UNITEDSTATES
SECURITIESAND EXCHANGE COMMISSION
Washington,DC 20549
FORM
10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Forthe quarterly period ended
June 29, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Forthe transition period from to .
CommissionFile Number:
001-40840
RBCBEARINGS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 95-4372080
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Tribology Center 06478
Oxford
,
CT
(Address of principal executive offices) (Zip Code)
(203)
267-7001
(Registrant's telephone number, including area code)
Securitiesregistered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
CommonStock, par value $0.01 per-share RBC The New York Stock Exchange
5.00% Series A Mandatory Convertible RBCP The New York Stock Exchange
Preferred Stock, par value $0.01 per-share
Indicateby check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities ExchangeAct 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
Indicateby check mark whether the registrant has submitted electronically, if
any, every Interactive DataFile required to be submitted pursuant to Rule 405
of Regulation S-T ((s)232.405 of this chapter) during the preceding12 months
(or for such shorter period that the registrant was required to submit and
post such files).
Yes
No
Indicateby 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," "smallerreporting 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
Ifan emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complyingwith any new or
revised financial accounting standards provided pursuant to Section 13(a) of
the Exchange Act.
Indicateby check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes No
Asof July 26, 2024, RBC Bearings Incorporated had
29,229,863
shares of Common Stock and 4,600,000 shares of Preferred Stock outstanding.
TABLEOF 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 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 27
Item 4. Controls and Procedures 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 28
Item 4. Mine Safety Disclosures 28
Item 5. Other Information 28
Item 6. Exhibits 29
i
PartI. FINANCIAL INFORMATION
Item1. Consolidated Financial Statements
RBCBearings Incorporated
ConsolidatedBalance Sheets
(dollarsin millions, except per share data)
June 29, March 30,
2024 2024
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 76.8 $ 63.5
Accounts receivable, net of allowances of $ 254.7 255.2
4.2
as of June 29, 2024 and $
4.4
as of March 30, 2024
Inventory 635.0 622.8
Prepaid expenses and other current assets 27.7 24.0
Total current assets 994.2 965.5
Property, plant and equipment, net 356.8 361.0
Operating lease assets, net 50.9 41.4
Goodwill 1,874.2 1,874.9
Intangible assets, net 1,375.9 1,391.9
Other noncurrent assets 44.5 43.9
Total assets $ 4,696.5 $ 4,678.6
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 127.5 $ 116.2
Accrued expenses and other current liabilities 190.5 167.3
Current operating lease liabilities 8.5 7.0
Current portion of long-term debt 3.8 3.8
Total current liabilities 330.3 294.3
Long-term debt, less current portion 1,127.6 1,188.1
Noncurrent operating lease liabilities 42.9 35.3
Deferred income taxes 280.2 284.2
Other noncurrent liabilities 111.6 124.8
Total liabilities 1,892.6 1,926.7
Stockholders' equity:
Preferred stock, $ 0.0 0.0
.01
par value; authorized shares:
10,000,000
as of June 29, 2024 and March 30, 2024, respectively; issued shares:
4,600,000
as of June 29, 2024 and March 30, 2024, respectively
Common stock, $ 0.3 0.3
.01
par value; authorized shares:
60,000,000
at June 29, 2024 and March 30, 2024, respectively; issued shares:
30,263,485
and
30,227,444
as of June 29, 2024 and March 30, 2024, respectively
Additional paid-in capital 1,630.6 1,625.2
Accumulated other comprehensive income/(loss) ( ) 0.7
0.4
Retained earnings 1,272.5 1,216.8
Treasury stock, at cost; ( ) ( )
1,042,261 99.1 91.1
shares and
1,015,053
shares as of June 29, 2024 and March 30, 2024, respectively
Total stockholders' equity 2,803.9 2,751.9
Total liabilities and stockholders' equity $ 4,696.5 $ 4,678.6
Seeaccompanying notes.
1
RBCBearings Incorporated
ConsolidatedStatements of Operations
(dollarsin millions, except per share data)
(Unaudited)
Three Months Ended
June 29, July 1,
2024 2023
Net sales $ 406.3 $ 387.1
Cost of sales 222.3 219.2
Gross margin 184.0 167.9
Operating expenses:
Selling, general and administrative 67.6 64.7
Other, net 18.9 18.2
Total operating expenses 86.5 82.9
Operating income 97.5 85.0
Interest expense, net 17.2 20.5
Other non-operating expense 0.4 0.5
Income before income taxes 79.9 64.0
Provision for income taxes 18.5 14.0
Net income 61.4 50.0
Preferred stock dividends 5.7 5.7
Net income attributable to common stockholders $ 55.7 $ 44.3
Net income per common share attributable to common stockholders:
Basic $ 1.92 $ 1.53
Diluted $ 1.90 $ 1.52
Weighted average common shares:
Basic 29,054,820 28,846,874
Diluted 29,294,998 29,114,819
Seeaccompanying notes.
2
RBCBearings Incorporated
ConsolidatedStatements of Comprehensive Income/(Loss)
(dollarsin millions)
(Unaudited)
Three Months Ended
June 29, July 1,
2024 2023
Net income $ 61.4 $ 50.0
Pension and postretirement liability adjustments, net of taxes 0.0 0.5
(1)
Change in fair value of derivative ( ) 4.8
(2) 0.1
Foreign currency translation adjustments ( ) 3.1
1.0
Total comprehensive income $ 60.3 $ 58.4
(1) These adjustments were net of tax benefit of $
0.0
and net of tax expense of $
0.2
for the three-month periods ended June 29, 2024 and July 1, 2023, respectively.
(2) These adjustments were net of tax benefit of $
0.0
and net of tax expense of $
1.4
for the three-month periods ended June 29, 2024 and July 1, 2023, respectively.
Seeaccompanying notes.
3
RBCBearings Incorporated
ConsolidatedStatements of Stockholders' Equity
(dollarsin millions, except share data)
(Unaudited)
Common Preferred Additional Accumulated Retained Treasury
Stock Stock Paid-in Other Stock
Comprehensive
Shares Amount Shares Amount Capital Income/(Loss) Earnings Shares Amount
Balance 30,227,444 $ 0.3 4,600,000 $ 0.0 $ 1,625.2 $ 0.7 $ 1,216.8 ( ) $ ( )
at 1,015,053 91.1
March
30,
2024
Net - - - - - - 61.4 - -
income
Stock-based - - - - 4.2 - - - -
compensation
Preferred - - - - - - ( ) - -
stock 5.7
dividends
Repurchase - - - - - - - ( ) ( )
of 27,208 8.0
common
stock
Exercise 8,642 - - - 1.2 - - - -
of
equity
awards
Change - - - - - 0.0 - - -
in
pension
and
post-retirement
plan
benefit
adjustments,
net
of
tax
benefit
of
$
0.0
Issuance 27,399 - - - - - - - -
of
restricted
stock,
net
of
forfeitures
Change - - - - - ( ) - - -
in 0.1
fair
value
of
derivative,
net
of
tax
benefit
of
$
0.0
Currency - - - - - ( ) - - -
translation 1.0
adjustments
Balance 30,263,485 $ 0.3 4,600,000 $ 0.0 $ 1,630.6 $ ( ) $ 1,272.5 ( ) $ ( )
at 0.4 1,042,261 99.1
June
29,
2024
Total
Stockholders'
Equity
$ 2,751.9
61.4
4.2
( )
5.7
( )
8.0
1.2
0.0
-
( )
0.1
( )
1.0
$ 2,803.9
Seeaccompanying notes.
4
RBCBearings Incorporated
ConsolidatedStatements of Stockholders' Equity
(dollarsin millions, except share data)
(Unaudited)
Common Preferred Additional Accumulated Retained Treasury
Stock Stock Paid-in Other Stock
Comprehensive
Shares Amount Shares Amount Capital Income/(Loss) Earnings Shares Amount
Balance 29,989,948 $ 0.3 4,600,000 $ 0.0 $ 1,589.9 $ ( ) $ 1,029.9 ( ) $ ( )
at 4.1 966,398 80.1
April
1,
2023
Net - - - - - - 50.0 - -
income
Stock-based - - - - 4.9 - - - -
compensation
Preferred - - - - - - ( ) - -
stock 5.7
dividends
Repurchase - - - - - - - ( ) ( )
of 32,804 6.8
common
stock
Exercise 11,772 - - - 1.0 - - - -
of
equity
awards
Change - - - - - 0.5 - - -
in
pension
and
post-retirement
plan
benefit
adjustments,
net
of
tax
expense
of
$
0.2
Issuance 54,627 - - - - - - - -
of
restricted
stock,
net
of
forfeitures
Change - - - - - 4.8 - - -
in
fair
value
of
derivative,
net
of
tax
expense
of
$
1.4
Currency - - - - - 3.1 - - -
translation
adjustments
Balance 30,056,347 $ 0.3 4,600,000 $ 0.0 $ 1,595.8 $ 4.3 $ 1,074.2 ( ) $ ( )
at 999,202 86.9
July
1,
2023
Total
Stockholders'
Equity
$ 2,535.9
50.0
4.9
( )
5.7
( )
6.8
1.0
0.5
-
4.8
3.1
$ 2,587.7
Seeaccompanying notes.
