0001324948 false --03-28 2020 Q3 RBC Bearings INC NASDAQ Large Accelerated Filer P11Y7M6D 0001324948 2019-03-31 2019-12-28 0001324948 2020-01-31 0001324948 2019-12-28 0001324948 2019-03-30 0001324948 2019-09-29 2019-12-28 0001324948 2018-09-30 2018-12-29 0001324948 2018-04-01 2018-12-29 0001324948 us-gaap:CommonStockMember 2019-03-30 0001324948 us-gaap:AdditionalPaidInCapitalMember 2019-03-30 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-30 0001324948 us-gaap:RetainedEarningsMember 2019-03-30 0001324948 us-gaap:TreasuryStockMember 2019-03-30 0001324948 us-gaap:CommonStockMember 2019-03-31 2019-06-29 0001324948 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 2019-06-29 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 2019-06-29 0001324948 us-gaap:RetainedEarningsMember 2019-03-31 2019-06-29 0001324948 us-gaap:TreasuryStockMember 2019-03-31 2019-06-29 0001324948 2019-03-31 2019-06-29 0001324948 us-gaap:CommonStockMember 2019-06-29 0001324948 us-gaap:AdditionalPaidInCapitalMember 2019-06-29 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-29 0001324948 us-gaap:RetainedEarningsMember 2019-06-29 0001324948 us-gaap:TreasuryStockMember 2019-06-29 0001324948 2019-06-29 0001324948 us-gaap:CommonStockMember 2019-06-30 2019-09-28 0001324948 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 2019-09-28 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 2019-09-28 0001324948 us-gaap:RetainedEarningsMember 2019-06-30 2019-09-28 0001324948 us-gaap:TreasuryStockMember 2019-06-30 2019-09-28 0001324948 2019-06-30 2019-09-28 0001324948 us-gaap:CommonStockMember 2019-09-28 0001324948 us-gaap:AdditionalPaidInCapitalMember 2019-09-28 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-28 0001324948 us-gaap:RetainedEarningsMember 2019-09-28 0001324948 us-gaap:TreasuryStockMember 2019-09-28 0001324948 2019-09-28 0001324948 us-gaap:CommonStockMember 2019-09-29 2019-12-28 0001324948 us-gaap:AdditionalPaidInCapitalMember 2019-09-29 2019-12-28 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-29 2019-12-28 0001324948 us-gaap:RetainedEarningsMember 2019-09-29 2019-12-28 0001324948 us-gaap:TreasuryStockMember 2019-09-29 2019-12-28 0001324948 us-gaap:CommonStockMember 2019-12-28 0001324948 us-gaap:AdditionalPaidInCapitalMember 2019-12-28 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-28 0001324948 us-gaap:RetainedEarningsMember 2019-12-28 0001324948 us-gaap:TreasuryStockMember 2019-12-28 0001324948 us-gaap:CommonStockMember 2018-03-31 0001324948 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0001324948 us-gaap:RetainedEarningsMember 2018-03-31 0001324948 us-gaap:TreasuryStockMember 2018-03-31 0001324948 2018-03-31 0001324948 us-gaap:CommonStockMember 2018-04-01 2018-06-30 0001324948 us-gaap:AdditionalPaidInCapitalMember 2018-04-01 2018-06-30 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-04-01 2018-06-30 0001324948 us-gaap:RetainedEarningsMember 2018-04-01 2018-06-30 0001324948 us-gaap:TreasuryStockMember 2018-04-01 2018-06-30 0001324948 2018-04-01 2018-06-30 0001324948 us-gaap:CommonStockMember 2018-06-30 0001324948 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0001324948 us-gaap:RetainedEarningsMember 2018-06-30 0001324948 us-gaap:TreasuryStockMember 2018-06-30 0001324948 2018-06-30 0001324948 us-gaap:CommonStockMember 2018-07-01 2018-09-29 0001324948 us-gaap:AdditionalPaidInCapitalMember 2018-07-01 2018-09-29 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-07-01 2018-09-29 0001324948 us-gaap:RetainedEarningsMember 2018-07-01 2018-09-29 0001324948 us-gaap:TreasuryStockMember 2018-07-01 2018-09-29 0001324948 2018-07-01 2018-09-29 0001324948 us-gaap:CommonStockMember 2018-09-29 0001324948 us-gaap:AdditionalPaidInCapitalMember 2018-09-29 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-29 0001324948 us-gaap:RetainedEarningsMember 2018-09-29 0001324948 us-gaap:TreasuryStockMember 2018-09-29 0001324948 2018-09-29 0001324948 us-gaap:CommonStockMember 2018-09-30 2018-12-29 0001324948 us-gaap:AdditionalPaidInCapitalMember 2018-09-30 2018-12-29 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-30 2018-12-29 0001324948 us-gaap:RetainedEarningsMember 2018-09-30 2018-12-29 0001324948 us-gaap:TreasuryStockMember 2018-09-30 2018-12-29 0001324948 us-gaap:CommonStockMember 2018-12-29 0001324948 us-gaap:AdditionalPaidInCapitalMember 2018-12-29 0001324948 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-29 0001324948 us-gaap:RetainedEarningsMember 2018-12-29 0001324948 us-gaap:TreasuryStockMember 2018-12-29 0001324948 2018-12-29 0001324948 roll:BeforeTaxCutJobActMember 2018-02-01 2018-02-28 0001324948 roll:AfterTaxCutJobActMember 2018-02-01 2018-02-28 0001324948 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2019-03-01 2019-03-30 0001324948 roll:AerospaceMember roll:PlainMember 2019-09-29 2019-12-28 0001324948 roll:IndustrialMember roll:PlainMember 2019-09-29 2019-12-28 0001324948 roll:PlainMember 2019-09-29 2019-12-28 0001324948 roll:AerospaceMember roll:PlainMember 2018-09-30 2018-12-29 0001324948 roll:IndustrialMember roll:PlainMember 2018-09-30 2018-12-29 0001324948 roll:PlainMember 2018-09-30 2018-12-29 0001324948 roll:AerospaceMember roll:RollerMember 2019-09-29 2019-12-28 0001324948 roll:IndustrialMember roll:RollerMember 2019-09-29 2019-12-28 0001324948 roll:RollerMember 2019-09-29 2019-12-28 0001324948 roll:AerospaceMember roll:RollerMember 2018-09-30 2018-12-29 0001324948 roll:IndustrialMember roll:RollerMember 2018-09-30 2018-12-29 0001324948 roll:RollerMember 2018-09-30 2018-12-29 0001324948 roll:AerospaceMember roll:BallMember 2019-09-29 2019-12-28 0001324948 roll:IndustrialMember roll:BallMember 2019-09-29 2019-12-28 0001324948 roll:BallMember 2019-09-29 2019-12-28 0001324948 roll:AerospaceMember roll:BallMember 2018-09-30 2018-12-29 0001324948 roll:IndustrialMember roll:BallMember 2018-09-30 2018-12-29 0001324948 roll:BallMember 2018-09-30 2018-12-29 0001324948 roll:AerospaceMember roll:EngineeredProductsMember 2019-09-29 2019-12-28 0001324948 roll:IndustrialMember roll:EngineeredProductsMember 2019-09-29 2019-12-28 0001324948 roll:EngineeredProductsMember 2019-09-29 2019-12-28 0001324948 roll:AerospaceMember roll:EngineeredProductsMember 2018-09-30 2018-12-29 0001324948 roll:IndustrialMember roll:EngineeredProductsMember 