1.6   $(0.4)   (23.2)%
% of segment net sales   5.4%   4.4%          

 

Net sales decreased $14.0 million, or 37.9%, for the three months ended June 27, 2020 compared to the same period last year. Our aerospace markets decreased 31.5% while our industrial markets decreased by 44.9%. The decrease in aerospace was driven by the commercial and defense OEM and distribution markets. The decrease in industrial net sales was due to mining and energy markets.

 

Gross margin for the three months ended June 27, 2020 was 36.7% of net sales, compared to 39.4% in the comparable period in fiscal 2020. This decrease in the gross margin was primarily due to decreased volumes during the period. During the first quarter 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 
   June 27,
2020
   June 29,
2019
   $
 Change
   %
 Change
 
                 
Total net sales  $18.8   $17.7   $1.1    6.4%
                     
Gross margin  $7.9   $7.8   $0.1    1.7%
Gross margin %   42.1%   44.0%          
                     
SG&A  $1.3   $1.6   $(0.3)   (17.6)%
% of segment net sales   7.1%   9.2%          

 

Net sales increased by $1.1 million for the first quarter of fiscal 2021 compared to the same period last year. Our aerospace markets increased 29.3% while our industrial sales decreased 3.8%. The increase in aerospace net sales was primarily driven by the defense OEM market. The decrease in industrial was primarily due to the energy and general industrial markets partially offset by increases in the semiconductor market.

 

Gross margin as a percentage of net sales was 42.1% for the first quarter of fiscal 2021 as compared to 44.0% for the same period last year. The decrease in margin percentage was a result of product mix during the period.

 

22

 

 

Engineered Products Segment

  

   Three Months Ended 
   June 27,
2020
   June 29,
2019
   $
 Change
   %
 Change
 
                 
Total net sales  $35.9   $40.6   $(4.7)   (11.7)%
                     
Gross margin  $11.0   $14.3   $(3.3)   (22.6)%
Gross margin %   30.8%   35.1%          
                     
SG&A  $3.8   $4.3   $(0.5)   (11.4)%
% of segment net sales   10.6%   10.6%          

 

Net sales decreased $4.7 million, or 11.7%, for the first three months of fiscal 2021 compared to the same period last year. Our aerospace markets decreased 20.2% while our industrial markets increased 0.8%. Excluding $2.2 million of current year net sales associated with our Swiss Tool division, acquired during the second quarter of fiscal 2020, net sales decreased 17.1% for the first three months of fiscal 2021 compared to the same period last year, with a 20.2% decrease in aerospace net sales and a 12.5% decrease in industrial net sales. The decrease in aerospace net sales were driven by the commercial OEM and aftermarket, partially offset by the defense OEM market. The decrease in our industrial net sales were driven by the general industrial markets.

 

Gross margin as a percentage of net sales was 30.8% for the first quarter of fiscal 2021 compared to 35.1% for the same period last year. This decrease was primarily attributable to the decrease in sales volumes during the period. During the first quarter of fiscal 2021, gross margin was also impacted by approximately $0.5 million of capacity inefficiencies driven by the impact of the COVID-19 pandemic.

 

Corporate

 

   Three Months Ended 
   June 27,
2020
   June 29,
2019
   $
 Change
   %
 Change
 
                 
SG&A  $15.2   $16.0   $(0.8)   (5.4)%
% of total net sales   9.7%   8.8%          

   

Corporate SG&A decreased $0.8 million, or 5.4%, for the first quarter of fiscal 2021 compared to the same period last year. This was primarily due to a decrease of $2.0 million in personnel costs and $0.2 million in other costs, partially offset by an increase of $0.8 million in professional fees and $0.6 million of share-based compensation.

 

Liquidity and Capital Resources

 

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

 

Our ability to meet future working capital, capital expenditures and debt service requirements will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, particularly 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.

 

23

 

 

Liquidity

 

As of June 27, 2020, we had cash and cash equivalents of $143.6 million, of which, approximately $15.3 million was cash held by our foreign operations. We expect that our undistributed foreign earnings will be re-invested indefinitely for working capital, internal growth and acquisitions for and by our foreign entities.

 

Domestic Credit Facility

 

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

 

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

 

The Credit Agreement requires the Company to comply with various covenants, including among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.50 to 1. The Credit Agreement allows the Company to, among other things, make distributions to shareholders, repurchase its stock, incur other debt or liens, or acquire or dispose of assets provided that the Company complies with certain requirements and limitations of the Credit Agreement. As of June 27, 2020, the Company was in compliance with all such covenants.

 

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

 

Approximately $3.7 million of the Revolver is being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs. As of June 27, 2020, $1.4 million in unamortized debt issuance costs remain. The Company has the ability to borrow up to an additional $246.3 million under the Revolver as of June 27, 2020.

 

Foreign Term Loan and Revolving Credit Facility

 

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

 

24

 

 

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

 

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

 

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 June 27, 2020, there was approximately $2.8 million outstanding under the Foreign Revolver and approximately $15.8 million outstanding under the Foreign Term Loan. These borrowings have been classified as Level 2 of the valuation hierarchy. As of June 27, 2020, approximately $0.1 million in unamortized debt issuance costs remain. Schaublin has the ability to borrow up to an additional $13.0 million under the Foreign Revolver as of June 27, 2020.

 

Schaublin’s required future annual principal payments for the next five years and thereafter are approximately $6.0 million for fiscal 2021 and approximately $3.2 million for each year from fiscal 2022 through fiscal 2025.

 

Other Notes Payable

 

On October 1, 2012, Schaublin purchased the land and building that it occupied and had been leasing for approximately $14.9 million. Schaublin obtained a 20-year fixed-rate mortgage of approximately $9.9 million at an interest rate of 2.9%. The balance of the purchase price of approximately $5.1 million was paid from cash on hand. The balance on this mortgage as of June 27, 2020 was approximately $6.0 million and has been classified as Level 2 of the valuation hierarchy.

 

The Company’s required future annual principal payments for the next five years are approximately $0.5 million for each year from fiscal 2021 through fiscal 2025 and $3.6 million thereafter.

  

25

 

 

Cash Flows

 

Three-month Period Ended June 27, 2020 Compared to the Three-month Period Ended June 29, 2019

 

The following table summarizes our cash flow activities:

  

   FY21   FY20   $
Change
 
Net cash provided by (used in):            
Operating activities  $48.4   $40.1   $8.3 
Investing activities   (3.6)   (12.0)   8.4 
Financing activities   (4.3)   (26.4)   22.1 
Effect of exchange rate changes on cash   (0.1)   1.1    (1.2)
Increase in cash and cash equivalents  $40.4   $2.8   $37.6 

 

During the first three months of fiscal 2021, we generated cash of $48.4 million from operating activities compared to $40.1 million of cash generated during the same period of fiscal 2020. The increase of $8.3 million for fiscal 2021 was mainly a result of the favorable impact of a net change in operating assets and liabilities of $12.8 million and a favorable change in non-cash charges of $3.3 million, offset by a decrease in net income of $7.8 million. The favorable change in operating assets and liabilities was primarily the result of an increase in the amount of cash being provided by working capital items as detailed in the table below, while the increase in non-cash charges resulted from $0.2 million of amortization of intangible assets, $1.7 million in deferred taxes, $0.7 million of depreciation, $0.6 million of share-based compensation charges, and $0.1 million of other non-cash charges.

 

The following chart summarizes the favorable change in operating assets and liabilities of $12.8 million for fiscal 2021 versus fiscal 2020 and the favorable change of $4.6 million for fiscal 2020 versus fiscal 2019.