5
RBCBearings Incorporated
ConsolidatedStatements of Cash Flows
(dollarsin millions)
(Unaudited)
Three Months Ended
June 29, July 1,
2024 2023
Cash flows from operating activities:
Net income $ 61.4 $ 50.0
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 30.0 29.7
Deferred income taxes ( ) ( )
4.1 2.6
Amortization of deferred financing costs 0.6 0.9
Stock-based compensation 6.5 5.4
Noncash operating lease expense 1.7 1.7
Loss on disposition of assets - 0.2
Consolidation, restructuring, and other noncash charges - 0.3
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 0.5 ( )
12.0
Inventory ( ) ( )
12.1 15.6
Prepaid expenses and other current assets ( ) ( )
3.8 2.1
Other noncurrent assets ( ) ( )
0.6 2.6
Accounts payable 11.3 ( )
6.8
Accrued expenses and other current liabilities 23.9 13.0
Other noncurrent liabilities ( ) 2.2
17.9
Net cash provided by operating activities 97.4 61.7
Cash flows from investing activities:
Capital expenditures ( ) ( )
9.0 6.7
Proceeds from sale of assets - 0.2
Net cash used in investingactivities ( ) ( )
9.0 6.5
Cash flows from financing activities:
Repayments of term loans ( ) ( )
60.0 50.0
Repayments of notes payable ( ) ( )
1.1 1.1
Principal payments on finance lease obligations ( ) ( )
1.1 1.0
Preferred stock dividends paid ( ) ( )
5.7 5.7
Exercise of stock options 1.2 1.0
Repurchase of common stock ( ) ( )
8.0 6.8
Net cash used in financing activities ( ) ( )
74.7 63.6
Effect of exchange rate changes on cash ( ) ( )
0.4 0.3
Cash and cash equivalents:
Increase/(decrease) during the period 13.3 ( )
8.7
Cash and cash equivalents, at beginning of period 63.5 65.4
Cash and cash equivalents, at end of period $ 76.8 $ 56.7
Supplemental disclosures of cash flow information:
Cash paid for:
Income taxes $ 12.5 $ 1.1
Interest 22.0 25.1
Seeaccompanying notes.
6
RBCBearings Incorporated
Notesto Unaudited Interim Consolidated Financial Statements
(dollarsin millions, except share and per-share data)
1.Basis of Presentation
Theinterim consolidated financial statements included herein have been
prepared by RBC Bearings Incorporated, a Delaware corporation (collectivelywith
its subsidiaries, the "Company"), without audit, pursuant to the rules and
regulations of the Securities and ExchangeCommission ("SEC"). The interim
financial statements included with this report have been prepared on a
consistent basis withthe Company's audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for thefiscal
year ended March 30, 2024 (our "Annual Report"). We condensed or omitted
certain information and footnote disclosuresnormally included in our annual
audited financial statements, which we prepared in accordance with U.S.
Generally Accepted AccountingPrinciples ("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.
Thesefinancial 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 ofoperations for the interim
periods presented. These financial statements should be read in conjunction
with the Company's auditedfinancial statements and notes thereto included in
our Annual Report.
Theresults of operations for the three-month period ended June 29, 2024 are
not necessarily indicative of the operating results for theentire fiscal year
ending March 29, 2025. The three-month periods ended June 29, 2024 and July 1,
2023 each included
13 weeks
. Alldollar amounts contained in these financial statements and footnotes are
stated in millions, except for per share data.
2.Significant Accounting Policies
TheCompany's significant accounting policies are detailed in "Note 2 - Summary
of Significant Accounting Policies" ofour Annual Report.
Significantchanges to our accounting policies as a result of adopting new
accounting standards are discussed below.
RecentAccounting Standards Adopted
NotApplicable.
RecentAccounting Standards Yet to Be Adopted
InNovember 2023, Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) 2023-07,
Segment Reporting (Topic280): Improvements to Reportable Segment Disclosures
. The amendments in ASU 2023-07 improve the disclosures about a public
entity'sreportable segments and address requests from investors for
additional, more detailed information about a reportable segment'sexpenses.
ASU 2023-07 is effective for annual reporting periods beginning after December
15, 2024. As of June 29, 2024, the Company isevaluating the impact the
standard will have on its consolidated financial statements.
InDecember 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):
Improvements to Income Tax Disclosures. The amendments in ASU 2023-09address
investor requests for more transparency about income tax information through
improvements to income tax disclosures primarilyrelated to the rate
reconciliation and income taxes paid information. ASU 2023-09 is effective for
annual reporting periods beginningafter December 15, 2024. As of June 29,
2024, the Company is evaluating the impact the standard will have on its
consolidated financialstatements.
7
3.Revenue from Contracts with Customers
Disaggregationof Revenue
Thefollowing table disaggregates total revenue by end market which is how we
view our reportable segments (see Note 12):
Three Months Ended
June 29, July 1,
2024 2023
Aerospace/Defense $ 149.1 $ 120.5
Industrial 257.2 266.6
Total $ 406.3 $ 387.1
Thefollowing table disaggregates total revenue by geographic origin:
Three Months Ended
June 29, July 1,
2024 2023
United States $ 360.1 $ 341.3
International 46.2 45.8
Total $ 406.3 $ 387.1
Thefollowing table illustrates the approximate percentage of revenue
recognized for performance obligations satisfied over time versus theamount of
revenue recognized for performance obligations satisfied at a point in time:
Three Months Ended
June 29, July 1,
2024 2023
Point-in-time 97 % 98 %
Over time 3 % 2 %
Total 100 % 100 %
RemainingPerformance Obligations
Remainingperformance obligations represent the transaction price of orders
meeting the definition of a contract for which work has not been performedor
has been partially performed and excludes unexercised contract options. The
duration of the majority of our contracts, as definedby ASC Topic 606, is less
than one year. The Company has elected to apply the practical expedient, which
allows the Company to excluderemaining performance obligations with an
original expected duration of one year or less. The aggregate amount of the
transaction priceallocated to remaining performance obligations for such
contracts with a duration of more than one year was approximately $
461.6
at June29, 2024. The Company expects to recognize revenue on approximately
64
% and
92
% of the remaining performance obligations over the next12 and 24 months,
respectively, with the remainder recognized thereafter.
ContractBalances
Thetiming of revenue recognition, invoicing and cash collections affects
accounts receivable, unbilled receivables (contract assets) andcustomer
advances and deposits (contract liabilities) on the consolidated balance
sheets. These assets and liabilities are reported onthe consolidated balance
sheets on an individual contract basis at the end of each reporting period.
8
ContractAssets (Unbilled Receivables)
- Pursuant to the over-time revenue recognition model, revenue may be
recognized prior to the customerbeing invoiced. An unbilled receivable is
recorded to reflect revenue that is recognized when (1) the cost-to-cost
method is appliedand (2) such revenue exceeds the amount invoiced to the
customer.
Asof June 29, 2024 and March 30, 2024, current contract assets were $
8.0
and $
6.9
, respectively, and included within prepaid expenses andother current assets
on the consolidated balance sheets. The increase in contract assets was
primarily due to the recognition of revenuerelated to the satisfaction or
partial satisfaction of performance obligations prior to billing, partially
offset by amounts billed tocustomers during the period. As of June 29, 2024
and March 30, 2024, the Company did not have any contract assets classified as
noncurrenton the consolidated balance sheets.
ContractLiabilities (Deferred Revenue)
- The Company may receive a customer advance or deposit, or have an
unconditional right to receivea 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
transferof the related goods or services is at the discretion of the customer.
Asof June 29, 2024 and March 30, 2024, current contract liabilities were $
30.5
and $
22.5
, respectively, and are included within accruedexpenses and other current
liabilities on the consolidated balance sheets. The increase in current
contract liabilities was primarilydue to advance payments received and the
reclassification of a portion of advance payments received from the noncurrent
portion of contractliabilities partially offset by revenue recognized on
customer contracts. For the three months ended June 29, 2024, the Company
recognizedrevenues of $
5.7
that were included in the contract liability balance as of March 30, 2024. For
the three months ended July 1, 2023,the Company recognized revenues of $
4.6
that were included in the contract liability balance at April 1, 2023.
Asof June 29, 2024 and March 30, 2024, noncurrent contract liabilities were $
10.1
and $
19.9
, respectively, and included within other noncurrentliabilities on the
consolidated balance sheets. The decrease in noncurrent contract liabilities
was primarily due to advance paymentsreceived, partially offset by the
reclassification of a portion of advance payments received to the current
portion of contract liabilities.
VariableConsideration
Theamount of consideration to which the Company expects to be entitled in
exchange for goods and services is not generally subject to significantvariation
s. However, the Company does offer certain customers rebates, prompt payment
discounts, end-user discounts and the right toreturn eligible products. The
Company estimates this variable consideration using the expected value amount,
which is based on historicalexperience. The Company includes estimated amounts
in the transaction price to the extent it is probable that a significant
reversalof cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is resolved. The Companyadjusts the
estimate of revenue at the earlier of when the amount of consideration the
Company expects to receive changes or when theconsideration becomes fixed.
Accrued customer rebates were $
41.0
and $
38.0
at June 29, 2024 and March 30, 2024, respectively, and areincluded within
accrued expenses and other current liabilities on the consolidated balance
sheets.
9
4.Accumulated Other Comprehensive Income/(Loss)
Thecomponents of comprehensive income/(loss) that relate to the Company are
net income, foreign currency translation adjustments, changesin fair value of
derivatives, and pension plan and postretirement benefits.
Thefollowing summarizes the activity within each component of accumulated
other comprehensive income/(loss), net of taxes:
Currency Change in Pension and Total
Translation Fair Value of Postretirement
Derivatives Liability
Balance at March 30, 2024 $ ( ) $ 1.2 $ $ 0.7
3.6 3.1
Reclassification to net income - 0.8 - 0.8
Net loss on foreign currency translation ( ) - - ( )
1.0 1.0
Loss on derivative instrument, net of taxes - ( ) - ( )
0.9 0.9
Net current period other comprehensive income ( ) ( ) 0.0 ( )
1.0 0.1 1.1
Balance at June 29, 2024 $ ( ) $ 1.1 $ 3.1 $ ( )
4.6 0.4
5.Net income Per-share Attributable to Common Stockholders
Basicnet income per-share attributable to common stockholders is computed by
dividing net income attributable to common stockholders by theweighted-average
number of common shares outstanding.
Dilutednet income per-share attributable to common stockholders is computed by
dividing net income attributable to common stockholders by thesum of the
weighted-average number of common shares and dilutive common share equivalents
then outstanding using the treasury stock method.Common share equivalents
consist of the incremental common shares issuable upon the exercise of stock
options and the conversion of our
5.00
% Series A Mandatory Convertible Preferred Stock (the "MCPS") to common shares.