2018-09-30 2018-12-29 0001324948 roll:EngineeredProductsMember 2018-09-30 2018-12-29 0001324948 roll:AerospaceMember 2019-09-29 2019-12-28 0001324948 roll:IndustrialMember 2019-09-29 2019-12-28 0001324948 roll:AerospaceMember 2018-09-30 2018-12-29 0001324948 roll:IndustrialMember 2018-09-30 2018-12-29 0001324948 roll:AerospaceMember roll:PlainMember 2019-03-31 2019-12-28 0001324948 roll:IndustrialMember roll:PlainMember 2019-03-31 2019-12-28 0001324948 roll:PlainMember 2019-03-31 2019-12-28 0001324948 roll:AerospaceMember roll:PlainMember 2018-04-01 2018-12-29 0001324948 roll:IndustrialMember roll:PlainMember 2018-04-01 2018-12-29 0001324948 roll:PlainMember 2018-04-01 2018-12-29 0001324948 roll:AerospaceMember roll:RollerMember 2019-03-31 2019-12-28 0001324948 roll:IndustrialMember roll:RollerMember 2019-03-31 2019-12-28 0001324948 roll:RollerMember 2019-03-31 2019-12-28 0001324948 roll:AerospaceMember roll:RollerMember 2018-04-01 2018-12-29 0001324948 roll:IndustrialMember roll:RollerMember 2018-04-01 2018-12-29 0001324948 roll:RollerMember 2018-04-01 2018-12-29 0001324948 roll:AerospaceMember roll:BallMember 2019-03-31 2019-12-28 0001324948 roll:IndustrialMember roll:BallMember 2019-03-31 2019-12-28 0001324948 roll:BallMember 2019-03-31 2019-12-28 0001324948 roll:AerospaceMember roll:BallMember 2018-04-01 2018-12-29 0001324948 roll:IndustrialMember roll:BallMember 2018-04-01 2018-12-29 0001324948 roll:BallMember 2018-04-01 2018-12-29 0001324948 roll:AerospaceMember roll:EngineeredProductsMember 2019-03-31 2019-12-28 0001324948 roll:IndustrialMember roll:EngineeredProductsMember 2019-03-31 2019-12-28 0001324948 roll:EngineeredProductsMember 2019-03-31 2019-12-28 0001324948 roll:AerospaceMember roll:EngineeredProductsMember 2018-04-01 2018-12-29 0001324948 roll:IndustrialMember roll:EngineeredProductsMember 2018-04-01 2018-12-29 0001324948 roll:EngineeredProductsMember 2018-04-01 2018-12-29 0001324948 roll:AerospaceMember 2019-03-31 2019-12-28 0001324948 roll:IndustrialMember 2019-03-31 2019-12-28 0001324948 roll:AerospaceMember 2018-04-01 2018-12-29 0001324948 roll:IndustrialMember 2018-04-01 2018-12-29 0001324948 roll:RollerMember 2019-03-30 0001324948 roll:PlainMember 2019-03-30 0001324948 roll:BallMember 2019-03-30 0001324948 roll:EngineeredProductsMember 2019-03-30 0001324948 roll:RollerMember 2019-12-28 0001324948 roll:PlainMember 2019-12-28 0001324948 roll:BallMember 2019-12-28 0001324948 roll:EngineeredProductsMember 2019-12-28 0001324948 roll:ProductApprovalsMember 2019-03-31 2019-12-28 0001324948 roll:ProductApprovalsMember 2019-12-28 0001324948 roll:ProductApprovalsMember 2019-03-30 0001324948 roll:CustomerRelationshipsAndListsMember 2019-03-31 2019-12-28 0001324948 roll:CustomerRelationshipsAndListsMember 2019-12-28 0001324948 roll:CustomerRelationshipsAndListsMember 2019-03-30 0001324948 us-gaap:TradeNamesMember 2019-03-31 2019-12-28 0001324948 us-gaap:TradeNamesMember 2019-12-28 0001324948 us-gaap:TradeNamesMember 2019-03-30 0001324948 roll:DistributorAgreementsMember 2019-03-31 2019-12-28 0001324948 roll:DistributorAgreementsMember 2019-12-28 0001324948 roll:DistributorAgreementsMember 2019-03-30 0001324948 roll:PatentsAndTrademarksMember 2019-03-31 2019-12-28 0001324948 roll:PatentsAndTrademarksMember 2019-12-28 0001324948 roll:PatentsAndTrademarksMember 2019-03-30 0001324948 roll:DomainNamesMember 2019-03-31 2019-12-28 0001324948 roll:DomainNamesMember 2019-12-28 0001324948 roll:DomainNamesMember 2019-03-30 0001324948 us-gaap:OtherIntangibleAssetsMember 2019-03-31 2019-12-28 0001324948 us-gaap:OtherIntangibleAssetsMember 2019-12-28 0001324948 us-gaap:OtherIntangibleAssetsMember 2019-03-30 0001324948 roll:DomesticRevolvingFacilityMember 2019-12-28 0001324948 roll:DomesticRevolvingFacilityMember 2019-03-30 0001324948 roll:ForeignTermLoanMember 2019-12-28 0001324948 roll:ForeignTermLoanMember 2019-03-30 0001324948 roll:ForeignRevolvingFacilityMember 2019-12-28 0001324948 roll:ForeignRevolvingFacilityMember 2019-03-30 0001324948 roll:OtherLoanMember 2019-12-28 0001324948 roll:OtherLoanMember 2019-03-30 0001324948 roll:AmendedCreditAgreementMember roll:RevolverMember 2019-01-31 0001324948 roll:AmendedCreditAgreementMember roll:RevolverMember 2019-01-01 2019-01-31 0001324948 roll:SargentAerospaceDefenseBusinessMember us-gaap:BaseRateMember 2019-03-31 2019-12-28 0001324948 srt:MinimumMember 2019-03-31 2019-12-28 0001324948 srt:MaximumMember 2019-03-31 2019-12-28 0001324948 roll:SchaublinMember us-gaap:SecuredDebtMember roll:CHFMember 2019-08-15 0001324948 roll:SchaublinMember us-gaap:SecuredDebtMember 2019-08-15 0001324948 roll:SchaublinMember 2019-08-01 2019-08-15 0001324948 roll:SchaublinMember us-gaap:RevolvingCreditFacilityMember roll:CHFMember 2019-08-15 0001324948 roll:SchaublinMember us-gaap:RevolvingCreditFacilityMember 2019-08-15 0001324948 roll:SchaublinCreditAgreementMember roll:CHFMember 2019-08-15 0001324948 roll:SchaublinCreditAgreementMember 2019-08-15 0001324948 roll:SchaublinMember us-gaap:BaseRateMember 2019-03-31 2019-12-28 0001324948 roll:SchaublinMember roll:ForeignCreditAgreementMember 2019-03-31 2019-12-28 0001324948 roll:SchaublinMember roll:ForeignRevolverMember 2019-03-31 2019-12-28 0001324948 roll:SchaublinMember roll:ForeignTermLoanMember 2019-03-31 2019-12-28 0001324948 roll:SchaublinMember 2019-12-28 0001324948 roll:ForeignRevolverMember 2019-12-28 0001324948 roll:SchaublinMember us-gaap:LandAndBuildingMember 2012-10-01 0001324948 roll:SchaublinMember us-gaap:LandAndBuildingMember 2012-09-30 2012-10-01 0001324948 roll:SchaublinMember 2012-09-30 2012-10-01 0001324948 srt:SubsidiariesMember 2018-09-30 2018-12-29 0001324948 srt:SubsidiariesMember 2018-04-01 2018-12-29 0001324948 us-gaap:CorporateMember 2019-09-29 2019-12-28 0001324948 us-gaap:CorporateMember 2018-09-30 2018-12-29 0001324948 us-gaap:CorporateMember 2019-03-31 2019-12-28 0001324948 us-gaap:CorporateMember 2018-04-01 2018-12-29 0001324948 srt:SubsidiariesMember roll:EngineeredProductsMember 2018-09-30 2018-12-29 0001324948 2019-08-01 2019-08-15 0001324948 roll:CHFMember 2019-08-01 2019-08-15 0001324948 2019-08-15 0001324948 us-gaap:SubsequentEventMember 2020-01-31 2020-01-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure iso4217:CHF roll:Segment