  

   FY21   FY20 
Cash provided by (used in):        
Accounts receivable   $15.0   $0.6 
Inventory    4.2    (0.2)
Prepaid expenses and other current assets    2.3    (0.9)
Other non-current assets    (3.6)   0.3 
Accounts payable    (1.2)   2.9 
Accrued expenses and other current liabilities    (7.0)   3.5 
Other non-current liabilities    3.1    (1.6)
Total change in operating assets and liabilities:  $12.8   $4.6 

 

During the first three months of fiscal 2021, we used $3.6 million for investing activities as compared to $12.0 million used during the first three months of fiscal 2020. This decrease in cash used was attributable to an $8.2 million decrease in capital expenditures and $0.2 million in cash received as a result of opening balance sheet adjustments made during the measurement period for the acquisition of Swiss Tool.

 

During the first three months of fiscal 2021, we used $4.3 million for financing activities compared to $26.4 million for the first three months of fiscal 2020. This decrease in cash used was primarily attributable to $17.0 million less payments made on outstanding debt and $5.1 million less treasury stock purchases.

 

26

 

 

Capital Expenditures

 

Our capital expenditures were $3.9 million for the three-month period ended June 27, 2020. We expect to make additional capital expenditures of $10.0 to $15.0 million during the remainder of fiscal 2021 in connection with our existing business. We expect to fund these capital expenditures principally through existing cash and internally generated funds. We may also make substantial additional capital expenditures in connection with acquisitions.

 

Other Matters

 

Critical Accounting Policies and Estimates

 

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

 

Off-Balance Sheet Arrangements

 

As of June 27, 2020, we had no significant off-balance sheet arrangements other than $3.7 million of outstanding standby letters of credit, all of which were under the Revolver.

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

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

 

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

 

Foreign Currency Exchange Rates. Our Swiss operations utilize the Swiss franc as the functional currency, our French and German operations utilize the euro as the functional currency and our Polish operations utilize the Polish zloty as the functional currency. As a result, we are exposed to risk associated with fluctuating currency exchange rates between the U.S. dollar and these currencies. Foreign currency transaction gains and losses are included in earnings. Approximately 9% of our net sales were impacted by foreign currency fluctuations for the three-month period ended June 27, 2020 compared to 8% for the same period in the prior year. We expect that this proportion is likely to increase as we seek to increase our penetration of foreign markets, particularly within the aerospace and defense markets. Foreign currency transaction exposure arises primarily from the transfer of foreign currency from one subsidiary to another within the group, and to foreign currency denominated trade receivables. Unrealized currency translation gains and losses are recognized upon translation of the foreign operations’ balance sheets to U.S. dollars. Because our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our earnings. We periodically enter into derivative financial instruments in the form of forward exchange contracts to reduce the effect of fluctuations in exchange rates on certain third-party sales transactions denominated in non-functional currencies. Based on the accounting guidance related to derivatives and hedging activities, we record derivative financial instruments at fair value. For derivative financial instruments designated and qualifying as cash flow hedges, the effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive income, and is reclassified into earnings when the hedged transaction affects earnings. As of June 27, 2020, we had no derivatives.

  

ITEM 4. Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of June 27, 2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 27, 2020, our disclosure controls and procedures were (1) designed to ensure that information relating to our Company required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported to our Chief Executive Officer and Chief Financial Officer within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, and (2) effective, in that they provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the three-month period ended June 27, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

 

27

 

 

PART II - OTHER INFORMATION

  

ITEM 1. Legal Proceedings

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

 

ITEM 1A. Risk Factors

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

 

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

Unregistered Sales of Equity Securities

 

None.

 

Use of Proceeds

 

Not applicable.

  

28

 

 

Issuer Purchases of Equity Securities

 

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

 

Total share repurchases under the 2019 plan for the three months ended June 27, 2020 are as follows:

 

               Approximate 
           Number of   dollar value 
           shares   of shares still 
           purchased   available to be 
           as part of the   purchased 
   Total number   Average   publicly   under the 
   of shares   price paid   announced   program 
Period  purchased   per share   program   (000’s) 
03/29/2020 – 04/25/2020   30   $110.00    30   $94,421 
04/26/2020 – 05/23/2020   792    115.91    792    94,329 
05/24/2020 – 06/27/2020   30,357    141.52    30,357   $90,033 
Total   31,179   $140.82    31,179      

   

ITEM 3.Defaults Upon Senior Securities

 

Not applicable.

  

ITEM 4.Mine Safety Disclosures

 

Not applicable.

 

ITEM 5.Other Information

 

Not applicable.

 

29

 

 

ITEM 6.Exhibits

  

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

 

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

 

30

 

  

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: August 6, 2020
       
  By:

/s/ Daniel A. Bergeron

    Name: Daniel A. Bergeron
    Title: Chief Financial Officer and
Chief Operating Officer
    Date: August 6, 2020

  

31

 

 

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.

  

 

32

 

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Exhibit 31.01

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Michael J. Hartnett, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of RBC Bearings Incorporated;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including any consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to 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; and

 

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

  

Date: August 6, 2020 By: /s/ Michael J. Hartnett  
    Michael J. Hartnett
    President and Chief Executive Officer

 

Exhibit 31.02

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Daniel A. Bergeron, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of RBC Bearings Incorporated;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including any consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to 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; and

 

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

  

Date: August 6, 2020 By: /s/ Daniel A. Bergeron
    Daniel A. Bergeron
    Vice President, Chief Financial Officer and
Chief Operating Officer

 

Exhibit 32.01

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO

18 U.S.C SECTION 1350

 

The undersigned, Michael J. Hartnett, the President and Chief Executive Officer of RBC Bearings Incorporated (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies that:

 

(i) the Quarterly Report on Form 10-Q for the period ended June 27, 2020 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 6, 2020

 

  /s/ Michael J. Hartnett  
  Michael J. Hartnett
  President and Chief Executive Officer

 

Exhibit 32.02

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350

 

The undersigned, Daniel A. Bergeron, Chief Financial Officer, of RBC Bearings Incorporated (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies:

 

(i) the Quarterly Report on Form 10-Q for the period ended June 27, 2020 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: August 6, 2020

 

  /s/ Daniel A. Bergeron
  Daniel A. Bergeron
  Vice President, Chief Financial Officer and
Chief Operating Officer