Weexclude outstanding stock options, stock awards and the MCPS from the
calculations if the effect would be anti-dilutive. The dilutiveeffect of the
MCPS is calculated using the if-converted method. The if-converted method
assumes that these securities were convertedto shares of common stock at the
beginning of the reporting period to the extent that the effect is dilutive.
If the effect is anti-dilutive,we calculate net income per-share attributable
to common stockholders by adjusting the numerator for the effect of the
cumulative MCPSdividends for the respective period.
Forthe three-month periods ended June 29, 2024 and July 1, 2023, respectively,
the effect of assuming the conversion of the
4,600,000
sharesof MCPS into shares of common stock was anti-dilutive, and therefore
excluded from the calculation of diluted earnings per-share attributableto
common stockholders. Accordingly, net income was reduced by cumulative MCPS
dividends, as presented in our consolidated statementof operations, for
purposes of calculating the numerator in the diluted net income per share
attributable to common stockholders.
Forthe three months ended June 29, 2024,
87,500
employee stock options and
7,818
restricted shares were excluded from the calculation ofdiluted earnings
per-share attributable to common stockholders. For the three months ended July
1, 2023,
125,898
employee stock optionsand
485
restricted shares were excluded from the calculation of diluted earnings
per-share attributable to common stockholders. The inclusionof these employee
stock options and restricted shares would have been anti-dilutive.
10
Thetable below reflects the calculation of weighted-average shares outstanding
for each period presented as well as the computation of basicand diluted net
income per-share attributable to common stockholders.
Three Months Ended
June 29, July 1,
2024 2023
Net income $ 61.4 $ 50.0
Preferred stock dividends 5.7 5.7
Net income attributable to common stockholders $ 55.7 $ 44.3
Denominator:
Denominator for basic net income per share attributable to 29,054,820 28,846,874
common stockholders - weighted-average shares outstanding
Effect of dilution due 240,178 267,945
to employee stock awards
Denominator for diluted net income per share attributable to 29,294,998 29,114,819
common stockholders - weighted-average shares outstanding
Basic net income per share $ 1.92 $ 1.53
attributable to common stockholders
Diluted net income per share $ 1.90 $ 1.52
attributable to common stockholders
6.Fair Value
Fairvalue is defined as the price that would be expected to be received to
sell an asset or paid to transfer a liability in an orderly transactionbetween
market participants at the measurement date (exit price). The FASB provides
accounting rules that classify the inputs used tomeasure fair value into the
following hierarchy:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - Unadjusted quoted prices in active markets for similar assets or
liabilities, or unadjusted quoted prices for identical or similar
assets or liabilities in markets that are not active, or inputs other
than quoted prices that are observable for the asset or liability.
Level 3 - Unobservable inputs for the asset or liability.
Financialassets and liabilities are classified in their entirety based on the
lowest level of input that is significant to the fair value measurement.
Asa result of the occurrence of triggering events such as purchase accounting
for acquisitions, the Company measures certain assets andliabilities based on
Level 3 inputs.
FinancialInstruments
TheCompany's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, trade accounts payable, accruedexpenses,
short-term borrowings, long-term debt, and a derivative in the form of an
interest rate swap. Due to their short-term nature,the carrying value of cash
and cash equivalents, accounts receivable, trade accounts payable, accrued
expenses and short-term borrowingsare a reasonable estimate of their fair
value. Long-term assets held on our balance sheets related to benefit plan
obligations are measuredat fair value. The fair value of the Company's
long-term fixed-rate debt, based on quoted market prices, was $
461.2
and $
456.8
at June 29, 2024 and March 30, 2024, respectively. The carrying value of this
debt was $
494.4
at June 29, 2024 and $
494.2
at March 30,2024. The fair value of long-term fixed-rate debt was measured
using Level 1 inputs. Due to the nature of fair value calculations
forvariable-rate debt, the carrying value of the Company's long-term
variable-rate debt is a reasonable estimate of its fair value.The fair value
of the interest rate swap was $
1.5
at June 29, 2024 and $
1.6
at March 30, 2024, and included in other noncurrent assetson the Company's
consolidated balance sheets. The fair value of the interest rate swap is
measured using Level 2 inputs. The interestrate swap, net of taxes, had
accumulated other comprehensive income of $
1.1
and $
1.2
as of June 29, 2024 and March 30, 2024, respectively.
11
TheCompany does not believe it has significant concentrations of risk
associated with the counterparties to its financial instruments.
7.Inventory
Inventoriesare stated at the lower of cost or net realizable value, using the
first-in, first-out method, and are summarized below:
June 29, March 30,
2024 2024
Raw materials $ 142.8 $ 138.1
Work in process 144.6 137.9
Finished goods 347.6 346.8
$ 635.0 $ 622.8
8.Goodwill and Intangible Assets
Goodwill
Goodwillbalances, by segment, consist of the following:
Aerospace Industrial Total
/Defense
March 30, 2024 $ 199.2 $ 1,675.7 $ 1,874.9
Currency translation adjustments - ( ) ( )
0.7 0.7
June 29, 2024 $ 199.2 $ 1,675.0 $ 1,874.2
IntangibleAssets
Weighted June 29, 2024 March 30, 2024
Average
Useful Gross Accumulated Gross Accumulated
Lives Carrying Amortization Carrying Amortization
(Years) Amount Amount
Product approvals 24 $ 50.7 $ 20.8 $ 50.7 $ 20.3
Customer relationships and lists 24 1,300.8 174.3 1,300.7 160.7
Trade names 25 217.2 34.9 217.2 32.5
Patents and trademarks 15 10.9 6.6 10.8 6.5
Domain names 10 0.4 0.4 0.4 0.4
Internal-use software 3 18.3 10.1 16.7 8.8
Other 5 1.6 1.2 1.6 1.3
1,599.9 248.3 1,598.1 230.5
Non-amortizable repair station certifications n/a 24.3 - 24.3 -
Total 24 $ 1,624.2 $ 248.3 $ 1,622.4 $ 230.5
12
Amortizationexpense for definite-lived intangible assets during the
three-month periods ended June 29, 2024 and July 1, 2023 was $
17.8
and $
17.5
,respectively.
These amounts are included in other, net on the Company's consolidated
statements of operations. Estimated amortizationexpense for the remainder of
fiscal 2025 and for the five succeeding fiscal years and thereafter is as
follows:
Remainder of Fiscal 2025 $ 54.4
Fiscal 2026 68.5
Fiscal 2027 64.7
Fiscal 2028 64.7
Fiscal 2029 64.6
Fiscal 2030 64.6
Fiscal 2031 and thereafter 970.1
9.Accrued Expenses and Other Current Liabilities
Thesignificant components of accrued expenses and other current liabilities
are as follows:
June 29, March 30,
2024 2024
Employee compensation and related benefits $ 46.4 $ 35.7
Taxes 35.2 23.1
Contract liabilities 30.5 22.5
Accrued rebates 41.0 38.0
Current finance lease liabilities 5.9 5.7
Accrued preferred stock dividends 4.8 4.8
Interest 4.8 10.4
Legal 1.3 1.3
Returns and warranties 9.5 9.2
Other 11.1 16.6
$ 190.5 $ 167.3
10.Debt
DomesticCredit Facility
Infiscal 2022, RBC Bearings Incorporated, our top holding company, and our
Roller Bearing Company of America, Inc. subsidiary ("RBCA")entered into a
Credit Agreement (the "Credit Agreement") with Wells Fargo Bank, National
Association ("Wells Fargo"),as Administrative Agent, Collateral Agent,
Swingline Lender and Letter of Credit Issuer, and the other lenders party
thereto. The CreditAgreement provides the Company with (a) a $
1,300.0
term loan (the "Term Loan"), which was used to fund a portion of the
cashpurchase price for the acquisition of Dodge Industrial, Inc. ("Dodge") and
to pay related fees and expenses, and (b) a $
500.0
revolving credit facility (the "Revolving Credit Facility" and together with
the Term Loan, the "Facilities").Debt issuance costs associated with the
Credit Agreement totaled $
14.9
and are being amortized over the life of the Credit Agreement.
13
Initially,
amounts outstanding under the Facilities generally bore interest at either, at
the Company's option, (a) a base rate determinedby reference to the higher of
(i) Wells Fargo's prime lending rate, (ii) the federal funds effective rate
plus 1/2 of 1.00% and(iii) the one-month LIBOR rate plus 1.00% or (b) the
LIBOR rate plus a specified margin, depending on the type of borrowing being
made.The applicable margin was based on the Company's consolidated ratio of
total net debt to consolidated EBITDA (as defined withinthe Credit Agreement)
from time to time. In December 2022, the Credit Agreement was amended to
replace LIBOR with the secured overnightfinancing rate administered by the
Federal Reserve Bank of New York ("SOFR") so that borrowings under the
Facilities denominatedin U.S. dollars bear interest at a rate per annum equal
to Term SOFR (as defined in the Credit Agreement) plus a credit spread
adjustmentof 0.10% plus a margin ranging from 0.75% to 2.00% depending on the
Company's consolidated ratio of total net debt to consolidatedEBITDA. The
Facilities are subject to a SOFR floor of 0.00%. As of June 29, 2024, the
Company's margin was 1.00% for SOFR loans,the commitment fee rate was 0.175%,
and the letter of credit fee rate was 1.00%.
A portion of the Term Loan is subject to a fixed-rateinterest swap as
discussed in Note 13.
TheTerm Loan matures in November 2026 and amortizes in quarterly installments
with the balance payable on the maturity date. The Companycan elect to prepay
some or all of the outstanding balance from time to time without penalty,
which will offset future quarterly amortizationinstallments. Due to
prepayments previously made, the required future principal payments on the
Term Loan are $
0
for fiscal 2025, $
0
for fiscal 2026, and $
615.0
for fiscal 2027. The Revolving Credit Facility expires in November 2026, at
which time all amounts outstandingunder the Revolving Credit Facility will be
payable.