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 28, 2019

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to          .

 

Commission File Number: 333-124824

 

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

 

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

 

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

 

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

 

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

  

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

 

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

 

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

 

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

  

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

 

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

 

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

 

As of January 31, 2020, RBC Bearings Incorporated had 25,039,691 shares of Common Stock outstanding.

  

 

 

 

 

TABLE OF CONTENTS

 

Part I - FINANCIAL INFORMATION 1
   
ITEM 1. Consolidated Financial Statements 1
   
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
   
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 35
   
ITEM 4. Controls and Procedures 36
   
Changes in Internal Control over Financial Reporting 36
   
Part II - OTHER INFORMATION 37
   
ITEM 1. Legal Proceedings 37
   
ITEM 1A. Risk Factors 37
   
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 37
   
ITEM 3. Defaults Upon Senior Securities 38
   
ITEM 4. Mine Safety Disclosures 38
   
ITEM 5. Other Information 38
   
ITEM 6. Exhibits 39

 

i

 

 

Part I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

RBC Bearings Incorporated

Consolidated Balance Sheets

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

 

             
   December 28,
2019
   March 30,
2019
 
   (Unaudited)     
ASSETS        
Current assets:        
Cash and cash equivalents  $60,328   $29,884 
Accounts receivable, net of allowance for doubtful accounts of $1,749 at December 28, 2019 and $1,430 at March 30, 2019   121,847    130,735 
Inventory   362,138    335,001 
Prepaid expenses and other current assets   10,423    7,661 
Total current assets   554,736    503,281 
Property, plant and equipment, net   222,599    207,895 
Operating lease assets, net   29,644     
Goodwill   277,381    261,431 
Intangible assets, net of accumulated amortization of $53,172 at December 28, 2019 and $46,101 at March 30, 2019   163,860    155,641 
Other assets   24,297    19,119 
Total assets  $1,272,517   $1,147,367 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $50,209   $49,592 
Accrued expenses and other current liabilities   35,388    40,070 
Current operating lease liabilities   6,756     
Current portion of long-term debt   6,649    467 
Total current liabilities   99,002    90,129 
Deferred income taxes   10,521    6,862 
Long-term debt, less current portion   16,160    43,179 
Long-term operating lease liabilities   22,982     
Other non-current liabilities   44,646    38,631 
Total liabilities   193,311    178,801 
           
Stockholders’ equity:          
Preferred stock, $.01 par value; authorized shares: 10,000,000 at December 28, 2019 and March 30, 2019, respectively; none issued or outstanding        
Common stock, $.01 par value; authorized shares: 60,000,000 at December 28, 2019 and March 30, 2019, respectively; issued shares: 25,863,146 and 25,607,196 at December 28, 2019 and March 30, 2019, respectively   259    256 
Additional paid-in capital   405,725    378,655 
Accumulated other comprehensive loss   (5,925)   (7,467)
Retained earnings   735,467    641,894 
Treasury stock, at cost, 835,087 shares and 752,913 shares at December 28, 2019 and March 30, 2019, respectively   (56,320)   (44,772)
Total stockholders’ equity   1,079,206    968,566 
Total liabilities and stockholders’ equity  $1,272,517   $1,147,367 

  

See accompanying notes.

  

1

 

 

RBC Bearings Incorporated

Consolidated Statements of Operations

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

(Unaudited)

  

                             
   Three Months Ended   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   December 28,
2019
   December 29,
2018
 
Net sales  $177,019   $171,453   $541,618   $520,354 
Cost of sales   106,308    103,326    329,099    316,669 
Gross margin   70,711    68,127    212,519    203,685 
Operating expenses:                    
Selling, general and administrative   30,719    29,142    91,580    88,043 
Other, net   2,526    19,147    7,674    23,922 
Total operating expenses   33,245    48,289    99,254    111,965 
Operating income   37,466    19,838    113,265    91,720 
Interest expense, net   466    1,197    1,486    4,354 
Other non-operating expense   217    (386)   581    984 
Income before income taxes   36,783    19,027    111,198    86,382 
Provision for income taxes   6,268    2,849    18,914    12,626 
Net income  $30,515   $16,178   $92,284   $73,756 
Net income per common share:                    
Basic  $1.24   $0.66   $3.75   $3.03 
Diluted  $1.22   $0.65   $3.71   $2.99 
Weighted average common shares:                    
Basic   24,699,461    24,457,555    24,595,179    24,308,029 
Diluted   24,981,480    24,800,647    24,898,635    24,693,015 

 

See accompanying notes.

  

2

 

 

RBC Bearings Incorporated

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(Unaudited)

 

                             
   Three Months Ended   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   December 28,
2019
   December 29,
2018
 
Net income  $30,515   $16,178   $92,284   $73,756 
Pension and postretirement liability adjustments, net of taxes   178    194    534    582 
Foreign currency translation adjustments   1,624    (1,137)   2,297    (4,758)
Total comprehensive income  $32,317   $15,235   $95,115   $69,580 

 

See accompanying notes.

  

3

 

 

RBC Bearings Incorporated

Consolidated Statements of Stockholders’ Equity

(dollars in thousands)

(Unaudited)

  

Common Stock

Additional Paid-in Capital

 Accumulated Other Comprehensive Income/(Loss)

Retained Earnings (Accumulated Deficit) 

 Treasury Stock

                                                     
   Common Stock   Additional
Paid-in
   Accumulated
Other
Comprehensive
   Retained   Treasury Stock   Total
Stockholders’
 
   Shares   Amount   Capital   Income/(Loss)   Earnings   Shares   Amount   Equity 
Balance at March 30, 2019   25,607,196   $256   $378,655   $(7,467)  $641,894    (752,913)  $(44,772)  $968,566 
Net income                   30,499            30,499 
Share-based compensation           4,802                    4,802 
Repurchase of common stock                       (69,877)   (9,514)   (9,514)
Exercise of equity awards   4,356    1    275                    276 
Change in net prior service cost and actuarial losses, net of taxes of $54               178                178 
Issuance of restricted stock   86,490                             
Impact from adoption of ASU 2018-02               (1,289)   1,289             
Currency translation adjustments               2,542                2,542 
Balance at June 29, 2019   25,698,042   $257   $383,732   $(6,036)  $673,682    (822,790)  $(54,286)  $997,349 
Net income                   31,270            31,270 
Share-based compensation           5,059                    5,059 
Repurchase of common stock                       (2,048)   (334)   (334)
Exercise of equity awards   138,898    1    10,184                    10,185 
Change in net prior service cost and actuarial losses, net of taxes of $55               178                178 
Issuance of restricted stock   5,677                             
Currency translation adjustments               (1,869)               (1,869)
Balance at September 28, 2019   25,842,617   $258   $398,975   $(7,727)  $704,952    (824,838)  $(54,620)  $1,041,838 
Net income                   30,515            30,515 
Share-based compensation           5,135                    5,135 
Repurchase of common stock                       (10,249)   (1,700)   (1,700)
Exercise of equity awards   18,419    1    1,615                    1,616 
Change in net prior service cost and actuarial losses, net of taxes of $55               178                178 
Issuance of restricted stock   2,110                             
Currency translation adjustments               1,624                1,624 
Balance at December 28, 2019   25,863,146   $259   $405,725   $(5,925)  $735,467    (835,087)  $(56,320)  $1,079,206 

 

See accompanying notes.