v3.20.2
Document And Entity Information - shares
3 Months Ended
Jun. 27, 2020
Jul. 31, 2020
Document Information Line Items    
Entity Registrant Name RBC BEARINGS INCORPORATED  
Trading Symbol ROLL  
Document Type 10-Q  
Current Fiscal Year End Date --03-28  
Entity Common Stock, Shares Outstanding   25,071,591
Amendment Flag false  
Entity Central Index Key 0001324948  
Entity Current Reporting Status Yes  
Entity Filer Category Large Accelerated Filer  
Document Period End Date Jun. 27, 2020  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q1  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 333-124824  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 95-4372080  
Entity Address, Address Line One One Tribology Center  
Entity Address, City or Town Oxford  
Entity Address, State or Province CT  
Entity Address, Postal Zip Code 06478  
City Area Code (203)  
Local Phone Number 267-7001  
Title of 12(b) Security Common Stock, par value $0.01 per share  
Security Exchange Name NASDAQ  
Entity Interactive Data Current Yes  
v3.20.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 27, 2020
Mar. 28, 2020
Current assets:    
Cash and cash equivalents $ 143,615 $ 103,255
Accounts receivable, net of allowance for doubtful accounts of $1,642 at June 27, 2020 and $1,627 at March 28, 2020 113,184 128,995
Inventory 371,009 367,494
Prepaid expenses and other current assets 11,041 12,262
Total current assets 638,849 612,006
Property, plant and equipment, net 218,128 219,846
Operating lease assets, net 30,530 28,953
Goodwill 277,455 277,776
Intangible assets, net of accumulated amortization of $58,242 at June 27, 2020 and $55,732 at March 28, 2020 161,060 162,747
Other assets 23,187 20,584
Total assets 1,349,209 1,321,912
Current liabilities:    
Accounts payable 51,812 51,038
Accrued expenses and other current liabilities 36,098 40,580
Current operating lease liabilities 5,891 5,708
Current portion of long-term debt 6,489 6,429
Total current liabilities 100,290 103,755
Deferred income taxes 19,425 16,560
Long-term debt, less current portion 16,635 16,583
Long-term operating lease liabilities 24,857 23,396
Other non-current liabilities 45,367 43,619
Total liabilities 206,574 203,913
Stockholders’ equity:    
Preferred stock, $.01 par value; authorized shares: 10,000,000 at June 27, 2020 and March 28, 2020, respectively; none issued or outstanding
Common stock, $.01 par value; authorized shares: 60,000,000 at June 27, 2020 and March 28, 2020, respectively; issued shares: 25,941,772 and 25,881,415 at June 27, 2020 and March 28, 2020, respectively 259 259
Additional paid-in capital 418,069 412,400
Accumulated other comprehensive loss (6,229) (6,898)
Retained earnings 791,908 769,219
Treasury stock, at cost, 870,161 shares and 838,982 shares at June 27, 2020 and March 28, 2020, respectively (61,372) (56,981)
Total stockholders’ equity 1,142,635 1,117,999
Total liabilities and stockholders’ equity $ 1,349,209 $ 1,321,912
v3.20.2
Consolidated Balance Sheets (Parentheticals) - USD ($)
$ in Thousands
Jun. 27, 2020
Mar. 28, 2020
Statement of Financial Position [Abstract]    
Accounts receivable, allowance for doubtful accounts (in Dollars) $ 1,642 $ 1,627
Intangible assets, accumulated amortization (in Dollars) $ 58,242 $ 55,732
Preferred stock, par value (in Dollars per share) $ 0.01 $ 0.01
Preferred stock, authorized 10,000,000 10,000,000
Preferred stock, issued
Preferred stock, outstanding
Common stock, par value (in Dollars per share) $ 0.01 $ 0.01
Common stock, authorized 60,000,000 60,000,000
Common stock, issued 25,941,772 25,881,415
Treasury stock, shares 870,161 838,982
v3.20.2
Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Jun. 27, 2020
Jun. 29, 2019
Income Statement [Abstract]    
Net sales $ 156,493 $ 182,690
Cost of sales 97,040 111,996
Gross margin 59,453 70,694
Operating expenses:    
Selling, general and administrative 26,829 30,087
Other, net 3,810 2,117
Total operating expenses 30,639 32,204
Operating income 28,814 38,490
Interest expense, net 425 547
Other non-operating expense 42 169
Income before income taxes 28,347 37,774
Provision for income taxes 5,658 7,275
Net income $ 22,689 $ 30,499
Net income per common share:    
Basic (in Dollars per share) $ 0.92 $ 1.24
Diluted (in Dollars per share) $ 0.91 $ 1.23
Weighted average common shares:    
Basic (in Shares) 24,763,903 24,501,707
Diluted (in Shares) 24,933,941 24,807,307
v3.20.2
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Jun. 27, 2020
Jun. 29, 2019
Statement of Comprehensive Income [Abstract]    
Net income $ 22,689 $ 30,499
Pension and postretirement liability adjustments, net of taxes [1] 260 178
Foreign currency translation adjustments 409 2,542
Total comprehensive income $ 23,358 $ 33,219
[1] These adjustments were net of tax expense of $79 and $54 for the three-month periods ended June 27, 2020 and June 29, 2019, respectively.
v3.20.2
Consolidated Statements of Comprehensive Income (Unaudited) (Parentheticals) - USD ($)
$ in Thousands
3 Months Ended
Jun. 27, 2020
Jun. 29, 2019
Statement of Comprehensive Income [Abstract]    
Pension and postretirement liability adjustments, net of a tax benefit and expense $ 79 $ 54
v3.20.2
Consolidated Statements of Stockholders’ Equity (Unaudited) - USD ($)
$ in Thousands
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Income/(Loss)
Retained Earnings
Treasury Stock
Total
Balance at Mar. 30, 2019 $ 256 $ 378,655 $ (7,467) $ 641,894 $ (44,772) $ 968,566
Balance (in Shares) at Mar. 30, 2019 25,607,196       (752,913)  
Net income       30,499   30,499
Share-based compensation   4,802       4,802
Repurchase of common stock         $ (9,514) (9,514)
Repurchase of common stock (in Shares)         (69,877)  
Exercise of equity awards $ 1 275       276
Exercise of equity awards (in Shares) 4,356          
Change in net prior service cost and actuarial losses, net of tax expense     178     178
Issuance of restricted stock (in Shares) 86,490          
Impact from adoption of ASU 2018-02     (1,289) 1,289    
Currency translation adjustments     2,542     2,542
Balance at Jun. 29, 2019 $ 257 383,732 (6,036) 673,682 $ (54,286) 997,349
Balance (in Shares) at Jun. 29, 2019 25,698,042       (822,790)  
Balance at Mar. 28, 2020 $ 259 412,400 (6,898) 769,219 $ (56,981) 1,117,999
Balance (in Shares) at Mar. 28, 2020 25,881,415       (838,982)  
Net income       22,689   22,689
Share-based compensation   5,438       5,438
Repurchase of common stock         $ (4,391) (4,391)
Repurchase of common stock (in Shares)         (31,179)  
Exercise of equity awards   231       231
Exercise of equity awards (in Shares) 4,200          
Change in net prior service cost and actuarial losses, net of tax expense     260     260
Issuance of restricted stock (in Shares) 56,157          
Currency translation adjustments     409     409
Balance at Jun. 27, 2020 $ 259 $ 418,069 $ (6,229) $ 791,908 $ (61,372) $ 1,142,635
Balance (in Shares) at Jun. 27, 2020 25,941,772       (870,161)  
v3.20.2
Consolidated Statements of Stockholders’ Equity (Unaudited) (Parentheticals) - USD ($)
$ in Thousands
3 Months Ended
Jun. 27, 2020
Jun. 29, 2019
Statement of Stockholders' Equity [Abstract]    
Change in net prior service cost and actuarial losses, net of tax expense $ 79 $ 54
v3.20.2
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Jun. 27, 2020
Jun. 29, 2019
Cash flows from operating activities:    
Net income $ 22,689 $ 30,499
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation 5,892 5,236
Deferred income taxes 2,865 1,153
Amortization of intangible assets 2,504 2,284
Amortization of deferred financing costs 141 99
Share-based compensation 5,438 4,802
Other non-cash charges 3 (11)
Changes in operating assets and liabilities, net of acquisitions:    
Accounts receivable 15,848 815
Inventory (3,294) (7,423)
Prepaid expenses and other current assets 1,240 (1,052)
Other non-current assets (4,678) (1,041)
Accounts payable 739 1,986
Accrued expenses and other current liabilities (4,180) 2,773
Other non-current liabilities 3,152 16
Net cash provided by operating activities 48,359 40,136
Cash flows from investing activities:    
Purchase of property, plant and equipment (3,875) (12,040)
Proceeds from sale of assets 5 2
Acquisition of business 245  
Net cash used in investing activities (3,625) (12,038)
Cash flows from financing activities:    
Repayments of revolving credit facilities   (17,000)
Repayments of notes payable (122) (117)
Exercise of stock options 231 276
Repurchase of common stock (4,391) (9,514)
Net cash used in financing activities (4,282) (26,355)
Effect of exchange rate changes on cash (92) 1,086
Cash and cash equivalents:    
Increase during the period 40,360 2,829
Cash, at beginning of period 103,255 29,884
Cash, at end of period 143,615 32,713
Supplemental disclosures of cash flow information:    
Income taxes 899 489
Interest $ 267 $ 408
v3.20.2
Basis of Presentation
3 Months Ended
Jun. 27, 2020
Organization Consolidation And Presentation Of Financial Statements Abstract  
Basis of Presentation

1. Basis of Presentation

 

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

 

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

 