TheCredit Agreement requires the Company to comply with various covenants,
including the following financial covenants: (a) a maximum TotalNet Leverage
Ratio (as defined within the Credit Agreement) of 5.00:1.00, which maximum
Total Net Leverage Ratio shall decrease duringcertain subsequent test periods
as set forth in the Credit Agreement (provided that, no more than once during
the term of the Facilities,such maximum ratio applicable at such time may be
increased by the Company by 0.50:1.00 for a period of twelve (12) months after
theconsummation of a material acquisition); and (b) a minimum Interest
Coverage Ratio of 2.00:1.00.
As of June 29, 2024 the Company wasin compliance with all debt covenants.
TheCredit Agreement allows the Company to, among other things, make
distributions to stockholders, repurchase its stock, incur other debtor liens,
or acquire or dispose of assets provided that the Company complies with
certain requirements and limitations of the CreditAgreement.
TheCompany's domestic subsidiaries have guaranteed the Company's obligations
under the Credit Agreement, and the Company'sobligations and the domestic
subsidiaries' guaranty are secured by a pledge of substantially all of the
assets of the Company andits domestic subsidiaries.
Asof June 29, 2024, $
615.0
was outstanding under the Term Loan, $
3.7
of the Revolving Credit Facility was being utilized to provide lettersof
credit to secure the Company's obligations relating to certain insurance
programs, and $
18.0
of the Revolving Credit Facilityhad been used to fund the purchase of the
business assets of Specline, Inc. in fiscal 2024. The Company had the ability
to borrow an additional $
478.3
under the Revolving Credit Facility as of June 29, 2024.
SeniorNotes
Infiscal 2022, RBCA issued $
500.0
aggregate principal amount of
4.375
% Senior Notes due 2029 (the "Senior Notes"). The netproceeds from the
issuance of the Senior Notes were approximately $
492.0
, after deducting initial purchasers' discounts and commissionsand offering
expenses, and were used to fund a portion of the purchase price for the
acquisition of Dodge.
TheSenior Notes were issued pursuant to an indenture with Wilmington Trust,
National Association, as trustee (the "Indenture").The Indenture contains
covenants limiting the ability of the Company to (i) incur additional
indebtedness or guarantee indebtedness,(ii) declare or pay dividends, redeem
stock or make other distributions to stockholders, (iii) make investments,
(iv) create liens oruse assets as security in other transactions, (v) merge or
consolidate, or sell, transfer, lease or dispose of substantially all of
itsassets, (vi) enter into transactions with affiliates, and (vii) sell or
transfer certain assets. These covenants contain various exceptions,limitations
and qualifications. At any time that the Senior Notes are rated investment
grade, certain of these covenants will be suspended.
14
TheSenior Notes are guaranteed jointly and severally on a senior unsecured
basis by RBC Bearings and RBCA's domestic subsidiariesthat also guarantee the
Credit Agreement.
Intereston the Senior Notes accrues at a rate of
4.375
% and is payable semi-annually in cash in arrears on April 15 and October 15
of eachyear.
TheSenior Notes will mature on
October 15, 2029
. The Company may redeem some or all of the Senior Notes at any time on or
after October15, 2024 at the redemption prices set forth in the Indenture,
plus accrued and unpaid interest, if any, to, but excluding, the redemptiondate.
The Company may also redeem up to
40
% of the Senior Notes using the proceeds of certain equity offerings completed
before October15, 2024, at a redemption price equal to
104.375
% of the principal amount thereof, plus accrued and unpaid interest, if any,
to, butexcluding, the redemption date. In addition, at any time prior to
October 15, 2024, the Company may redeem some or all of the SeniorNotes at a
price equal to
100% of the principal amount, plus a "make-whole" premium
, plus accrued and unpaid interest,if any, to, but excluding, the redemption
date. If the Company sells certain of its assets or experiences specific kinds
of changes incontrol, the Company must offer to purchase the Senior Notes.
ForeignBorrowing Arrangements
Oneof our foreign subsidiaries, Schaublin SA, has a CHF
5.0
(approximately $
5.8
USD) credit line (the "Foreign Credit Line")with Credit Suisse (Switzerland)
Ltd. to provide future working capital, if necessary. As of June 29, 2024, $
2.2
had been borrowed fromthe Foreign Credit Line and $
0.1
was being utilized to provide a bank guarantee. Fees associated with the
Foreign Credit Line are nominal.
Thebalances payable under all our borrowing facilities are as follows:
June 29, March 30,
2024 2024
Revolver and term loan facilities $ 635.2 $ 695.2
Senior notes 500.0 500.0
Debt issuance costs ( ) ( )
10.1 10.7
Other 6.3 7.4
Total debt 1,131.4 1,191.9
Less: current portion 3.8 3.8
Long-term debt $ 1,127.6 $ 1,188.1
11.Income Taxes
TheCompany 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 March 28, 2020,
although certain tax credits generated in earlier years are openunder statute
from March 29, 2008
. The Company is no longer subject to U.S. federal tax examination by the
Internal Revenue Service foryears ending before March 28, 2020.
Theeffective income tax rates for the three-month periods ended June 29, 2024
and July 1, 2023, were
23.1
% and
21.9
%, respectively. In additionto discrete items, the effective income tax rates
for both these periods were different from the U.S. statutory rates due to the
foreign-derivedintangible income provision and U.S. credit for increasing
research activities, which decreased the rate, and state income taxes,
foreignincome taxes, and nondeductible compensation, which increased the rate.
Theeffective income tax rate for the three-month period ended June 29, 2024 of
23.1
% included $
0.6
of discrete tax benefits associated withstock-based compensation. The
effective income tax rate without discrete items for the three-month period
ended June 29, 2024 would havebeen
23.8
%. The effective income tax rate for the three-month period ended July 1, 2023
of
21.9
% included $
0.4
of discrete tax benefitsassociated with stock-based compensation and $
0.1
of discrete tax benefits associated with other items. The effective income tax
ratewithout discrete items for the three-month period ended July 1, 2023 would
have been
22.6
%. The Company believes it is reasonably possiblethat some of its unrecognized
tax positions may be effectively settled within the next 12 months due to the
closing of audits and thestatute of limitations expiring in various
jurisdictions. The decrease in the Company's unrecognized tax positions,
pertainingprimarily to federal and state credits and state tax, is estimated
to be approximately $
1.9
.
15
GlobalMinimum Tax
InOctober 2021, the Organisation for Economic Co-operation and Development
("OECD") announced an Inclusive Framework on BaseErosion and Profit Shifting
including Pillar Two Model Rules defining the global minimum tax, which calls
for the taxation of large multinationalcorporations at a minimum rate of
15
%. Subsequently multiple sets of administrative guidance have been issued.
Many non-US tax jurisdictionshave either recently enacted legislation to adopt
certain components of the Pillar Two Model Rules beginning in 2024 with the
adoptionof additional components in later years or announced their plans to
enact legislation in future years. We are continuing to evaluatethe impacts of
enacted legislation and pending legislation to enact Pillar Two Model Rules in
the non-US tax jurisdictions in which weoperate. At this time, we do not
anticipate the enacted or pending legislation to have a material impact on our
consolidated financialstatements.
12.Reportable Segments
TheCompany operates through operating segments and reports its financial
results based on how its chief operating decision maker makes operatingdecisions
, assesses the performance of the business, and allocates resources. Our
operating segments are our reportable segments. Thesereportable operating
segments are Aerospace/Defense and Industrial and are described below.
Aerospace/Defense.
This segment represents the end markets for the Company's highly engineered
bearings and precision components used in commercialaerospace, defense
aerospace, and sea and ground defense applications.
Industrial.
This segment represents the end markets for the Company's highly engineered
bearings and precision components used in variousindustrial applications
including: power transmission; construction, mining, energy and specialized
equipment manufacturing; semiconductorproduction equipment manufacturing;
agricultural machinery, commercial truck and automotive manufacturing; and
tool holding.
Segmentperformance is evaluated based on segment net sales and gross margin.
Items not allocated to segment operating income include corporateadministrative
expenses and certain other amounts. Where not separately disclosed, corporate
costs are allocated to each segment.
Identifiableassets by reportable segment consist of those directly identified
with the segment's operations.
16
Three Months Ended
June 29, July 1,
2024 2023
Net External Sales
Aerospace/Defense $ 149.1 $ 120.5
Industrial 257.2 266.6
$ 406.3 $ 387.1
Gross Margin
Aerospace/Defense $ 63.1 $ 47.3
Industrial 120.9 120.6
$ 184.0 $ 167.9
Selling, General & Administrative Expenses
Aerospace/Defense $ 10.3 $ 9.1
Industrial 34.1 34.0
Corporate 23.2 21.6
$ 67.6 $ 64.7
Operating Income
Aerospace/Defense $ 50.6 $ 36.8
Industrial 72.5 71.1
Corporate ( ) ( )
25.6 22.9
$ 97.5 $ 85.0
June 29, March 30,
2024 2024
Total Assets
Aerospace/Defense $ 820.4 $ 798.6
Industrial 3,782.3 3,779.6
Corporate 93.8 100.4
$ 4,696.5 $ 4,678.6
13.Derivative Financial Instruments
TheCompany is exposed to certain risks relating to its ongoing business
operations, including market risks relating to fluctuations in interestrates.
Derivative financial instruments are recognized on the consolidated balance
sheets as either assets or liabilities and are measuredat fair value. Changes
in the fair values of the derivative are recorded each period in earnings or
accumulated other comprehensive income,depending on whether a derivative is
effective as part of a hedged transaction. Gains and losses on derivative
instruments reported inaccumulated other comprehensive income/(loss) are
subsequently included in earnings in the periods in which earnings are
affected bythe hedged item. The Company does not use derivative instruments
for speculative purposes.