  

4

 

 

RBC Bearings Incorporated

Consolidated Statements of Stockholders’ Equity (continued)

(dollars in thousands)

(Unaudited)

 

   Common Stock   Additional
Paid-in
   Accumulated
Other
Comprehensive
   Retained Earnings (Accumulated  

Treasury Stock

   Total
Stockholders’
 
   Shares   Amount   Capital   Income/(Loss)   Deficit)   Shares   Amount   Equity 
Balance at March 31, 2018    25,123,694   $251   $339,148   $(2,285)  $536,978    (713,687)  $(39,540)  $834,552 
Net income                    27,467            27,467 
Share-based compensation            3,766                    3,766 
Repurchase of common stock                        (11,865)   (1,491)   (1,491)
Exercise of equity awards    100,142    2    6,416                    6,418 
Change in net prior service cost and actuarial losses, net of taxes of $58                194                194 
Issuance of restricted stock    87,345                             
Impact from adoption of ASU 2014-09                    (277)           (277)
Currency translation adjustments                (4,061)               (4,061)
Balance at June 30, 2018    25,311,181   $253   $349,330   $(6,152)  $564,168    (725,552)  $(41,031)  $866,568 
Net income                    30,111            30,111 
Share-based compensation            4,039                    4,039 
Repurchase of common stock                        (15,522)   (2,040)   (2,040)
Exercise of equity awards    192,300    2    12,989                    12,991 
Change in net prior service cost and actuarial losses, net of taxes of $58                194                194 
Issuance of restricted stock    6,210                             
Currency translation adjustments                440                440 
Balance at September 29, 2018    25,509,691   $255   $366,358   $(5,518)  $594,279    (741,074)  $(43,071)  $912,303 
Net income                    16,178            16,178 
Share-based compensation            3,904                    3,904 
Other            154                    154 
Repurchase of common stock                        (7,911)   (1,180)   (1,180)
Exercise of equity awards    16,050    1    1,251                    1,252 
Change in net prior service cost and actuarial losses, net of taxes of $59                194                194 
Issuance of restricted stock    41,090                             
Currency translation adjustments                (1,137)               (1,137)
Balance at December 29, 2018    25,566,831   $256   $371,667   $(6,461)  $610,457    (748,985)  $(44,251)  $931,668 

 

See accompanying notes.

 

5

 

 

RBC Bearings Incorporated

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

 

               
   Nine Months Ended 
  

December 28,

2019

  

December 29,

2018

 
Cash flows from operating activities:        
Net income   $92,284   $73,756 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation    16,209    14,931 
Deferred income taxes    249    (884)
Amortization of intangible assets    7,066    7,331 
Amortization of deferred financing costs    365    780 
Loss on extinguishment of debt    -    987 
Share-based compensation    14,996    11,709 
Consolidation and restructuring charges    -    16,786 
Other non-cash charges    90    (50)
Changes in operating assets and liabilities, net of acquisitions:          
Accounts receivable    10,283    (3,076)
Inventory    (20,739)   (31,953)
Prepaid expenses and other current assets    (2,049)   (3,140)
Other non-current assets    (6,426)   (2,368)
Accounts payable    22    (320)
Accrued expenses and other current liabilities    (4,092)   (3,142)
Other non-current liabilities    2,937    (2,334)
Net cash provided by operating activities    111,195    79,013 
           
Cash flows from investing activities:          
Purchase of property, plant and equipment    (27,562)   (29,205)
Proceeds from sale of assets    300    1,904 
Proceeds from sale of business    -    22,284 
Acquisition of business    (33,842)   - 
Net cash used in investing activities    (61,104)   (5,017)
           
Cash flows from financing activities:          
Proceeds received from revolving credit facilities    9,435    149,250 
Proceeds received from term loans    15,383    - 
Repayments of revolving credit facilities    (45,411)   (40,500)
Repayments of term loans    -    (168,750)
Repayments of notes payable    (352)   (354)
Finance fees paid in connection with credit facilities and term loans    (276)   - 
Exercise of stock options    12,077    20,661 
Repurchase of common stock    (11,548)   (4,711)
Net cash used in financing activities    (20,692)   (44,404)
           
Effect of exchange rate changes on cash    1,045    (2,058)
           
Cash and cash equivalents:          
Increase during the period    30,444    27,534 
Cash, at beginning of period    29,884    54,163 
Cash, at end of period   $60,328   $81,697 
           
Supplemental disclosures of cash flow information:          
Cash paid for:          
Income taxes   $21,569   $16,601 
Interest    1,029    3,111 

 

See accompanying notes.

 

6

 

 

RBC Bearings Incorporated

Notes to Unaudited Interim Consolidated Financial Statements

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

 

1. Basis of Presentation

 

The interim consolidated financial statements included herein have been prepared by RBC Bearings Incorporated, a Delaware corporation (collectively with its subsidiaries, the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The interim financial statements included with this report have been prepared on a consistent basis with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2019. We condensed or omitted certain information and footnote disclosures normally included in our annual audited financial statements, which we prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP). As used in this report, the terms “we,” “us,” “our,” “RBC” and the “Company” mean RBC Bearings Incorporated and its subsidiaries, unless the context indicates another meaning.

 

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

 

The results of operations for the three- and nine-month periods ended December 28, 2019 are not necessarily indicative of the operating results for the entire fiscal year ending March 28, 2020. The three-month periods ended December 28, 2019 and December 29, 2018 each include 13 weeks. The amounts shown are in thousands, unless otherwise indicated. 

 

2. Significant Accounting Policies

Accounting Policies (Textual)

 

The Company’s significant accounting policies are detailed in “Note 2 - Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended March 30, 2019. Significant changes to our accounting policies as a result of adopting new accounting standards are discussed below.

 

Recent Accounting Standards Adopted

 

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). The core principle of this ASU is that an entity should recognize on its balance sheet assets and liabilities arising from a lease. In accordance with that principle, ASU 2016-02 requires that a lessee recognize a liability to make lease payments (the lease liability) and a lease asset (right-of-use asset) representing its right to use the underlying leased asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on the lease classification as a finance or operating lease.

 

The Company adopted this accounting standard on March 31, 2019 and has elected the modified retrospective transition method, which permits the application of the new lease standard at the adoption date and recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company has elected not to apply the recognition requirements to short-term leases, and will recognize the lease payments in the income statement on a straight-line basis over the lease term and variable payments in the period in which the obligation for those payments is incurred. The Company has elected the following practical expedients (which must be elected as a package and applied consistently to all leases): an entity need not reassess whether any expired or existing contracts are or contain leases; an entity need not reassess the lease classification for any expired or existing leases; and an entity need not reassess initial direct costs for any existing leases. The Company has also elected the practical expedient that permits the inclusion of lease and nonlease components as a single component and account for it as a lease; this election has been made for all asset classes. We also elected the hindsight practical expedient to determine the reasonably certain lease term for existing leases, which resulted in the extension of lease terms for certain existing leases.