The results of operations for the three-month period ended June 27, 2020 are not necessarily indicative of the operating results for the entire fiscal year ending April 3, 2021. The three-month periods ended June 27, 2020 and June 29, 2019 each include 13 weeks. The amounts shown are in thousands, unless otherwise indicated.

v3.20.2
Significant Accounting Policies
3 Months Ended
Jun. 27, 2020
Accounting Policies [Abstract]  
Significant Accounting Policies

2. Significant Accounting Policies

 

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

 

Recent Accounting Standards Adopted

 

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

 

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

 

Recent Accounting Standards Yet to Be Adopted

 

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

 

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

v3.20.2
Revenue from Contracts with Customers
3 Months Ended
Jun. 27, 2020
Revenue from Contract with Customer [Abstract]  
Revenue from Contracts with Customers

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 overall revenues for the three-month periods ended June 27, 2020 and June 29, 2019 are as follows:

 

Principal End Markets

  

   Three Months Ended 
   June 27, 2020   June 29, 2019 
   Aerospace   Industrial   Total   Aerospace   Industrial   Total 
Plain  $59,352   $19,523   $78,875   $67,306   $20,183   $87,489 
Roller   13,230    9,670    22,900    19,313    17,546    36,859 
Ball   7,022    11,818    18,840    5,430    12,280    17,710 
Engineered Products   19,378    16,500    35,878    24,270    16,362    40,632 
   $98,982   $57,511   $156,493   $116,319   $66,371   $182,690 

 

Remaining Performance Obligations

 

Remaining performance obligations represent the transaction price of orders meeting the definition of a contract under Accounting Standards Codification (ASC) 606 for which work has not been performed or has been partially performed and excludes unexercised contract options. The duration of many of our contracts, as defined by ASC 606, is less than one year. The Company has elected to apply the practical expedient that allows companies to exclude remaining performance obligations with an original expected duration of one year or less. Performance obligations having a duration of more than one year are concentrated in contracts for certain products and services provided to the U.S. government or its contractors. The aggregate amount of the transaction price allocated to remaining performance obligations for such contracts with a duration of more than one year was approximately $274,688 at June 27, 2020. The Company expects to recognize revenue on approximately 65% and 88% of the remaining performance obligations over the next 12 and 24 months, respectively, with the remainder recognized thereafter. Excluded from these remaining performance obligations are orders received from customers for which the delivery date has not yet been agreed to.

Contract Balances

 

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

 

Contract Assets (Unbilled Receivables) - Pursuant to the over-time revenue recognition model, revenue may be recognized prior to the customer being invoiced. An unbilled receivable is recorded to reflect revenue that is recognized when (1) the cost-to-cost method is applied and (2) such revenue exceeds the amount invoiced to the customer.

 

Contract Liabilities (Deferred Revenue) - The Company may receive a customer advance or deposit, or have an unconditional right to receive a customer advance, prior to revenue being recognized. Since the performance obligations related to such advances may not have been satisfied, a contract liability is established. Advance payments are not considered a significant financing component as the timing of the transfer of the related goods or services is at the discretion of the customer.

 

These assets and liabilities are reported on the consolidated balance sheets on an individual contract basis at the end of each reporting period. As of June 27, 2020 and March 28, 2020, accounts receivable with customers, net, were $113,184 and $128,995, respectively. The tables below represent a roll-forward of contract assets and contract liabilities for the three-month period ended June 27, 2020:

 

Contract Assets - Current (1)    
     
Balance at March 28, 2020  $2,604 
Additional revenue recognized in excess of billings   670 
Less: amounts billed to customers   (1,429)
Balance at June 27, 2020  $1,845 

 

(1)Included within prepaid expenses and other current assets on the consolidated balance sheets.

  

Contract Liabilities – Current (2)    
     
Balance at March 28, 2020  $11,116 
Payments received prior to revenue being recognized   634 
Revenue recognized   (6,310)
Reclassification (to)/from noncurrent   727 
Balance at June 27, 2020  $6,167 

 

(2)Included within accrued expenses and other current liabilities on the consolidated balance sheets. During the first three months of fiscal 2021, the Company recognized revenues of $5,821 that were included in the contract liability balance at March 28, 2020.

 

Contract Liabilities – Noncurrent (3)    
     
Balance at March 28, 2020  $2,427 
Payments received prior to revenue being recognized   
 
Reclassification (to)/from current   (727)
Balance at June 27, 2020  $1,700 

 

(3)Included within other non-current liabilities on the consolidated balance sheets.

 

As of June 27, 2020, the Company did not have any contract assets classified as noncurrent on the consolidated balance sheet.

v3.20.2
Accumulated Other Comprehensive Income (Loss)
3 Months Ended
Jun. 27, 2020
Equity Abstract  
Accumulated Other Comprehensive Income (Loss)

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 March 28, 2020  $(582)  $(6,316)  $(6,898)
Other comprehensive income before reclassifications   409        409 
Amounts reclassified from accumulated other comprehensive income       260    260 
Net current period other comprehensive income   409    260    669 
Balance at June 27, 2020  $(173)  $(6,056)  $(6,229)
v3.20.2
Net Income Per Common Share
3 Months Ended
Jun. 27, 2020
Earnings Per Share [Abstract]  
Net Income Per Common Share

5. Net Income Per Common Share

 

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

 

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

 

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

  

   Three Months Ended 
   June 27,
2020
   June 29,
2019
 
         
Net income  $22,689   $30,499 
           
Denominator for basic net income  per common share—weighted-average shares outstanding   24,763,903    24,501,707 
Effect of dilution due to employee stock awards   170,038    305,600 
Denominator for diluted net income per common share — weighted-average shares outstanding   24,933,941    24,807,307 
           
Basic net income per common share  $0.92   $1.24 
           
Diluted net income per common share  $0.91   $1.23 

  

At June 27, 2020, 504,768 employee stock options and 61,025 restricted shares have been excluded from the calculation of diluted earnings per share. At June 29, 2019, 373,840 employee stock options and 86,040 restricted shares have been excluded from the calculation of diluted earnings per share. The inclusion of these employee stock options and restricted shares would be anti-dilutive.

v3.20.2
Cash and Cash Equivalents
3 Months Ended
Jun. 27, 2020
Cash and Cash Equivalents [Abstract]  
Cash and Cash Equivalents

6. 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.

 

Short-term investments, if any, are comprised of equity securities and are measured at fair value by using quoted prices in active markets and are classified as Level 1 of the valuation hierarchy.

v3.20.2
Inventory
3 Months Ended
Jun. 27, 2020
Inventory Disclosure [Abstract]  
Inventory

7. Inventory

 

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

 

   June 27,
2020
   March 28,
2020
 
Raw materials  $52,310   $51,362 
Work in process   93,496    97,286 
Finished goods   225,203    218,846 
   $371,009   $367,494 
v3.20.2
Goodwill and Intangible Assets
3 Months Ended
Jun. 27, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

8. Goodwill and Intangible Assets

 

Goodwill

 

   Roller   Plain   Ball   Engineered
Products
   Total 
March 28, 2020  $16,007   $79,597   $5,623   $176,549   $277,776 
Translation adjustments   
    
    
    62    62 
Acquisition (1)   
    
    
    (383)   (383)
June 27, 2020  $16,007   $79,597   $5,623   $176,228   $277,455 

 

(1)Includes a reduction of goodwill recognized due to opening balance sheet adjustments made during the measurement period of the Company’s acquisition of Vianel Holding AG (“Swiss Tool”) on August 15, 2019.