OnOctober 28, 2022, the Company entered into a three-year USD-denominated
interest rate swap (the "Swap") with athird-party financial counterparty under
the Credit Agreement (see Note 10). The Swap was executed to protect the
Company frominterest rate volatility on our variable-rate Term Loan. The Swap
became effective December 30, 2022 and is comprised of a $
600.0
notional with a maturity of
three years
. The notional was $
400.0
as of June 29, 2024. We receive a variable rate based on one-monthTerm SOFR
and pay a fixed rate of
4.455
%. As of June 29, 2024, approximately
79
% of our debt bears interest at a fixed rate aftergiving effect to the
interest rate swap agreement in place. The notional on the Swap amortizes as
follows:
Year1: $
600.0
Year2: $
400.0
Year3: $
100.0
TheSwap has been designated as a cash flow hedge of the variability of the
first unhedged interest payments (the hedged transactions) paidover the
hedging relationship's specified time period of
three years
attributable to the borrowing's contractually specifiedinterest index on the
hedged principal of its general borrowing program or replacement or
refinancing thereof. The fair value of theSwap has been disclosed in Note 6.
The balance in accumulated other comprehensive income/(loss) related to the
Swap has been disclosedin Note 4. The gain/loss reclassified from accumulated
other comprehensive income/(loss) into earnings has been recorded as
interestincome/expense on the Swap and included in the operating section of
the Company's consolidated statements of cash flows.
17
Item2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Alldollar amounts in this MD&A presentation are stated in millions except for
per share amounts.
CautionaryStatement as to Forward-Looking Information
Theobjective of the discussion and analysis is to provide material information
relevant to an assessment of the financial condition andresults of operations
of the Company including an evaluation of the amounts and certainty of cash
flows from operations and from outsidesources.
Theinformation in this discussion contains "forward-looking statements" within
the meaning of Section 27A of the SecuritiesAct of 1933 and Section 21E of the
Securities Exchange Act of 1934 which are subject to the "safe harbor" created
by thosesections. 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 allforward-looking
statements contain these identifying words. We may not actually achieve the
plans, intentions or expectations disclosedin our forward-looking statements
and you should not place undue reliance on our forward-looking statements.
Actual results or eventscould differ materially from the plans, intentions and
expectations disclosed in the forward-looking statements that we make. These
forward-lookingstatements involve risks and uncertainties that could cause our
actual results to differ materially from those in the forward-lookingstatements,
including, without limitation: (a) the bearing and engineered products
industries are highly competitive, and this competitioncould reduce our
profitability or limit our ability to grow; (b) the loss of a major customer,
or a material adverse change in a majorcustomer's business, could result in a
material reduction in our revenues, cash flows and profitability; (c) weakness
in any ofthe industries in which our customers operate, as well as the
cyclical nature of our customers' businesses generally, could materiallyreduce
our revenues, cash flows and profitability; (d) future reductions or changes
in U.S. government spending could negatively affectour business; (e)
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; (f) our results could be impacted by
governmental trade policies andtariffs relating to our supplies imported from
foreign vendors or our finished goods exported to other countries; (g) some of
our productsare 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; (h) the
retirement of commercial aircraft could reduce our revenues,cash flows and
profitability; (i) work stoppages and other labor problems could materially
reduce our ability to operate our business;(j) unexpected equipment failures,
catastrophic events or capacity constraints could increase our costs and
reduce our sales due to productioncurtailments or shutdowns; (k) we may not be
able to continue to make the acquisitions necessary for us to realize our
growth strategy;(l) businesses that we have acquired (such as Dodge) or that
we may acquire in the future may have liabilities that are not known to us;(m)
goodwill and indefinite-lived intangibles comprise a significant portion of
our total assets, and if we determine that goodwill andindefinite-lived
intangibles have become impaired in the future, our results of operations and
financial condition in such years may bematerially and adversely affected; (n)
we depend heavily on our senior management and other key personnel, the loss
of whom could materiallyaffect our financial performance and prospects; (o)
our international operations are subject to risks inherent in such activities;
(p)currency translation risks may have a material impact on our results of
operations; (q) we may incur material losses for product liabilityand
recall-related claims; (r) our intellectual property and proprietary
information are valuable, and any inability to protect them couldadversely
affect our business and results of operations; in addition, we may be subject
to infringement claims by third parties; (s) cancellationof orders in our
backlog could negatively impact our revenues, cash flows and profitability;
(t) our failure to maintain effective disclosurecontrols and procedures and
internal control over financial reporting could result in material
misstatements in our financial statementsand a failure to meet our reporting
and financial obligations, each of which could have a material adverse effect
on the Company'sfinancial condition and the trading price of our common stock;
(u) risks associated with utilizing information technology systems
couldadversely affect our operations; (v) our quarterly performance can be
affected by the timing of government product inspections and approvals;(w) we
incurred substantial debt in order to complete the Dodge acquisition, which
could constrain our business and exposes us to therisk of defaults under our
debt instruments; and (x) increases in interest rates would increase the cost
of servicing the Term Loan andcould reduce our profitability. Additional
information regarding these and other risks and uncertainties is contained in
our periodicfilings with the SEC, including, without limitation, the risks
identified under the heading "Risk Factors" set forth in ourAnnual Report. Our
forward-looking statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, jointventures 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
notesthereto, that appears elsewhere in this Quarterly Report.
18
Overview
Weare a leading international manufacturer of highly engineered precision
bearings, components and essential systems for the industrial,aerospace and
defense industries. Our precision solutions are integral to the manufacture
and operation of most machines and mechanicalsystems, reduce wear to moving
parts, facilitate proper power transmission, and reduce damage and energy loss
caused by friction. Whilewe manufacture products in all major bearings
categories, we focus primarily on the higher end of the bearing and engineered
componentmarkets where we believe our value-added manufacturing and
engineering capabilities enable us to differentiate ourselves from our
competitorsand enhance profitability. We believe our expertise has enabled us
to garner leading positions in many of the product markets in whichwe
primarily compete. With 54 facilities in 11 countries, of which 38 are
manufacturing facilities, we have been able to significantlybroaden our end
markets, products, customer base and geographic reach.
Ourchief operating decision maker ("CODM") makes operating decisions, assesses
the performance of the business, and al
locatesresources
under two reportable business segments- Aerospace/Defense and Industrial:
Aerospace/Defense.
This segment represents the end markets for the Company's highly engineered bearings and precision
components used in commercial aerospace, defense aerospace, and marine and ground defense applications.
Industrial.
This segment represents the end markets for the Company's highly engineered bearings, gearings and
precision components used in various industrial applications including: power transmission; construction,
mining, energy and specialized equipment manufacturing; semiconductor production equipment
manufacturing; agricultural machinery, commercial truck and automotive manufacturing; and tool holding.
Themarkets for our products are cyclical, and we have endeavored to mitigate
this cyclicality by entering into single and sole-source relationshipsand
long-term purchase agreements, through diversification across multiple market
segments within the Aerospace/Defense and Industrialsegments, by increasing
sales to the aftermarket, and by focusing on developing highly customized
solutions.
Currently,our strategy is built around maintaining our role as a leading
manufacturer of highly engineered bearings and precision components throughthe
following efforts:
Developing innovative solutions
.
By leveraging our design and manufacturing expertise and our extensive customer relationships, we
continue to develop new products for markets in which there are substantial growth opportunities.
Expanding customer base and penetrating end markets
.
We continually seek opportunities to access new customers, geographic locations and
bearing platforms with existing products or profitable new product opportunities.
Increasing aftermarket sales.
We believe that increasing our aftermarket sales of replacement parts
will further enhance the continuity and predictability of our revenues
and enhance our profitability. Such sales include sales to third party
distributors and sales to OEMs for replacement products and aftermarket
services. The acquisition of Dodge has had a profound impact on our
sales volumes to distributors and other aftermarket customers. We
will further increase the percentage of our revenues derived from the
replacement market by continuing to implement several initiatives.
Pursuing selective acquisitions.
The acquisition of businesses that complement or expand our operations
has been and continues to be an important element of our business
strategy. We believe that there will continue to be consolidation
within the industry that may present us with acquisition opportunities.
Outlook
Ournet sales for the three-month period ended June 29, 2024 increased 5.0%
compared to the same period last fiscal year. The increase innet sales was a
result of a 23.7% increase in our Aerospace/Defense segment partially offset
by a 3.5% decrease in our Industrial segment.Our backlog, as of June 29, 2024
was $825.8 compared to $821.5 as of March 30, 2024.
Weare continuing to see the expansion of the commercial aerospace business,
which experienced a 17.3% increase in net sales for the t
hree-monthperiod ended June 29, 2024 versus the same period last fiscal year.
We anticipate this growth to continue through the rest of the currentfiscal
year and beyond. Orders have continued to grow as evidenced by our backlog.
Defense sales, which represented approximately 34.8%of segment sales during
the quarter, were up 38.1% quarter over quarter. We expect this growth to
continue throughout the current fiscal yearand beyond as we are gearing up to
fulfill the substantial number of defense orders in our backlog. Though sales
in our Industrial segmenthave decreased compared to the comparable period in
the prior year, our margins have continued to improve driven by continuous
operationalimprovements and product mix.
TheCompany expects net sales to be approximately $395.0 to $405.0 in the
second quarter of fiscal 2025, an increase of 2.4% to 5.0% comparedto the
second quarter of fiscal 2024.
Webelieve that operating cash flows and available credit under the Revolving
Credit Facility will provide adequate resources to fund internalgrowth
initiatives for the foreseeable future, including at least the next 12 months.
As of June 29, 2024, we had cash and cash equivalentsof $76.8, of which
approximately $29.4 was cash held by our foreign operations.