 

7

 

 

 The cumulative-effect of the changes made to the balance sheet on the first day of adoption resulted in the recognition of lease assets and lease liabilities for operating lease commitments of $27,378. The adoption of this accounting standard had no impact on the Company’s consolidated statement of operations, debt compliance or the captions on the consolidated statement of cash flows.

 

The Company determines if an arrangement is a lease at contract inception. For leases where the Company is the lessee, it recognizes lease assets and related lease liabilities at the lease commencement date based on the present value of lease payments over the lease term. The lease term is the noncancellable period for which a lessee has the right to use an underlying asset, including periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. For renewal options, the Company performs an assessment at commencement if it is reasonably likely to exercise the option. The assessment is based on the Company’s intentions, past practices, estimates and factors that create an economic incentive for the Company. Generally, the Company is not reasonably certain to exercise the renewal option in a lease contract, with the exception of some of our leased manufacturing facilities. While some of the Company’s leases include options allowing early termination of the lease, the Company historically has not terminated its lease agreements early unless there is an economic, financial or business reason to do so; therefore, the Company does not typically consider the termination option in its lease term at commencement.

 

Most of the Company’s leases do not provide an implicit interest rate. As a result, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

 

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition.

 

In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows companies to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act (TCJA) from accumulated other comprehensive income to retained earnings. These stranded tax effects refer to the tax amounts included in accumulated other comprehensive income at the previous 35% U.S. corporate statutory federal tax rate, for which the related deferred tax asset or liability was remeasured to the new 21% U.S. corporate statutory federal tax rate in the period of the TCJA’s enactment. The new standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted, and can be applied either in the period of adoption or retrospectively to each period impacted by the TCJA. As a result of the Company’s adoption on March 31, 2019, the Company reclassified $1,289 from accumulated other comprehensive income to retained earnings, both of which are components of total stockholders’ equity. The adoption of this accounting standard had no impact on the Company’s consolidated statement of operations, debt compliance or the captions on the consolidated statement of cash flows.

 

Recent Accounting Standards Yet to Be Adopted

 

In September 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance will replace the current incurred loss approach with a new expected credit loss impairment model. The new model will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt instruments, net investments in leases, loan commitments and standby letters of credit. Upon initial recognition of the exposure, the expected credit loss model will require entities to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses should consider historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating expected credit losses. ASU 2016-13 does not prescribe a specific method to make the estimate, so its application will require significant judgment. This ASU is effective for public companies in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the effect that the adoption of this ASU will have on the Company’s consolidated financial statements.

 

8

 

 

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

 

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

 

Other new pronouncements issued but not effective until after March 28, 2020 are not expected to have a material impact on our financial position, results of operations or liquidity.

 

3. Revenue from Contracts with Customers

 

Disaggregation of Revenue

 

The Company operates in four business segments with similar economic characteristics, including nature of the products and production processes, distribution patterns and classes of customers. Revenue is disaggregated within these business segments by our two principal end markets: aerospace and industrial. Comparative information of the Company’s overall revenues for the three- and nine-month periods ended December 28, 2019 and December 29, 2018 are as follows:

 

Principal End Markets 

 

Schedule of revenue from business segments of customers    
   Three Months Ended 
   December 28, 2019   December 29, 2018 
   Aerospace   Industrial   Total   Aerospace   Industrial   Total 
Plain   $67,753   $19,123   $86,876   $58,733   $20,573   $79,306 
Roller    17,332    14,497    31,829    17,763    17,078    34,841 
Ball    6,103    12,372    18,475    5,513    11,207    16,720 
Engineered Products    24,958    14,881    39,839    23,670    16,916    40,586 
   $116,146   $60,873   $177,019   $105,679   $65,774   $171,453 

 

9

 

 

   Nine Months Ended 
   December 28, 2019   December 29, 2018 
   Aerospace   Industrial   Total   Aerospace   Industrial   Total 
Plain   $205,346   $59,026   $264,372   $172,938   $62,373   $235,311 
Roller    54,288    46,985    101,273    52,805    54,906    107,711 
Ball    16,619    36,990    53,609    14,534    38,298    52,832 
Engineered Products    73,596    48,768    122,364    76,403    48,097    124,500 
   $349,849   $191,769   $541,618   $316,680   $203,674   $520,354 

 

Remaining Performance Obligations

 

Remaining performance obligations represent the transaction price of orders meeting the definition of a contract under Accounting Standards Codification (ASC) 606 for which work has not been performed or has been partially performed and excludes unexercised contract options. The duration of many of our contracts, as defined by ASC 606, is less than one year. The Company has elected to apply the practical expedient that allows companies to exclude remaining performance obligations with an original expected duration of one year or less. Performance obligations having a duration of more than one year are concentrated in contracts for certain products and services provided to the U.S. government or its contractors. The aggregate amount of the transaction price allocated to remaining performance obligations for such contracts with a duration of more than one year was approximately $263,231 at December 28, 2019. The Company expects to recognize revenue on approximately 73% and 94% of the remaining performance obligations over the next 12 and 24 months, respectively, with the remainder recognized thereafter.

 

Contract Balances

 

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

 

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

 

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

 

10

 

 

These assets and liabilities are reported on the consolidated balance sheets on an individual contract basis at the end of each reporting period. As of December 28, 2019 and March 30, 2019, accounts receivable with customers, net, were $121,847 and $130,735, respectively. The tables below represent a roll-forward of contract assets and contract liabilities for the nine-month period ended December 28, 2019:

 

Schedule of contract assets and contract liabilities  Contract Assets - Current (1)  
Contract Assets - Current (1)    
     
Balance at March 30, 2019   $1,895 
Additional revenue recognized in excess of billings    3,298 
Less: amounts billed to customers    (2,661)
Balance at December 28, 2019   $2,532 

 

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

 

   Contract Liabilities – Current (2) 
Contract Liabilities – Current (2)    
     
Balance at March 30, 2019   $10,121 
Payments received prior to revenue being recognized    9,223 
Revenue recognized    (13,143)
Reclassification (to)/from noncurrent    (482
Balance at December 28, 2019   $5,719 

(2)Included within accrued expenses and other current liabilities on the consolidated balance sheets. During the first nine months of fiscal 2020, the Company recognized revenues of $7,319 that were included in the contract liability balance at March 30, 2019.

 

(2) Included within accrued expenses and other current liabilities on the consolidated balance sheets. During the first nine months of fiscal 2020, the Company recognized revenues of $7,319 that were included in the contract liability balance at March 30, 2019.

 

   Contract Liabilities – Noncurrent (3) 
Contract Liabilities – Noncurrent (3)    
     
Balance at March 30, 2019   $587 
Payments received prior to revenue being recognized    454 
Reclassification (to)/from current    482 
Balance at December 28, 2019   $1,523 

 

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

 

As of December 28, 2019, the Company did not have any contract assets classified as noncurrent on the consolidated balance sheet.