 

Intangible Assets

 

      June 27, 2020   March 28, 2020 
   Weighted
Average
Useful
Lives
  Gross
Carrying
Amount
   Accumulated
Amortization
   Gross
Carrying
Amount
   Accumulated Amortization 
Product approvals  24  $50,878   $13,125   $50,878   $12,597 
Customer relationships and lists  23   109,696    24,731    109,645    23,557 
Trade names  10   16,331    9,278    16,330    8,906 
Distributor agreements  5   722    722    722    722 
Patents and trademarks  16   11,775    6,167    11,553    6,045 
Domain names  10   437    437    437    437 
Other  3   5,182    3,782    4,633    3,468 
       195,021    58,242    194,198    55,732 
Non-amortizable repair station certifications  n/a   24,281    
    24,281    
 
Total  21  $219,302   $58,242   $218,479   $55,732 

 

Amortization expense for definite-lived intangible assets for the three-month period ended June 27, 2020 was $2,504, compared to $2,284 for the three-month period ended June 29, 2019. Estimated amortization expense for the remaining nine months of fiscal 2021, the five succeeding fiscal years and thereafter is as follows:

 

2021  $7,240 
2022   9,538 
2023   9,456 
2024   9,327 
2025   8,679 
2026   7,218 
2027 and thereafter   85,321 
v3.20.2
Debt
3 Months Ended
Jun. 27, 2020
Debt Disclosure [Abstract]  
Debt

9. Debt

 

The balances payable under all borrowing facilities are as follows:

 

   June 27,
2020
   March 28,
2020
 
Revolver and term loan facilities  $18,664   $18,593 
Debt issuance costs   (1,546)   (1,687)
Other   6,006    6,106 
Total debt   23,124   $23,012 
Less: current portion   6,489   $6,429 
Long-term debt  $16,635   $16,583 

 

The current portion of long-term debt as of June 27, 2020 includes the current portion of the foreign term loan, foreign revolving facility and the Schaublin mortgage, all of which are discussed below in further detail.

 

Domestic Credit Facility

 

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

 

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

 

The Credit Agreement requires the Company to comply with various covenants, including among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.50 to 1. The Credit Agreement allows the Company to, among other things, make distributions to shareholders, repurchase its stock, incur other debt or liens, or acquire or dispose of assets provided that the Company complies with certain requirements and limitations of the Credit Agreement. As of June 27, 2020, the Company was in compliance with all such covenants.

 

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

 

Approximately $3,700 of the Revolver is being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs. As of June 27, 2020, $1,418 in unamortized debt issuance costs remain. The Company has the ability to borrow up to an additional $246,300 under the Revolver as of June 27, 2020.

 

Foreign Term Loan and Revolving Credit Facility

 

On August 15, 2019, one of our foreign subsidiaries, Schaublin SA (“Schaublin”), entered into two separate credit agreements (the “Foreign Credit Agreements”) with Credit Suisse (Switzerland) Ltd. to finance the acquisition of Swiss Tool and provide future working capital. The Schaublin 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.

 

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

 

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

 

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

 

As of June 27, 2020, there was approximately $2,847 outstanding under the Foreign Revolver and approximately $15,817 outstanding under the Foreign Term Loan. These borrowings have been classified as Level 2 of the valuation hierarchy. As of June 27, 2020, approximately $128 in unamortized debt issuance costs remain. Schaublin has the ability to borrow up to an additional $12,970 under the Foreign Revolver as of June 27, 2020.

 

Schaublin’s required future annual principal payments for the next five years and thereafter are approximately $5,999 for fiscal 2021, approximately $3,163 for each year from fiscal 2022 through fiscal 2024 and approximately $3,176 for fiscal 2025.

 

Other Notes Payable

 

On October 1, 2012, Schaublin purchased the land and building that it occupied and had been leasing for approximately $14,910. Schaublin obtained a 20-year fixed-rate mortgage of approximately $9,857 at an interest rate of 2.9%. The balance of the purchase price of approximately $5,053 was paid from cash on hand. The balance on this mortgage as of June 27, 2020 was approximately $6,006 and has been classified as Level 2 of the valuation hierarchy.

 

The Company’s required future annual principal payments for the next five years are approximately $490 for each year from fiscal 2021 through fiscal 2025 and $3,556 thereafter.

v3.20.2
Income Taxes
3 Months Ended
Jun. 27, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

 

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

 

The effective income tax rates for the three-month periods ended June 27, 2020 and June 29, 2019, were 20.0% and 19.3%, respectively. In addition to discrete items, the effective income tax rates for these periods are different from the U.S. statutory rates due to the foreign-derived intangible income provision and U.S. credit for increasing research activities, which decrease the rate, and state income taxes that increase the rate.

 

The effective income tax rate for the three-month period ended June 27, 2020 of 20.0% includes $315 of tax benefit associated with share-based compensation, along with $75 of tax benefit for the release of unrecognized tax positions associated with a statute of limitations expiration. The effective income tax rate without discrete items for the three-month period ended June 27, 2020 would have been 21.3%. The effective income tax rate for the three-month period ended June 29, 2019 of 19.3% includes discrete items of $510 of tax benefit associated with share-based compensation and $241 of tax benefit associated with other permanent adjustments from filing the Company’s fiscal 2018 foreign tax returns. The effective income tax rate without discrete items for the three-month period ended June 29, 2019 would have been 21.2%. The Company believes it is reasonably possible that some of its unrecognized tax positions may be effectively settled within the next 12 months due to the closing of audits and the statute of limitations expiring in varying jurisdictions. The decrease in the Company’s unrecognized tax positions, pertaining primarily to federal and state credits and state tax, is estimated to be approximately $1,524.

v3.20.2
Reportable Segments
3 Months Ended
Jun. 27, 2020
Segment Reporting [Abstract]  
Reportable Segments

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 are aggregated as reportable segments as they have similar economic characteristics, including nature of the products and production processes, distribution patterns and classes of customers.

 

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

 

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

 

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

 

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

 

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

 

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

  

   Three Months Ended 
   June 27,
2020
   June 29,
2019
 
Net External Sales        
Plain  $78,875   $87,489 
Roller   22,900    36,859 
Ball   18,840    17,710 
Engineered Products   35,878    40,632 
   $156,493   $182,690 
Gross Margin          
Plain  $32,077   $34,114 
Roller   8,407    14,524 
Ball   7,927    7,799 
Engineered Products   11,042    14,257 
   $59,453   $70,694 
Selling, General & Administrative Expenses          
Plain  $5,271   $6,514 
Roller   1,239    1,614 
Ball   1,346    1,633 
Engineered Products   3,812    4,303 
Corporate   15,161    16,023 
   $26,829   $30,087 
Operating Income          
Plain  $25,401   $26,825 
Roller   7,099    12,570 
Ball   6,551    6,137 
Engineered Products   5,981    9,002 
Corporate   (16,218)   (16,044)
   $28,814   $38,490 
Intersegment Sales          
Plain  $1,562   $1,847 
Roller   3,378    3,201 
Ball   667    669 
Engineered Products   10,649    10,822 
   $16,256   $16,539 

  

All intersegment sales are eliminated in consolidation.

v3.20.2
Acquisition
3 Months Ended
Jun. 27, 2020
Acquisition [Abstract]  
Acquisition

12. Acquisition

 

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

v3.20.2
Accounting Policies, by Policy (Policies)
3 Months Ended
Jun. 27, 2020
Accounting Policies [Abstract]  
Recent Accounting Standards Adopted

Recent Accounting Standards Adopted

 

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

 

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

 

Recent Accounting Standards Yet to Be Adopted

Recent Accounting Standards Yet to Be Adopted

 

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

 

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

v3.20.2
Revenue from Contracts with Customers (Tables)
3 Months Ended
Jun. 27, 2020
Revenue from Contract with Customer [Abstract]  
Schedule of revenue from business segments of customers
   Three Months Ended 
   June 27, 2020   June 29, 2019 
   Aerospace   Industrial   Total   Aerospace   Industrial   Total 
Plain  $59,352   $19,523   $78,875   $67,306   $20,183   $87,489 
Roller   13,230    9,670    22,900    19,313    17,546    36,859 
Ball   7,022    11,818    18,840    5,430    12,280    17,710 
Engineered Products   19,378    16,500    35,878    24,270    16,362    40,632 
   $98,982   $57,511   $156,493   $116,319   $66,371   $182,690 

 

Schedule of contract assets and contract liabilities
Contract Assets - Current (1)    
     
Balance at March 28, 2020  $2,604 
Additional revenue recognized in excess of billings   670 
Less: amounts billed to customers   (1,429)
Balance at June 27, 2020  $1,845 

 

(1)Included within prepaid expenses and other current assets on the consolidated balance sheets.