19
Resultsof Operations
Three Months Ended
June 29, July 1, $ %
2024 2023 Change Change
Total net sales $ 406.3 $ 387.1 $ 19.2 5.0 %
Net income attributable to common stockholders $ 55.7 $ 44.3 $ 11.4 25.7 %
Net income per-share attributable to common stockholders: diluted $ 1.90 $ 1.52
Weighted average common shares: diluted 29,294,998 29,114,819
Ournet sales for the three-month period ended June 29, 2024 increased 5.0%
compared to the same period last fiscal year. Net sales inour Industrial
segment decreased 3.5% quarter over quarter against a strong comparable
quarter in the prior fiscal year. Food andbeverage, and mining and metals
markets were very strong while semicon and oil and gas sales showed weakness
compared to theprior year. Net sales in our Aerospace/Defense segment
increased 23.7% quarter over quarter, led by commercial OEM and the
aftermarket,which was up 17.3% compared to the same period in the prior year.
Defense sales increased 38.1% compared to the same period in theprior year,
driven by aerospace and marine. The increase in commercial aerospace reflected
recovery in orders from large OEMs asbuild rates escalate, and our expansion
in the aftermarket.
Netincome attributable to common stockholders for the first quarter of fiscal
2025 was $55.7 compared to $44.3 for the same period lastfiscal year.
GrossMargin
Three Months Ended
June 29, July 1, $ %
2024 2023 Change Change
Gross Margin $ 184.0 $ 167.9 $ 16.1 9.6 %
% of net sales 45.3 % 43.4 %
Gross margin was 45.3% of net sales for the firstquarter of fiscal 2025
compared to 43.4% for the first quarter of fiscal 2024. The increase in gross
margin as a percentage of net saleswas driven by manufacturing efficiencies
and a favorable product mix in both the Industrial and Aerospace/Defense
segments.
Selling,General and Administrative
Three Months Ended
June 29, July 1, $ %
2024 2023 Change Change
SG&A $ 67.6 $ 64.7 $ 2.9 4.5 %
% of net sales 16.6 % 16.7 %
SG&Afor the first quarter of fiscal 2025 was $67.6, or 16.6% of net sales, as
compared to $64.7, or 16.7% of net sales, for the same periodof fiscal 2024.
The increase in SG&A was primarily driven by increased personnel costs, IT
costs and other professional fees.
20
Other,Net
Three Months Ended
June 29, July 1, $ %
2024 2023 Change Change
Other, net $ 18.9 $ 18.2 $ 0.7 3.8 %
% of net sales 4.7 % 4.7 %
Otheroperating expenses for the first quarter of fiscal 2025 totaled $18.9
compared to $18.2 for the same period last fiscal year. For thefirst quarter
of fiscal 2025, other operating expenses included $17.8 of amortization of
intangible assets and $1.1 of other items. Forthe first quarter of fiscal
2024, other operating expenses included $17.5 of amortization of intangible
assets and $0.7 of other items.
InterestExpense, Net
Three Months Ended
June 29, July 1, $ %
2024 2023 Change Change
Interest expense, net $ 17.2 $ 20.5 $ (3.3 ) (16.1 )%
% of net sales 4.2 % 5.3 %
Interest expense, net, consists of interest charged on the Company'sdebt
agreements and amortization of deferred financing fees, offset by interest
income (see "Liquidity and Capital Resources"below). Interest expense, net,
was $17.2 for the first quarter of fiscal 2025 compared to $20.5 for the same
period last fiscal year.The decrease in interest expense between the periods
is directly related to the debt reduction efforts made by the Company over the
pastfiscal year. The interest rate swap that we entered into during fiscal
2023 (see "Liquidity and Capital Resources" below)has enabled us to manage
interest costs as approximately 79% of our debt bears interest at a fixed
rate, after giving effect to the interestrate swap agreement in place.
OtherNon-Operating Expense
Three Months Ended
June 29, July 1, $ %
2024 2023 Change Change
Other non-operating expense /(income) $ 0.4 $ 0.5 $ (0.1 ) (20.0 )%
% of net sales 0.1 % 0.1 %
Othernon-operating expenses were $0.4 for the first quarter of fiscal 2025
compared to $0.5 for the same period in the prior year and consistedprimarily
of post-retirement benefit costs and foreign exchange gains and losses.
IncomeTaxes
Three Months Ended
June 29, July 1,
2024 2023
Income tax expense $ 18.5 $ 14.0
Effective tax rate 23.1 % 21.9 %
Incometax expense for the three-month period ended June 29, 2024 was $18.5
compared to $14.0 for the three-month period ended July 1, 2023.Our effective
income tax rate for the three-month period ended June 29, 2024 was 23.1%
compared to 21.9% for the three-month period endedJuly 1, 2023. The effective
income tax rate for the three-month period ended June 29, 2024 of 23.1%
included $0.6 of tax benefits associatedwith stock-based compensation. The
effective income tax rate without discrete items for the three-month period
ended June 29, 2024 wouldhave been 23.8%. The effective income tax rate for
the three-month period ended July 1, 2023 of 21.9% included $0.4 of tax
benefits associatedwith stock-based compensation and $0.1 of tax benefits
associated with other items. The effective income tax rate without discrete
itemsfor the three-month period ended July 1, 2023 would have been 22.6%.
21
SegmentInformation
OurCODM makes operating decisions, assesses the performance of the business,
and allocates resources under two operating segments: Aerospace/Defense;and
Industrial. We use segment net sales and gross margin as the primary
measurements to assess the financial performance of each reportablesegment.
Aerospace/DefenseSegment
Three Months Ended
June 29, July 1, $ %
2024 2023 Change Change
Total net sales $ 149.1 $ 120.5 $ 28.6 23.7 %
Gross margin $ 63.1 $ 47.3 $ 15.8 33.4 %
% of segment net sales 42.3 % 39.3 %
SG&A $ 10.3 $ 9.1 $ 1.2 13.2 %
% of segment net sales 6.9 % 7.6 %
Net sales increased $28.6,or 23.7%, for the three months ended June 29, 2024
compared to the same period last fiscal year. Our commercial aerospace
markets, whichconsisted of $78.5 of OEM and $18.8 of distribution and
aftermarket, increased by 17.3% compared to fiscal 2024 when OEM net sales
were$65.6 and distribution and aftermarket net sales were $17.3. This was
driven by strong execution on the incremental orders we have seenin recent
periods in the OEM markets and expansion in the aftermarket. Our defense
markets, which consisted of $40.2 of OEM and $11.6of distribution and
aftermarket, increased by 38.1% compared to fiscal 2024 when OEM net sales
were $30.3 and distribution and aftermarketnet sales were $7.3. The increase
in defense sales was driven by marine, helicopters and missiles.
Grossmargin as a percentage of segment net sales was 42.3% for the first
quarter of fiscal 2025 compared to 39.3% for the same period lastfiscal year.
The increase in gross margin as a percentage of net sales was primarily driven
by efficiencies achieved at the plants inpart due to increased sales volumes
and favorable product mix. This margin profile is expected to continue as the
commercial aerospaceindustry continues to expand and we continue to enhance
our manufacturing processes.
IndustrialSegment
Three Months Ended
June 29, July 1, $ %
2024 2023 Change Change
Total net sales $ 257.2 $ 266.6 $ (9.4 ) (3.5 )%
Gross margin $ 120.9 $ 120.6 $ 0.3 0.2 %
% of segment net sales 47.0 % 45.2 %
SG&A $ 34.1 $ 34.0 $ 0.1 0.3 %
% of segment net sales 13.3 % 12.8 %
Netsales decreased $9.4 for the three months ended June 29, 2024 compared to
the same period last fiscal year. We saw strength in foodand beverage, and
mining and metals markets offset by weakness in semiconductor and oil and gas.
Industrial OEM sales were $81.8and $84.7 for the three month periods ended
June 29, 2024 and July 1, 2023, respectively. Industrial sales to distribution
and theaftermarket were $175.4 and $181.9 for the three month periods ended
June 29, 2024 and July 1, 2023, respectively.
Grossmargin for the three months ended June 29, 2024 was 47.0% of net sales,
compared to 45.2% in the comparable period in fiscal 2024. Theimproved gross
margin was due to product mix and manufacturing efficiencies achieved at the
plants.
22
Corporate
Three Months Ended
June 29, July 1, $ %
2024 2023 Change Change
SG&A $ 23.2 $ 21.6 $ 1.6 7.4 %
% of total net sales 5.7 % 5.6 %
CorporateSG&A was $23.2, or 5.7% of net sales, for the first quarter of fiscal
2025 compared to $21.6, or 5.6% of net sales, for the sameperiod last fiscal
year. The quarter over quarter increase was primarily due to increases in
personnel costs and professional fees.
Liquidityand Capital Resources
Ourcapital requirements include manufacturing equipment and materials. We have
historically fueled our growth, in part, throughacquisitions, including the
Dodge acquisition completed in fiscal 2022 and the Specline acquisition
completed in fiscal 2024. Wehave historically met our working capital, capital
expenditure and acquisition funding needs through our net cash flows provided
byoperations, various debt arrangements and public sales of equity. We believe
that operating cash flows and availablecredit under the Revolving Credit
Facility (which expires in November 2026) will provide adequate resources to
fund internal growthinitiatives for the foreseeable future.
Ourability to meet future working capital, capital expenditure 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 ourend markets and prices for
steel, and our ability to pass through price increases on a timely basis, many
of which are outside of ourcontrol. In addition, future acquisitions could
have a significant impact on our liquidity position and our need for
additional funds.
Fromtime to time, we evaluate our existing facilities and operations and their
strategic importance to us. If we determine that a given facilityor operation
does not have future strategic importance, we may sell, relocate, consolidate
or otherwise dispose of that facility or operations.Although we believe our
operations would not be materially impaired by such dispositions, relocations
or consolidations, we could incursignificant cash or non-cash charges in
connection with them.
Liquidity
Asof June 29, 2024, we had cash and cash equivalents of $76.8, of which
approximately $29.4 was cash held by our foreign operations. Weexpect that our
undistributed foreign earnings will be re-invested indefinitely for working
capital, internal growth, and acquisitionsfor and by our foreign subsidiaries.