 

4. Accumulated Other Comprehensive Income (Loss)

 

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

 

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

 

Schedule of accumulated other comprehensive income (loss), net of taxes            
  

Currency

Translation

  

Pension and

Postretirement

Liability

   Total 
Balance at March 30, 2019   $(3,301)  $(4,166)  $(7,467)
Impact from adoption of ASU 2018-02        (1,289)   (1,289)
Other comprehensive income before reclassifications    2,297        2,297 
Amounts reclassified from accumulated other comprehensive income        534    534 
Net current period other comprehensive income    2,297    534    2,831 
Balance at December 28, 2019   $(1,004)  $(4,921)  $(5,925)

 

11

 

 

5. Net Income Per Common Share

 

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

 

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

 

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

 

 Schedule basic and diluted net income per common share                        
   Three Months Ended   Nine Months Ended 
  

December 28,

2019

  

December 29,

2018

  

December 28,

2019

  

December 29,

2018

 
                 
Net income   $30,515   $16,178   $92,284   $73,756 
                     
Denominator for basic net income  per common share—weighted-average shares outstanding    24,699,461    24,457,555    24,595,179    24,308,029 
Effect of dilution due to employee stock awards    282,019    343,092    303,456    384,986 
Denominator for diluted net income per common share — weighted-average shares outstanding    24,981,480    24,800,647    24,898,635    24,693,015 
                     
Basic net income per common share   $1.24   $0.66   $3.75   $3.03 
                     
Diluted net income per common share   $1.22   $0.65   $3.71   $2.99 

 

At December 28, 2019, 217,470 employee stock options and no restricted shares have been excluded from the calculation of diluted earnings per share. At December 29, 2018, 221,315 employee stock options and no restricted shares have been excluded from the calculation of diluted earnings per share. The inclusion of these employee stock options and restricted shares would be anti-dilutive.

 

6. Cash and Cash Equivalents

 

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

 

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

 

7. Inventory

 

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

 

Schedule of inventory        
  

December 28,

2019

  

March 30,

2019

 
Raw materials   $52,193   $48,690 
Work in process    97,162    90,820 
Finished goods    212,783    195,491 
  $362,138   $335,001 

 

12

 

8. Goodwill and Intangible Assets

 

Goodwill

 

Schedule of goodwill                    
   Roller   Plain   Ball   Engineered Products   Total 
March 30, 2019   $16,007   $79,597   $5,623   $160,204   $261,431 
Translation adjustments                (5)   (5)
Acquisition (1)                15,955    15,955 
December 28, 2019   $16,007   $79,597   $5,623   $176,154   $277,381 

 

(1)Includes the assets acquired as part of the Company’s acquisition of Vianel Holding AG (“Swiss Tool”) on August 15, 2019, which is discussed further in Note 13.

 

Intangible Assets

       December 28, 2019   March 30, 2019 
   Weighted Average Useful Lives   Gross Carrying Amount  

 

Accumulated Amortization

   Gross Carrying Amount  

 

Accumulated Amortization

 
Product approvals    24   $50,878   $12,066   $50,878   $10,481 
Customer relationships and lists (2)    23    109,328    22,380    96,458    19,149 
Trade names    10    16,321    8,534    15,959    7,447 
Distributor agreements    5    722    722    722    722 
Patents and trademarks (2)    15    11,215    5,923    10,534    5,540 
Domain names    10    437    437    437    437 
Other    2    3,850    3,110    2,473    2,325 
         192,751    53,172    177,461    46,101 
Non-amortizable repair station certifications    n/a    24,281        24,281     
Total    21   $217,032   $53,172   $201,742   $46,101 

 

(2)Includes the assets acquired as part of the Company’s acquisition of Vianel Holding AG (“Swiss Tool”) on August 15, 2019, which is discussed further in Note 13.

 

Amortization expense for definite-lived intangible assets for the three- and nine-month periods ended December 28, 2019 were $2,473 and $7,066, respectively, compared to $2,400 and $7,331 for the three- and nine-month periods ended December 29, 2018, respectively. Estimated amortization expense for the remaining three months of fiscal 2020, the five succeeding fiscal years and thereafter is as follows:

 

Schedule of estimated amortization expense     
2020  $2,414 
2021   9,632 
2022   9,512 
2023   9,428 
2024   8,523 
2025   7,652 
2026 and thereafter   92,418 

 

13

 

 

9. Leases

 

The Company enters into operating leases for manufacturing facilities, warehouses, sales offices, information technology equipment, plant equipment, vehicles and certain other equipment with varying end dates from January 2020 to February 2038, including renewal options.

 

The following table represents the impact of leasing on the consolidated balance sheet:

 

 Schedule of operating leases    
Operating Leases: 

December 28,

2019

 
Lease assets:    
Operating lease assets, net   $29,644 
      
Lease liabilities:     
Current operating lease liabilities    6,756 
Long-term operating lease liabilities    22,982 
Total operating lease liabilities   $29,738 

 

The Company did not have any finance leases as of December 28, 2019. Cash paid included in the measurement of lease liabilities was $1,504 and $4,235 for the three- and nine-month periods ended December 28, 2019, respectively. Lease assets obtained in exchange for new operating lease liabilities were $1,592 and $4,961 for the three- and nine-month periods ended December 28, 2019, respectively.

 

Operating lease expense was $1,867 and $5,355 for the three- and nine-month periods ended December 28, 2019, respectively. Short-term and variable lease expense were immaterial for both the three- and nine-month periods ended December 28, 2019.

 

Future undiscounted lease payments for the remaining lease terms as of December 28, 2019, including renewal options reasonably certain of being exercised, are as follows:

 

 Schedule of future undiscounted lease payments    
   Operating Leases 
Within one year   $5,961 
One to two years    5,090 
Two to three years    3,647 
Three to four years    3,196 
Four to five years    2,507 
Thereafter    17,174 
Total future undiscounted lease payments    37,575 
Less: imputed interest    (7,837)
Total operating lease liabilities   $29,738 

 

The weighted-average remaining lease term on December 28, 2019 for our operating leases is 11.6 years. The weighted-average discount rate on December 28, 2019 for our operating leases is 4.8%.

 

14

 

 

10. Debt

 

The balances payable under all borrowing facilities are as follows:

Domestic revolving facility [Member]

Foreign term loan [Member]

Foreign revolving facility [Member]

  

Schedule of balances payable under borrowing facilities        
  

December 28,

2019

  

March 30,

2019

 
Domestic revolving facility   $   $39,250 
Foreign term loan    15,377     
Foreign revolving facility    3,178     
Debt issuance costs    (1,824)   (1,912)
Other    6,078    6,308 
Total debt    22,809    43,646 
Less: current portion    6,649    467 
Long-term debt   $16,160   $43,179 

 

The current portion of long-term debt as of December 28, 2019 includes the current portion of the foreign term loan, foreign revolving facility and the Schaublin mortgage, all of which are discussed below in further detail.

 

CHF [Member] 

Domestic Credit Facility

 

On January 31, 2019, the Company amended the 2015 credit agreement with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer, and the other lenders party thereto (the “2015 Credit Agreement”). The 2015 Credit Agreement as so amended (the “Amended Credit Agreement”) now provides the Company with a $250,000 revolving credit facility (the “Revolver”) in place of the revolver provided in the 2015 Credit Agreement. The Revolver expires on January 31, 2024. Debt issuance costs associated with the Amended Credit Agreement totaled $852 and will be amortized through January 31, 2024 along with the unamortized debt issuance costs remaining from the 2015 Credit Agreement.

 

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

 

The Amended Credit Agreement requires the Company to comply with various covenants, including among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.50 to 1. The Amended Credit Agreement allows the Company to, among other things, make distributions to shareholders, repurchase its stock, incur other debt or liens, or acquire or dispose of assets provided that the Company complies with certain requirements and limitations of the Amended Credit Agreement. As of December 28, 2019, the Company was in compliance with all such covenants.

 

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

 

Approximately $3,850 of the Revolver is being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs. As of December 28, 2019, $1,616 in unamortized debt issuance costs remain. The Company has the ability to borrow up to an additional $246,150 under the Revolver as of December 28, 2019.