  

Contract Liabilities – Current (2)    
     
Balance at March 28, 2020  $11,116 
Payments received prior to revenue being recognized   634 
Revenue recognized   (6,310)
Reclassification (to)/from noncurrent   727 
Balance at June 27, 2020  $6,167 

 

(2)Included within accrued expenses and other current liabilities on the consolidated balance sheets. During the first three months of fiscal 2021, the Company recognized revenues of $5,821 that were included in the contract liability balance at March 28, 2020.

 

Contract Liabilities – Noncurrent (3)    
     
Balance at March 28, 2020  $2,427 
Payments received prior to revenue being recognized   
 
Reclassification (to)/from current   (727)
Balance at June 27, 2020  $1,700 

 

(3)Included within other non-current liabilities on the consolidated balance sheets.

 

v3.20.2
Accumulated Other Comprehensive Income (Loss) (Tables)
3 Months Ended
Jun. 27, 2020
Stockholders' Equity Note [Abstract]  
Schedule of component of accumulated other comprehensive income (loss)
   Currency
Translation
   Pension and
Postretirement
Liability
   Total 
Balance at March 28, 2020  $(582)  $(6,316)  $(6,898)
Other comprehensive income before reclassifications   409        409 
Amounts reclassified from accumulated other comprehensive income       260    260 
Net current period other comprehensive income   409    260    669 
Balance at June 27, 2020  $(173)  $(6,056)  $(6,229)
v3.20.2
Net Income Per Common Share (Tables)
3 Months Ended
Jun. 27, 2020
Earnings Per Share [Abstract]  
Schedule basic and diluted net income per common share
   Three Months Ended 
   June 27,
2020
   June 29,
2019
 
         
Net income  $22,689   $30,499 
           
Denominator for basic net income  per common share—weighted-average shares outstanding   24,763,903    24,501,707 
Effect of dilution due to employee stock awards   170,038    305,600 
Denominator for diluted net income per common share — weighted-average shares outstanding   24,933,941    24,807,307 
           
Basic net income per common share  $0.92   $1.24 
           
Diluted net income per common share  $0.91   $1.23 

  

v3.20.2
Inventory (Tables)
3 Months Ended
Jun. 27, 2020
Inventory Disclosure [Abstract]  
Schedule of inventory
   June 27,
2020
   March 28,
2020
 
Raw materials  $52,310   $51,362 
Work in process   93,496    97,286 
Finished goods   225,203    218,846 
   $371,009   $367,494 
v3.20.2
Goodwill and Intangible Assets (Tables)
3 Months Ended
Jun. 27, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of goodwill balances, by segment
   Roller   Plain   Ball   Engineered
Products
   Total 
March 28, 2020  $16,007   $79,597   $5,623   $176,549   $277,776 
Translation adjustments   
    
    
    62    62 
Acquisition (1)   
    
    
    (383)   (383)
June 27, 2020  $16,007   $79,597   $5,623   $176,228   $277,455 

 

(1)Includes a reduction of goodwill recognized due to opening balance sheet adjustments made during the measurement period of the Company’s acquisition of Vianel Holding AG (“Swiss Tool”) on August 15, 2019.

 

Schedule of intangible assets
      June 27, 2020   March 28, 2020 
   Weighted
Average
Useful
Lives
  Gross
Carrying
Amount
   Accumulated
Amortization
   Gross
Carrying
Amount
   Accumulated Amortization 
Product approvals  24  $50,878   $13,125   $50,878   $12,597 
Customer relationships and lists  23   109,696    24,731    109,645    23,557 
Trade names  10   16,331    9,278    16,330    8,906 
Distributor agreements  5   722    722    722    722 
Patents and trademarks  16   11,775    6,167    11,553    6,045 
Domain names  10   437    437    437    437 
Other  3   5,182    3,782    4,633    3,468 
       195,021    58,242    194,198    55,732 
Non-amortizable repair station certifications  n/a   24,281    
    24,281    
 
Total  21  $219,302   $58,242   $218,479   $55,732 

 

Schedule of estimated amortization expense
2021  $7,240 
2022   9,538 
2023   9,456 
2024   9,327 
2025   8,679 
2026   7,218 
2027 and thereafter   85,321 
v3.20.2
Debt (Tables)
3 Months Ended
Jun. 27, 2020
Debt Disclosure [Abstract]  
Schedule of debt
   June 27,
2020
   March 28,
2020
 
Revolver and term loan facilities  $18,664   $18,593 
Debt issuance costs   (1,546)   (1,687)
Other   6,006    6,106 
Total debt   23,124   $23,012 
Less: current portion   6,489   $6,429 
Long-term debt  $16,635   $16,583 

 

v3.20.2
Reportable Segments (Tables)
3 Months Ended
Jun. 27, 2020
Segment Reporting [Abstract]  
Schedule of segment information
   Three Months Ended 
   June 27,
2020
   June 29,
2019
 
Net External Sales        
Plain  $78,875   $87,489 
Roller   22,900    36,859 
Ball   18,840    17,710 
Engineered Products   35,878    40,632 
   $156,493   $182,690 
Gross Margin          
Plain  $32,077   $34,114 
Roller   8,407    14,524 
Ball   7,927    7,799 
Engineered Products   11,042    14,257 
   $59,453   $70,694 
Selling, General & Administrative Expenses          
Plain  $5,271   $6,514 
Roller   1,239    1,614 
Ball   1,346    1,633 
Engineered Products   3,812    4,303 
Corporate   15,161    16,023 
   $26,829   $30,087 
Operating Income          
Plain  $25,401   $26,825 
Roller   7,099    12,570 
Ball   6,551    6,137 
Engineered Products   5,981    9,002 
Corporate   (16,218)   (16,044)
   $28,814   $38,490 
Intersegment Sales          
Plain  $1,562   $1,847 
Roller   3,378    3,201 
Ball   667    669 
Engineered Products   10,649    10,822 
   $16,256   $16,539 

  