DomesticCredit Facility
TheCredit Agreement, which was entered into in fiscal 2022, provides the
Company with (a) the $1,300.0 Term Loan, which was used tofund a portion of
the purchase price for the acquisition of Dodge and to pay related fees and
expenses, and (b) the $500.0 RevolvingCredit Facility. Debt issuance costs
associated with the Credit Agreement totaled $14.9 and are being amortized
over the life ofthe Credit Agreement.
Initially, amountsoutstanding under the Facilities generally bore interest at
either, at the Company's option, (a) a base rate determined by referenceto the
higher of (i) Wells Fargo's prime lending rate, (ii) the federal funds
effective rate plus 1/2 of 1.00% and (iii) the one-monthLIBOR rate plus 1.00%
or (b) the LIBOR rate plus a specified margin, depending on the type of
borrowing being made. The applicable marginwas based on the Company's
consolidated ratio of total net debt to consolidated EBITDA (as defined within
the Credit Agreement)from time to time. In December 2022, the Credit Agreement
was amended to replace LIBOR with the secured overnight financing rate
administeredby the Federal Reserve Bank of New York (i.e., SOFR) so that
borrowings under the Facilities denominated in U.S. dollars bear interestat a
rate per annum equal to Term SOFR (as defined in the Credit Agreement) plus a
credit spread adjustment of 0.10% plus a margin rangingfrom 0.75% to 2.00%
depending on the Company's consolidated ratio of total net debt to
consolidated EBITDA. The Facilities aresubject to a SOFR floor of 0.00%. As of
June 29, 2024, the Company's margin was 1.00% for SOFR loans, the commitment
fee rate was0.175%, and the letter of credit fee rate was 1.00%. A portion of
the Term Loan is subject to the Swap.
23
TheTerm Loan matures in November 2026 and amortizes in quarterly installments
with the balance payable on the maturity date. The Companycan elect to prepay
some or all of the outstanding balance from time to time without penalty,
which will offset future quarterly amortizationinstallments. Due to
prepayments previously made, the required future principal payments on the
Term Loan are $0 for fiscal 2025,$0 for fiscal 2026, and $615.0 for fiscal
2027. The Revolving Credit Facility expires in November 2026, at which time
all amountsoutstanding under the Revolving Credit Facility will be payable.
TheCredit Agreement requires the Company to comply with various covenants,
including the following financial covenants: (a) a maximum TotalNet Leverage
Ratio (as defined within the Credit Agreement) of 5.00:1.00, which maximum
Total Net Leverage Ratio shall decrease duringcertain subsequent test periods
as set forth in the Credit Agreement (provided that, no more than once during
the term of the Facilities,such maximum ratio applicable at such time may be
increased by the Company by 0.50:1.00 for a period of twelve (12) months after
theconsummation of a material acquisition); and (b) a minimum Interest
Coverage Ratio of 2.00:1.00. As of June 29, 2024 the Companywas in compliance
with all debt covenants.
TheCredit Agreement allows the Company to, among other things, make
distributions to stockholders, repurchase its stock, incur other debtor liens,
or acquire or dispose of assets provided that the Company complies with
certain requirements and limitations of the CreditAgreement.
TheCompany's domestic subsidiaries have guaranteed the Company's obligations
under the Credit Agreement, and the Company'sobligations and the domestic
subsidiaries' guaranty are secured by a pledge of substantially all of the
assets of the Company andits domestic subsidiaries.
Asof June 29, 2024, $615.0 was outstanding under the Term Loan, $3.7 of the
Revolving Credit Facility was being utilized to provideletters of credit to
secure the Company's obligations relating to certain insurance programs, and
$18.0 of the Revolving CreditFacility had been used to fund the purchase of
the business assets of Specline, Inc in fiscal 2024. The Company had the
ability to borrow an additional $478.3 under the Revolving Credit Facility as
of June 29, 2024.
SeniorNotes
Infiscal 2022, RBCA issued $500.0 aggregate principal amount of Senior Notes.
The net proceeds from the issuance of the Senior Noteswere approximately
$492.0, after deducting initial purchasers' discounts and commissions and
offering expenses, and were used tofund a portion of the cash purchase price
for the acquisition of Dodge.
TheSenior Notes were issued pursuant to the Indenture with Wilmington Trust,
National Association, as trustee. The Indenture contains covenants limiting
the ability of the Company to (i) incur additional indebtednessor guarantee
indebtedness, (ii) declare or pay dividends, redeem stock or make other
distributions to stockholders, (iii) makeinvestments, (iv) create liens or use
assets as security in other transactions, (v) merge or consolidate, or sell,
transfer, leaseor dispose of substantially all of its assets, (vi) enter into
transactions with affiliates, and (vii) sell or transfer certainassets. These
covenants contain various exceptions, limitations and qualifications. At any
time that the Senior Notes are ratedinvestment grade, certain of these
covenants will be suspended.
TheSenior Notes are guaranteed jointly and severally on a senior unsecured
basis by RBC Bearings and RBCA's domestic subsidiaries that also guarantee the
Credit Agreement.
Intereston the Senior Notes accrues at a rate of 4.375% and is payable
semi-annually in cash in arrears on April 15 and October 15 of eachyear.
TheSenior Notes will mature on October 15, 2029. The Company may redeem some
or all of the Senior Notes at any time on or after October15, 2024 at the
redemption prices set forth in the Indenture, plus accrued and unpaid
interest, if any, to, but excluding, the redemptiondate. The Company may also
redeem up to 40% of the Senior Notes using the proceeds of certain equity
offerings completed before October15, 2024, at a redemption price equal to
104.375% of the principal amount thereof, plus accrued and unpaid interest, if
any, to, butexcluding, the redemption date. In addition, at any time prior to
October 15, 2024, the Company may redeem some or all of the SeniorNotes at a
price equal to 100% of the principal amount, plus a "make-whole" premium, plus
accrued and unpaid interest,if any, to, but excluding, the redemption date. If
the Company sells certain of its assets or experiences specific kinds of
changes incontrol, the Company must offer to purchase the Senior Notes.
24
ForeignBorrowing Arrangements
TheForeign Credit Line provides Schaublin SA with a CHF 5.0 (approximately
$5.8 USD) credit line with Credit Suisse (Switzerland)Ltd. to provide future
working capital, if necessary. As of June 29, 2024, $2.2 had been borrowed
from the Foreign Credit Line and$0.1 was being utilized to provide a bank
guarantee. Fees associated with the Foreign Credit Line are nominal.
InterestRate Swap
TheCompany is exposed to market risks relating to fluctuations in interest
rates.
Tohedge against this risk, in fiscal 2023, the Company entered into the Swap
with a third-party financial counterparty under theCredit Agreement. The Swap
was executed to protect the Company from interest rate volatility on our
variable-rate Term Loan. TheSwap became effective December 30, 2022 and is
comprised of a $600.0 notional with a maturity of three years. The notional
was$400.0 as of June 29, 2024. We receive a variable rate based on one-month
Term SOFR and pay a fixed rate of 4.455%. As of June 29,2024, approximately
79% of our debt bore interest at a fixed rate after giving effect to the Swap
in place. The notional on the Swapwill amortize as follows:
Year1: $600.0
Year2: $400.0
Year3: $100.0
TheSwap has been designated as a cash flow hedge of the variability of the
first unhedged interest payments (the hedged transactions) paidover the
hedging relationship's specified time period of three years attributable to
the borrowing's contractually specifiedinterest index on the hedged principal
of its general borrowing program or replacement or refinancing thereof.
CashFlows
Three-monthPeriod Ended June 29, 2024 Compared to the Three-month Period Ended
July 1, 2023
Thefollowing table summarizes our cash flow activities:
Three Months Ended
June 29, July 1, $
2024 2023 Change
Net cash provided by/(used in):
Operating activities $ 97.4 $ 61.7 $ 35.7
Investing activities (9.0 ) (6.5 ) (2.5 )
Financing activities (74.7 ) (63.6 ) (11.1 )
Effect of exchange rate changes on cash (0.4 ) (0.3 ) (0.1 )
Increase/(decrease) in cash and cash equivalents $ 13.3 $ (8.7 ) $ 22.0
Duringthe first three months of fiscal 2025, we generated cash of $97.4 from
operating activities compared to $61.7 during the same periodof fiscal 2024.
The increase of $35.7 was the result of an increase in net income of $11.4 and
a favorable change in operating assetsand liabilities of $25.2, partially
offset by the unfavorable impact of non-cash activity of $0.9. The favorable
change in operatingassets and liabilities is detailed in the table below. The
change in non-cash activity was driven by $1.1 more in stock-based
compensationand $0.3 more in depreciation and amortization, offset by $1.5
more in deferred taxes, $0.3 less in amortization of deferred financingcosts,
$0.3 less in consolidation and restructuring charges and $0.2 less in losses
on asset dispositions.
25
Thefollowing table summarizes the impact on cash flow from operating assets
and liabilities for the first quarter of fiscal 2025 versusthe first quarter
of fiscal 2024.
Three Months Ended
June 29, July 1, $
2024 2023 Change
Cash provided by/(used in):
Accounts receivable $ 0.5 $ (12.0 ) $ 12.5
Inventory (12.1 ) (15.6 ) 3.5
Prepaid expenses and other current assets (3.8 ) (2.1 ) (1.7 )
Other noncurrent assets (0.6 ) (2.6 ) 2.0
Accounts payable 11.3 (6.8 ) 18.1
Accrued expenses and other current liabilities 23.9 13.0 10.9
Other noncurrent liabilities (17.9 ) 2.2 (20.1 )
Total change in operating assets and liabilities: $ 1.3 $ (23.9 ) $ 25.2
Duringthe first three months of fiscal 2025, we used $9.0 for investing
activities as compared to $6.5 used in the first three months offiscal 2024.