 

15

 

 

Foreign Term Loan and Revolving Credit Facility

 

On August 15, 2019, one of our foreign divisions, Schaublin SA (“Schaublin”), entered into two separate credit agreements (the “Schaublin Credit Agreements”) with Credit Suisse (Switzerland) Ltd. to (i) finance the acquisition of Swiss Tool, which is discussed in further detail in Note 13, and (ii) provide future working capital. The Schaublin Credit Agreements provided Schaublin with a CHF 15,000 (approximately $15,383) term loan (the “Foreign Term Loan”), which expires on August 15, 2024 and a CHF 15,000 (approximately $15,383) revolving credit facility (the “Foreign Revolver”), which continues in effect until terminated by either Schaublin or Credit Suisse. Debt issuance costs associated with the Schaublin Credit Agreements totaled CHF 270 (approximately $277) and will be amortized throughout the life of the credit agreements.

 

Amounts outstanding under the Foreign Term Loan and the Foreign Revolver generally bear interest at LIBOR plus a specified margin. The applicable margin is based on Schaublin’s ratio of total net debt to consolidated EBITDA at each measurement date. Currently, Schaublin’s margin is 2.00%.

 

The Foreign Credit Agreements require Schaublin to comply with various covenants, which are tested annually on March 31. These covenants include, among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.00 to 1 as of March 31, 2020 and not greater than 2.50 to 1 as of March 31, 2021 and thereafter. Schaublin is also required to maintain an economic equity of CHF 20,000 at all times. The Foreign Credit Agreements allow Schaublin to, among other things, incur other debt or liens and acquire or dispose of assets provided that Schaublin complies with certain requirements and limitations of the Foreign Credit Agreements. As of December 28, 2019, Schaublin was in compliance with all such covenants.

 

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

 

As of December 28, 2019, there was approximately $3,178 outstanding under the Foreign Revolver and approximately $15,377 outstanding under the Foreign Term Loan. As of December 28, 2019, approximately $208 in unamortized debt issuance costs remain. Schaublin has the ability to borrow up to an additional $12,199 under the Foreign Revolver as of December 28, 2019.

 

Schaublin’s required future annual principal payments for the next five years and thereafter are $0 for fiscal 2020, approximately $6,254 for fiscal 2021, approximately $3,075 for each year from fiscal 2022 through fiscal 2024 and approximately $3,076 thereafter.

 

Other Notes Payable

 

On October 1, 2012, Schaublin purchased the land and building that it occupied and had been leasing for approximately $14,910. Schaublin obtained a 20-year fixed-rate mortgage of approximately $9,857 at an interest rate of 2.9%. The balance of the purchase price of approximately $5,053 was paid from cash on hand. The balance on this mortgage as of December 28, 2019 was approximately $6,078.

 

11. Income Taxes

 

 Miami Division [Member]

The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to state or foreign income tax examinations by tax authorities for years ending before April 2, 2005. The Company is no longer subject to U.S. federal tax examination by the Internal Revenue Service for years ending before April 2, 2016.

 

The effective income tax rates for the three-month periods ended December 28, 2019 and December 29, 2018, were 17.0% and 15.0%. In addition to discrete items, the effective income tax rates for these periods are different from the U.S. statutory rates due to the foreign-derived intangible income provision and U.S. credit for increasing research activities which decrease the rate and state income taxes which increase the rate.

 

16

 

 

The effective income tax rate for the three-month period ended December 28, 2019 of 17.0% includes $857 of tax benefit associated with share-based compensation. The third quarter provision for fiscal 2020 was also impacted by $567 of tax benefit associated with the decrease in the Company’s unrecognized tax positions related to the statute of limitations expiration. The effective income tax rate without discrete items for the three-month period ended December 28, 2019 would have been 20.9%. The effective income tax rate for the three-month period ended December 29, 2018 of 15.0% includes $4,048 of tax benefit associated with the sale of the Miami division. The third quarter provision for fiscal 2019 was also impacted by $1,469 of tax benefit associated with the decrease in the Company’s unrecognized tax positions, pertaining primarily to items associated with the consolidation and restructuring of the Company’s U.K. manufacturing facility. The third quarter provision for fiscal 2019 also includes $943 tax expense associated with withholding tax on a one-time repatriation of cash from the Company’s foreign operations and $558 of tax benefit associated with share-based compensation. The effective income tax rate without discrete items for the three-month period ended December 29, 2018 would have been 22.3%. The Company believes it is reasonably possible that some of its unrecognized tax positions may be effectively settled within the next twelve months due to the closing of audits and the statute of limitations expiring in varying jurisdictions. The decrease in the Company’s unrecognized tax positions, pertaining primarily to credits and state tax, is estimated to be approximately $487.

 

Income tax expense for the nine-month period ended December 28, 2019 was $18,914 compared to $12,626 for the nine-month period ended December 29, 2018. Our effective income tax rate for the nine-month period ended December 28, 2019 was 17.0% compared to 14.6% for the nine-month period ended December 29, 2018. The effective income tax rate for the nine-month period ended December 28, 2019 of 17.0% includes $3,896 of tax benefit associated with share-based compensation and $477 of tax benefit associated with the decrease in the Company’s unrecognized tax positions related to statute of limitations expiration and $241 of tax benefit associated with other permanent adjustments from filing the Company’s fiscal 2018 foreign tax returns. The effective income tax rate without this benefit and other items for the nine-month period ended December 28, 2019 would have been 21.2%. The effective income tax rate for the nine-month period ended December 29, 2018 of 14.6% includes $4,048 of tax benefit associated with the sale of the Miami division. The effective income tax rate was also impacted by $1,510 of tax benefit associated with the decrease in the Company’s unrecognized tax positions, pertaining primarily to items associated with the consolidation and restructuring of the Company’s U.K. manufacturing facility. The effective rate was also impacted by $943 of tax expense associated with withholding tax on a one-time repatriation of cash from the Company’s foreign operations and $5,063 of tax benefits associated with share-based compensation. The effective income tax rate without discrete items for the nine-month period ended December 29, 2018 would have been 21.6%.

 

17

 

 

12. Reportable Segments

 

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

 

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

 

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

 

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

 

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

 

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

 

18

 

 

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

  

Schedule of segment information        
   Three Months Ended   Nine Months Ended 
  

December 28,

2019

  

December 29,

2018

  

December 28,

2019

  

December 29,

2018

 
Net External Sales                
Plain   $86,876   $79,306   $264,372   $235,311 
Roller    31,829    34,841    101,273    107,711 
Ball    18,475    16,720    53,609    52,832 
Engineered Products    39,839    40,586    122,364    124,500 
   $177,019   $171,453   $541,618   $520,354 
Gross Margin                    
Plain   $35,016   $31,921   $104,830   $93,404 
Roller    14,048    14,631    41,968    45,858 
Ball    8,184    6,861    23,486    21,548 
Engineered Products    13,463    14,714    42,235    42,875 
   $70,711   $68,127   $212,519   $203,685 
Selling, General & Administrative Expenses                    
Plain   $6,726   $6,475   $19,774   $18,997 
Roller    1,632    1,559    4,893    4,739 
Ball    1,598    1,656    4,805    4,867 
Engineered Products    4,410    4,795    13,147    15,231 
Corporate    16,353    14,657    48,961    44,209 
   $30,719   $29,142   $91,580   $88,043 
Operating Income                    
Plain   $27,503   $25,044   $82,583   $72,443 
Roller    12,427    13,049    36,731    41,083 
Ball    6,579    5,164    18,623    16,532 
Engineered Products    8,274    (8,082)   25,699    8,315 
Corporate    (17,317)   (15,337)   (50,371)   (46,653)
   $37,466   $19,838   $113,265   $91,720 
Intersegment Sales                    
Plain   $1,638   $1,285   $4,994   $4,525 
Roller    3,498    3,602    10,722    10,771 
Ball    585    740    2,170    2,302 
Engineered Products    11,449    9,284    33,022    28,400 
   $17,170   $14,911   $50,908   $45,998 

 

The net loss of $16,802 related to the sale of the Miami division during the third quarter of fiscal 2019 is included within the Engineered Products segment. All intersegment sales are eliminated in consolidation.