v3.20.2
Revenue from Contracts with Customers (Details) - USD ($)
$ in Thousands
3 Months Ended
Jun. 27, 2020
Mar. 28, 2020
Revenue from Contract with Customer [Abstract]    
Aggregate amount of the transaction price allocated to remaining performance obligations $ 274,688  
Revenue recognize remaining performance obligations The Company expects to recognize revenue on approximately 65% and 88% of the remaining performance obligations over the next 12 and 24 months, respectively, with the remainder recognized thereafter.  
Accounts receivable with customers, net $ 113,184 $ 128,995
Revenue recognized included in the contract liability   $ 5,821
v3.20.2
Revenue from Contracts with Customers (Details) - Schedule of revenue from business segments of customers - USD ($)
$ in Thousands
3 Months Ended
Jun. 27, 2020
Jun. 29, 2019
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers $ 156,493 $ 182,690
Plain [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 78,875 87,489
Roller [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 22,900 36,859
Ball [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 18,840 17,710
Engineered Products [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 35,878 40,632
Aerospace [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 98,982 116,319
Aerospace [Member] | Plain [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 59,352 67,306
Aerospace [Member] | Roller [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 13,230 19,313
Aerospace [Member] | Ball [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 7,022 5,430
Aerospace [Member] | Engineered Products [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 19,378 24,270
Industrial [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 57,511 66,371
Industrial [Member] | Plain [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 19,523 20,183
Industrial [Member] | Roller [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 9,670 17,546
Industrial [Member] | Ball [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers 11,818 12,280
Industrial [Member] | Engineered Products [Member]    
Revenue, Major Customer [Line Items]    
Revenue from contracts with customers $ 16,500 $ 16,362
v3.20.2
Revenue from Contracts with Customers (Details) - Schedule of contract assets and contract liabilities
$ in Thousands
3 Months Ended
Jun. 27, 2020
USD ($)
Contract Assets - Current (1)  
Balance at March 28, 2020 $ 2,604 [1]
Additional revenue recognized in excess of billings 670 [1]
Less: amounts billed to customers (1,429) [1]
Balance at June 27, 2020 1,845 [1]
Contract Liabilities – Current (2)  
Balance at March 28, 2020 11,116 [2]
Payments received prior to revenue being recognized 634 [2]
Revenue recognized (6,310) [2]
Reclassification (to)/from noncurrent 727 [2]
Balance at June 27, 2020 6,167 [2]
Contract Liabilities – Noncurrent (3)  
Balance at March 28, 2020 2,427 [3]
Payments received prior to revenue being recognized [3]
Reclassification (to)/from current (727) [3]
Balance at June 27, 2020 $ 1,700 [3]
[1] Included within prepaid expenses and other current assets on the consolidated balance sheets.
[2] Included within accrued expenses and other current liabilities on the consolidated balance sheets. During the first three months of fiscal 2021, the Company recognized revenues of $5,821 that were included in the contract liability balance at March 28, 2020.
[3] Included within other non-current liabilities on the consolidated balance sheets.
v3.20.2
Accumulated Other Comprehensive Income (Loss) (Details) - Schedule of component of accumulated other comprehensive income (loss)
$ in Thousands
3 Months Ended
Jun. 27, 2020
USD ($)
Accumulated Other Comprehensive Income (Loss) [Line Items]  
Beginning balance $ (6,898)
Other comprehensive income before reclassifications 409
Amounts reclassified from accumulated other comprehensive income 260
Net current period other comprehensive income 669
Ending balance (6,229)
Currency Translation [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
Beginning balance (582)
Other comprehensive income before reclassifications 409
Net current period other comprehensive income 409
Ending balance (173)
Pension and Postretirement Liability [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
Beginning balance (6,316)
Amounts reclassified from accumulated other comprehensive income 260
Net current period other comprehensive income 260
Ending balance $ (6,056)
v3.20.2
Net Income Per Common Share (Details) - shares
3 Months Ended
Jun. 27, 2020
Jun. 29, 2019
Employee Stock Options [Member]    
Net Income Per Common Share (Details) [Line Items]    
Number of employee stock options and restricted shares excluded from calculation of diluted earnings per share 504,768 373,840
Restricted Shares [Member]    
Net Income Per Common Share (Details) [Line Items]    
Number of employee stock options and restricted shares excluded from calculation of diluted earnings per share 61,025 86,040
v3.20.2
Net Income Per Common Share (Details) - Schedule basic and diluted net income per common share - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Jun. 27, 2020
Jun. 29, 2019
Schedule basic and diluted net income per common share [Abstract]    
Net income (in Dollars) $ 22,689 $ 30,499
Denominator for basic net income per common share—weighted-average shares outstanding 24,763,903 24,501,707
Effect of dilution due to employee stock awards 170,038 305,600
Denominator for diluted net income per common share — weighted-average shares outstanding 24,933,941 24,807,307
Basic net income per common share (in Dollars per share) $ 0.92 $ 1.24
Diluted net income per common share (in Dollars per share) $ 0.91 $ 1.23
v3.20.2
Inventory (Details) - Schedule of inventory - USD ($)
$ in Thousands
Jun. 27, 2020
Mar. 28, 2020
Schedule of inventory [Abstract]    
Raw materials $ 52,310 $ 51,362
Work in process 93,496 97,286
Finished goods 225,203 218,846
Inventory, Net, Total $ 371,009 $ 367,494
v3.20.2
Goodwill and Intangible Assets (Details) - USD ($)
$ in Thousands
3 Months Ended
Jun. 27, 2020
Jun. 29, 2019
Goodwill and Intangible Assets Disclosure [Abstract]    
Amortization expense $ 2,504 $ 2,284
v3.20.2
Goodwill and Intangible Assets (Details) - Schedule of goodwill balances, by segment
$ in Thousands
3 Months Ended
Jun. 27, 2020
USD ($)
Goodwill [Line Items]  
Balance at beginning $ 277,776
Translation adjustments 62
Acquisition (383) [1]
Balance at end 277,455
Roller [Member]  
Goodwill [Line Items]  
Balance at beginning 16,007
Translation adjustments
Acquisition [1]
Balance at end 16,007
Plain [Member]  
Goodwill [Line Items]  
Balance at beginning 79,597
Translation adjustments
Acquisition [1]
Balance at end 79,597
Ball [Member]  
Goodwill [Line Items]  
Balance at beginning 5,623
Translation adjustments
Acquisition [1]
Balance at end 5,623
Engineered Products [Member]  
Goodwill [Line Items]  
Balance at beginning 176,549
Translation adjustments 62
Acquisition (383) [1]
Balance at end $ 176,228
[1] Includes a reduction of goodwill recognized due to opening balance sheet adjustments made during the measurement period of the Company’s acquisition of Vianel Holding AG (“Swiss Tool”) on August 15, 2019.
v3.20.2
Goodwill and Intangible Assets (Details) - Schedule of intangible assets - USD ($)
$ in Thousands
3 Months Ended
Jun. 27, 2020
Mar. 28, 2020
Finite-Lived Intangible Assets [Line Items]    
Gross Carrying Amount $ 195,021 $ 194,198
Accumulated Amortization $ 58,242 55,732
Non-amortizable repair station certifications, Weighted Average Useful Lives n/a  
Non-amortizable repair station certifications, Gross Carrying Amount $ 24,281 24,281
Non-amortizable repair station certifications, Accumulated Amortization
Total, Weighted Average Useful Lives 21 years  
Total, Gross Carrying Amount $ 219,302 218,479
Total, Accumulated Amortization $ 58,242 55,732
Product Approvals [Member]    
Finite-Lived Intangible Assets [Line Items]    
Weighted Average Useful Lives 24 years  
Gross Carrying Amount $ 50,878 50,878
Accumulated Amortization $ 13,125 12,597
Customer Relationships And Lists [Member]    
Finite-Lived Intangible Assets [Line Items]    
Weighted Average Useful Lives 23 years  
Gross Carrying Amount $ 109,696 109,645
Accumulated Amortization $ 24,731 23,557
Trade Names [Member]    
Finite-Lived Intangible Assets [Line Items]    
Weighted Average Useful Lives 10 years  
Gross Carrying Amount $ 16,331 16,330
Accumulated Amortization $ 9,278 8,906