This increase in cash used was primarily attributable to a $2.3 increase in
capital expenditures and $0.2 decrease inproceeds from the sale of assets.
Duringthe first three months of fiscal 2025, we used cash of $74.7 for
financing activities compared to $63.6 in the first three months offiscal
2024. This increase in cash used was primarily attributable to $10.0 more
payments made on outstanding debt, $0.1 more principalpayments made on finance
lease obligations and $1.2 more repurchases of common stock, partially offset
by $0.2 more exercises of stock-basedawards.
CapitalExpenditures
Ourcapital expenditures were $9.0 for the three-month period ended June 29,
2024 compared to $6.7 for the three-month period ended July1, 2023. We expect
to make additional capital expenditures of $40.0 to $50.0 during the remainder
of fiscal 2025 in connection with ourexisting business. We expect to fund
these capital expenditures principally through existing cash and internally
generated funds. Wemay also make substantial additional capital expenditures
in connection with acquisitions.
Obligationsand Commitments
TheCompany's fixed contractual obligations and commitments are primarily
comprised of our debt obligations disclosed in Part I, Item1- Note 10 of this
report. We also have lease obligations which are materially consistent with
what we disclosed in our Annual Report.
OtherMatters
CriticalAccounting Policies and Estimates
Preparationof 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 financialstatements, result primarily
from the need to make estimates about the effects of matters that are
inherently uncertain. Management'sDiscussion and Analysis of Financial
Condition and Results of Operations and the Notes to the Consolidated
Financial Statements in ourAnnual Report describe the significant accounting
estimates and policies used in preparation of our consolidated financial
statements.Actual results in these areas could differ from management's
estimates. There were no significant changes in our critical accountingestimates
during the first three months of fiscal 2025.
Off-BalanceSheet Arrangements
TheCompany has $3.7 of outstanding standby letters of credit, all of which are
under the Revolving Credit Facility. We also have a contractualobligation for
licenses related to the implementation and upgrade of an enterprise resource
planning ("ERP") system. Theremaining contractual obligation related to these
ERP license costs of $7.6 will end in June of 2026.
Otherthan the items noted above, we had no significant off-balance sheet
arrangements as of June 29, 2024.
26
Item3. Quantitative and Qualitative Disclosures About Market Risk
Weare exposed to market risks that arise during the normal course of business
from changes in interest rates and foreign currency exchangerates.
InterestRates.
We currently have variable rate debt outstanding under the Term Loan. We
regularly evaluate the impact of interest rate changeson our net income and
cash flow and take action to limit our exposure when appropriate. As discussed
in Note 13 in Part I, Item I ofthis report, we have utilized an interest rate
swap to fix a portion of the variable rate interest expense associated with
the Term Loan.As of June 29, 2024, approximately 79% of our debt bears
interest at a fixed rate, after giving effect to the interest rate swap
agreementin place.
ForeignCurrency Exchange Rates.
Our operations in the following countries utilize the following currencies as
their functional currency:
Australia - Australian dollar India - rupee
Canada - Canadian dollar Mexico - peso
China - Chinese yuan Poland - zloty
France and Germany - euro Switzerland - Swiss franc
England - British pound
Asa result, we are exposed to risk associated with fluctuating currency
exchange rates between the U.S. dollar and these currencies. Foreigncurrency
transaction gains and losses are included in earnings. Approximately 11% of
our net sales were impacted by foreign currencyfluctuations for both the
three-month period ended June 29, 2024 and the three-month period ended July
1, 2023. For those countries outsidethe U.S. where we have sales, a
strengthening in the U.S. dollar as we have seen over the past few years or
devaluation in the localcurrency would reduce the value of our local inventory
as presented in our consolidated financial statements. In addition, a
strongerU.S. dollar or a weaker local currency would result in reduced net
sales, operating profit and shareholders' equity due to theimpact of foreign
exchange translation on our consolidated financial statements. Fluctuations in
foreign currency exchange rates maymake our products more expensive for others
to purchase or increase our operating costs, affecting our competitiveness and
our profitability.
Changesin exchange rates between the U.S. dollar and other currencies and
volatile economic, political and market conditions in emerging marketcountries
have in the past adversely affected our financial performance and may in the
future adversely affect the value of our assetslocated outside the United
States, our gross profit and our results of operations.
Weperiodically enter into derivative financial instruments in the form of
forward exchange contracts to reduce the effect of fluctuationsin exchange
rates on certain third-party sales transactions denominated in non-functional
currencies. As of June 29, 2024, the Companyhad no forward exchange contracts.
Item4. Controls and Procedures
Ourmanagement, with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of ourdisclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "ExchangeAct")) as of June 29, 2024.
Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that,as of June 29, 2024, our disclosure controls and
procedures were (1) designed to ensure that information relating to our
Company requiredto be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported toour
Chief Executive Officer and Chief Financial Officer within the time periods
specified in the rules and forms of the SEC, and (2)effective, in that they
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financialstatements for external purposes in accordance
with generally accepted accounting principles.
Changesin Internal Control over Financial Reporting
Nochange in our internal control over financial reporting occurred during the
three-month period ended June 29, 2024 that has materiallyaffected, 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
PARTII - OTHER INFORMATION
Item1. Legal Proceedings
Nolegal proceeding became a reportable event during the quarter and there were
no material developments during the quarter with respectto any legal
proceedings previously disclosed.
Item1A. Risk Factors
Therehave been no material changes to our risk factors and uncertainties since
the filing of our Annual Report with the SEC on May 17, 2024.For a discussion
of the risk factors, refer to Part I, Item 2, "Cautionary Statement as to
Forward-Looking Information" containedin this quarterly report and Part I,
Item 1A, "Risk Factors," contained in our Annual Report.
Item2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
During the first quarter offiscal 2025, we did not issue any common stock that
was not registered under the Securities Act of 1933.
Useof Proceeds
Notapplicable.
IssuerPurchases of Equity Securities
In2019, our Board of Directors authorized us to repurchase up to $100.0 of our
common stock from time to time on the open market, in blocktrade 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 priornotice.
Totalshare repurchases under the 2019 plan for the three months ended June 29,
2024 are as follows:
Period Total Average Number of Approximate
number price paid shares dollar value
of shares per-share purchased of shares still
purchased as part of the available to be
publicly purchased
announced under the
program program
(in millions)
03/31/2024 - 04/27/2024 62 $ 247.04 62 $ 60.3
04/28/2024 - 05/25/2024 - - - 60.3
05/26/2024 - 06/29/2024 27,146 295.28 27,146 $ 52.3
Total 27,208 $ 295.17 27,208
Item3. Defaults Upon Senior Securities
Notapplicable.
Item4. Mine Safety Disclosures
Notapplicable.
Item5. Other Information
Notapplicable
.
28
Item6. Exhibits
Exhibit Exhibit Description
Number
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 Inline XBRL Instance Document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.
* This certification accompanies this Quarterly Report on Form 10-Q, is not deemed filed with the SEC and is
not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this
Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.
29
SIGNATURES
Pursuantto the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf bythe
undersigned, thereunto duly authorized.
RBC Bearings Incorporated
(Registrant)
By: /s/ Michael J. Hartnett
Name: Michael J. Hartnett
Title: Chief Executive Officer
Date: August 2, 2024
By: /s/ Robert M. Sullivan
Name: Robert M. Sullivan
Title: Chief Financial Officer
Date: August 2, 2024
30
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Exhibit 31.01
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEYACT OF 2002
I, Michael J. Hartnett, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RBCBearings Incorporated;
2. Based on my knowledge, this report does not contain any untruestatement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances underwhich 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
financialinformation included in this report, fairly present in all material
respects the financial condition, results of operations and cashflows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsiblefor 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 causedsuch 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 whichthis 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
regardingthe reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generallyaccepted accounting principles; and
c) evaluated the effectiveness of the registrant's disclosurecontrols 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'sinternal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter that has materiallyaffected, 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 committeeof the registrant's
board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in thedesign
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant'sability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves managementor other employees who
have a significant role in the registrant's internal control over financial reporting.
Date: August 2, 2024 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-OXLEYACT OF 2002
I, Robert M. Sullivan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RBCBearings Incorporated;
2. Based on my knowledge, this report does not contain any untruestatement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances underwhich 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
financialinformation included in this report, fairly present in all material
respects the financial condition, results of operations and cashflows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsiblefor 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 causedsuch 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 whichthis 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
regardingthe reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generallyaccepted accounting principles; and
c) evaluated the effectiveness of the registrant's disclosurecontrols 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'sinternal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter that has materiallyaffected, 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 committeeof the registrant's
board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in thedesign
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant'sability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves managementor other employees who
have a significant role in the registrant's internal control over financial reporting.
Date: August 2, 2024 By: /s/ Robert M. Sullivan
Robert M. Sullivan
Vice President and Chief Financial Officer
Exhibit 32.01
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C SECTION 1350
The undersigned, Michael J. Hartnett, the Presidentand Chief Executive Officer
of RBC Bearings Incorporated (the "Company"), pursuant to 18 U.S.C. (s)1350,
hereby certifiesthat:
(i) the Quarterly Report on Form 10-Q for the period endedJune 29, 2024 of the Company (the "Report") fully
complies with the requirements of Section 13(a) or 15(d) ofthe Securities Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, inall material
respects, the financial condition and results of operations of the Company.
Date: August 2, 2024 /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, Robert M. Sullivan, Chief FinancialOfficer, of RBC Bearings
Incorporated (the "Company"), pursuant to 18 U.S.C. (s)1350, hereby certifies:
(i) the Quarterly Report on Form 10-Q for the period endedJune 29, 2024 of the Company (the "Report") fully
complies with the requirements of Section 13(a) or 15(d) ofthe Securities Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, inall material
respects, the financial condition and results of operations of the Company.
Dated: August 2, 2024 /s/ Robert M. Sullivan
Robert M. Sullivan
Vice President and Chief Financial Officer
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