Distributor Agreements [Member]    
Finite-Lived Intangible Assets [Line Items]    
Weighted Average Useful Lives 5 years  
Gross Carrying Amount $ 722 722
Accumulated Amortization $ 722 722
Patents And Trademarks [Member]    
Finite-Lived Intangible Assets [Line Items]    
Weighted Average Useful Lives 16 years  
Gross Carrying Amount $ 11,775 11,553
Accumulated Amortization $ 6,167 6,045
Domain Names [Member]    
Finite-Lived Intangible Assets [Line Items]    
Weighted Average Useful Lives 10 years  
Gross Carrying Amount $ 437 437
Accumulated Amortization $ 437 437
Other [Member]    
Finite-Lived Intangible Assets [Line Items]    
Weighted Average Useful Lives 3 years  
Gross Carrying Amount $ 5,182 4,633
Accumulated Amortization $ 3,782 $ 3,468
v3.20.2
Goodwill and Intangible Assets (Details) - Schedule of estimated amortization expense
$ in Thousands
Jun. 27, 2020
USD ($)
Schedule of estimated amortization expense [Abstract]  
2021 $ 7,240
2022 9,538
2023 9,456
2024 9,327
2025 8,679
2026 7,218
2027 and thereafter $ 85,321
v3.20.2
Debt (Details)
SFr in Thousands, $ in Thousands
3 Months Ended
Aug. 15, 2019
USD ($)
Oct. 01, 2012
USD ($)
Jun. 27, 2020
USD ($)
Jun. 29, 2019
USD ($)
Aug. 15, 2019
CHF (SFr)
Debt Instrument [Line Items]          
Debt issuance costs     $ 141 $ 99  
Future annual principal payments in Fiscal 2021     490    
Future annual principal payments in Fiscal 2023     490    
Future annual principal payments in Fiscal 2024     490    
Future annual principal payments in Fiscal 2025     490    
Future annual principal payments in Fiscal 2022     490    
Future annual principal payments in Fiscal thereafter     3,556    
Revolver [Member]          
Debt Instrument [Line Items]          
Line of credit     3,700    
Unamortized debt issuance costs     $ 1,418    
Debt instrument, description of variable rate basis     Amounts outstanding under the Revolver generally bear interest at (a) a base rate determined by reference to the higher of (1) Wells Fargo’s prime lending rate, (2) the federal funds effective rate plus 1/2 of 1% and (3) the one-month LIBOR rate plus 1%, or (b) LIBOR plus a specified margin, depending on the type of borrowing being made. The applicable margin is based on the Company’s consolidated ratio of total net debt to consolidated EBITDA at each measurement date. Currently, the Company’s margin is 0.00% for base rate loans and 0.75% for LIBOR loans.    
Debt instrument, basis spread on variable rate     0.75%    
Line of credit facility, remaining borrowing capacity     $ 246,300    
Foreign Revolver [Member]          
Debt Instrument [Line Items]          
Line of credit facility, remaining borrowing capacity     $ 12,970    
Amended Credit Agreement [Member] | Maximum [Member]          
Debt Instrument [Line Items]          
Consolidated net debt adjusted EBITDA ratio     3.50    
Amended Credit Agreement [Member] | Minimum [Member]          
Debt Instrument [Line Items]          
Consolidated net debt adjusted EBITDA ratio     1    
Amended Credit Agreement [Member] | Revolver [Member]          
Debt Instrument [Line Items]          
Line of credit     $ 250,000    
Debt instrument expiry date     Jan. 31, 2024    
Unamortized debt issuance costs     $ 852    
Schaublin Credit Agreement [Member]          
Debt Instrument [Line Items]          
Debt issuance costs $ 277        
Schaublin [Member]          
Debt Instrument [Line Items]          
Unamortized debt issuance costs     128    
Future annual principal payments in Fiscal 2021     5,999    
Future annual principal payments in Fiscal 2022     3,163    
Future annual principal payments in Fiscal 2023     3,163    
Future annual principal payments in Fiscal 2024     3,163    
Future annual principal payments in Fiscal 2025     3,176    
Cash paid for purchase price   $ 5,053      
Balance on mortgage loan     6,006    
Schaublin [Member] | Base Rate [Member]          
Debt Instrument [Line Items]          
Debt instrument, basis spread on variable rate 1.00%        
Schaublin [Member] | Foreign Term Loan [Member]          
Debt Instrument [Line Items]          
Debt instrument face amount $ 15,383       SFr 15,000
Credit facility outstanding amount     15,817    
Schaublin [Member] | Foreign Revolver [Member]          
Debt Instrument [Line Items]          
Debt instrument face amount $ 15,383       SFr 15,000
Credit facility outstanding amount     $ 2,847    
Schaublin [Member] | Foreign Credit Agreement [Member]          
Debt Instrument [Line Items]          
Line of credit covenant terms     The Foreign Credit Agreements require Schaublin to comply with various covenants, which are tested annually on March 31. These covenants include, among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.00 to 1 as of March 31, 2020 and not greater than 2.50 to 1 as of March 31, 2021 and thereafter. Schaublin is also required to maintain an economic equity of CHF 20,000 at all times.    
Schaublin [Member] | Land and Building [Member]          
Debt Instrument [Line Items]          
Land and building leased   $ 14,910      
Period for fixed rate on mortgage loan   Schaublin obtained a 20-year fixed-rate mortgage of approximately $9,857 at an interest rate of 2.9%.      
Mortgage loan fixed rate   $ 9,857      
Mortgage loan interest rate   2.90%      
v3.20.2
Debt (Details) - Schedule of debt - USD ($)
$ in Thousands
Jun. 27, 2020
Mar. 28, 2020
Schedule of debt [Abstract]    
Revolver and term loan facilities $ 18,664 $ 18,593
Debt issuance costs (1,546) (1,687)
Other 6,006 6,106
Total debt 23,124 23,012
Less: current portion 6,489 6,429
Long-term debt $ 16,635 $ 16,583
v3.20.2
Income Taxes (Details) - USD ($)
$ in Thousands
3 Months Ended
Jun. 27, 2020
Jun. 29, 2019
Income Tax Disclosure [Abstract]    
Income tax provision at the federal statutory rate 20.00% 19.30%
Income tax provision at the federal statutory rate reduced 20.00%  
U.S. corporate income tax rate amount $ 315 $ 510
Unrecognized tax positions associated with shared -based compensation $ 75 $ 241
Effective income tax rate without discrete 21.30% 21.20%
Estimated decrease in unrecognized tax positions in federal and state credits and state tax $ 1,524  
v3.20.2
Reportable Segments (Details)
3 Months Ended
Jun. 27, 2020
Segment Reporting [Abstract]  
Number of reportable business segments 4
v3.20.2
Reportable Segments (Details) - Schedule of segment information - USD ($)
$ in Thousands
3 Months Ended
Jun. 27, 2020
Jun. 29, 2019
Net External Sales    
Net External Sales $ 156,493 $ 182,690
Gross Margin    
Gross Margin 59,453 70,694
Selling, General & Administrative Expenses    
Selling, General & Administrative Expenses 26,829 30,087
Operating Income    
Operating Income 28,814 38,490
Intersegment Sales    
Intersegment Sales 16,256 16,539
Plain [Member]    
Net External Sales    
Net External Sales 78,875 87,489
Gross Margin    
Gross Margin 32,077 34,114
Selling, General & Administrative Expenses    
Selling, General & Administrative Expenses 5,271 6,514
Operating Income    
Operating Income 25,401 26,825
Intersegment Sales    
Intersegment Sales 1,562 1,847
Roller [Member]    
Net External Sales    
Net External Sales 22,900 36,859
Gross Margin    
Gross Margin 8,407 14,524
Selling, General & Administrative Expenses    
Selling, General & Administrative Expenses 1,239 1,614
Operating Income    
Operating Income 7,099 12,570
Intersegment Sales    
Intersegment Sales 3,378 3,201
Ball [Member]    
Net External Sales    
Net External Sales 18,840 17,710
Gross Margin    
Gross Margin 7,927 7,799
Selling, General & Administrative Expenses    
Selling, General & Administrative Expenses 1,346 1,633
Operating Income    
Operating Income 6,551 6,137
Intersegment Sales    
Intersegment Sales 667 669
Engineered Products [Member]    
Net External Sales    
Net External Sales 35,878 40,632
Gross Margin    
Gross Margin 11,042 14,257
Selling, General & Administrative Expenses    
Selling, General & Administrative Expenses 3,812 4,303
Operating Income    
Operating Income 5,981 9,002
Intersegment Sales    
Intersegment Sales 10,649 10,822
Corporate [Member]    
Selling, General & Administrative Expenses    
Selling, General & Administrative Expenses 15,161 16,023
Operating Income    
Operating Income $ (16,218) $ (16,044)
v3.20.2
Acquisition (Details) - Aug. 15, 2019
SFr in Thousands, $ in Thousands
USD ($)
CHF (SFr)
Disclosure Text Block Supplement [Abstract]    
Purchase price $ 33,597 SFr 32,768