 

13. Acquisition

 

On August 15, 2019, the Company, through its Schaublin SA subsidiary, acquired all of the outstanding shares of Vianel Holding AG (“Swiss Tool”) for a purchase price of approximately $33,842 (CHF 33,000), subject to a working capital adjustment. Swiss Tool, which is based in Bürglen, Switzerland, owns Swiss Tool Systems AG and other subsidiaries which collectively develop and manufacture high precision boring and turning solutions for metal cutting machines under the Swiss Tool Systems name. The preliminary purchase price allocation is as follows: accounts receivable ($1,325), inventory ($5,963), other current assets ($586), fixed assets ($3,487), intangible assets ($13,236), operating lease assets ($2,851), other non-current assets ($154), accounts payable ($562), other current liabilities ($894), operating lease liabilities ($2,851), deferred tax liabilities ($3,411) and noncurrent liabilities ($2,085). The purchase price allocation, which resulted in goodwill of approximately $15,955, is not deductible for tax purposes and is subject to change pending a final valuation of the assets and liabilities, including intangible assets and deferred income taxes. Swiss Tool is included in the Engineered Products reporting segment.

14. Subsequent Events

 

On January 31, 2020, the Company sold its property located in Houston, Texas for approximately $8,000. The transaction will be recorded in the fourth quarter of fiscal 2020.

 

19

 

 

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

 

Cautionary Statement As To Forward-Looking Information

 

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

 

The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation: (a) the bearing and engineered products industries are highly competitive, and this competition could reduce our profitability or limit our ability to grow; (b) The loss of a major customer, or a material adverse change in a major customer’s business, could result in a material reduction in our revenues, cash flows and profitability; (c) weakness in any of the industries in which our customers operate, as well as the cyclical nature of our customers’ businesses generally, could materially reduce our revenues, cash flows and profitability; (d) future reductions or changes in U.S. government spending could negatively affect our 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 changes in trade agreements or treaties and the imposition of tariffs on our goods exported to other countries; (g) our products are subject to certain approvals and government regulations and the loss of such approvals, or our failure to comply with such regulations, could materially reduce our revenues, cash flows and profitability; (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 production curtailments 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 or that we may acquire in the future may have liabilities which 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 and indefinite-lived intangibles have become impaired in the future, our results of operations and financial condition in such years may be materially and adversely affected; (n) we depend heavily on our senior management and other key personnel, the loss of whom could materially affect 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 are subject to changes in legislative, regulatory and legal developments involving income and other taxes; (r) we may be required to make significant future contributions to our pension plan; (s) we may incur material losses for product liability and recall-related claims; (t) environmental and health and safety laws and regulations impose substantial costs and limitations on our operations, and environmental compliance may be more costly than we expect; (u) our intellectual property and proprietary information are valuable, and any inability to protect them could adversely affect our business and results of operations; in addition, we may be subject to infringement claims by third parties; (v) cancellation of orders in our backlog could negatively impact our revenues, cash flows and profitability; (w) if we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud; (x) litigation could adversely affect our financial condition; (y) changes in accounting standards or changes in the interpretations of existing standards could affect our financial results; (z) risks associated with utilizing information technology systems could adversely affect our operations. Additional information regarding these and other risks and uncertainties is contained in our periodic filings with the SEC, including, without limitation, the risks identified under the heading “Risk Factors” set forth in the Annual Report on Form 10-K for the year ended March 30, 2019. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. We do not intend, and undertake no obligation, to update or alter any forward-looking statement. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appears elsewhere in this Quarterly Report.

 

20

 

 

Overview

 

We are a well-known international manufacturer and maker of highly engineered precision bearings and components. Our precision solutions are integral to the manufacture and operation of most machines and mechanical systems, reduce wear to moving parts, facilitate proper power transmission, and reduce damage and energy loss caused by friction. While we manufacture products in all major bearings categories, we focus primarily on the higher end of the bearing and engineered component markets where we believe our value-added manufacturing and engineering capabilities enable us to differentiate ourselves from our competitors and enhance profitability. We believe our unique expertise has enabled us to garner leading positions in many of the product markets in which we primarily compete. With 43 facilities, of which 33 are manufacturing facilities in four countries, we have been able to significantly broaden our end markets, products, customer base and geographic reach. We currently operate under four reportable business segments: Plain Bearings; Roller Bearings; Ball Bearings; and Engineered Products. The following further describes these reportable segments:

 

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

 

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

 

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

 

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

 

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

 

21

 

 

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

 

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

 

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

 

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

 

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

 

Outlook

 

Our net sales for the three-month period ended December 28, 2019 increased 3.2% compared to the same period last fiscal year. The increase was a result of a 9.9% increase in aerospace sales partially offset by a decrease of 7.5% in industrial sales. Excluding $2.9 million of sales associated with the Miami division sold in fiscal 2019, aerospace sales increased 13.0% year over year. The increase in aerospace sales was primarily due to the commercial and defense OEM and aftermarket business. Excluding $2.4 million of sales from the Swiss Tool acquisition in fiscal 2020, industrial sales decreased 11.0% year over year. The decrease in industrial sales was primarily driven by the marine business. Decreases in energy and mining were offset by increases in the semicon market. Overall, excluding sales associated with the Miami division and Swiss Tool, net sales increased 3.6% year over year. Our backlog as of December 28, 2019 was $477.7 million compared to $428.2 million as of December 29, 2018.

 

The Company expects net sales to be approximately $187.0 million to $191.0 million in the fourth quarter of fiscal 2020. This would result in a growth rate of 2.7% to 4.9% on a year-over-year basis and 1.3% to 3.5% excluding $2.4 million in sales associated with Swiss Tool, which the Company acquired in the second quarter of fiscal 2020.

 

The Company supplies precision bearings and components to Boeing and Boeing’s Vendor Base for the manufacturing of the 737 Max aircraft. Our current content for both the airframe and engines is approximately one hundred twenty thousand dollars per plane and will approach one hundred sixty thousand dollars per plane as new contracts mature.

 

Management believes that operating cash flows and available credit under all credit agreements will provide adequate resources to fund internal and external growth initiatives for the foreseeable future. As of December 28, 2019, we had cash and cash equivalents of $60.3 million of which approximately $13.5 million was cash held by our foreign operations.

  

22

 

 

Results of Operations

(dollars in millions)

  

   Three Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
Total net sales  $177.0   $171.5   $5.5    3.2%
Net income  $30.5   $16.2   $14.3    88.6%
Net income per common share: diluted  $1.22   $0.65           
Weighted average common shares: diluted   24,981,480    24,800,647           

 

Our net sales for the three-month period ended December 28, 2019 increased 3.2% compared to the same period last fiscal year. The increase was a result of a 9.9% increase in aerospace sales partially offset by a decrease of 7.5% in industrial sales. Excluding $2.9 million of sales associated with the Miami division sold in fiscal 2019, aerospace sales increased 13.0% year over year. The increase in aerospace sales was primarily due to the commercial and defense OEM and aftermarket business. Excluding $2.4 million of sales from the Swiss Tool acquisition in fiscal 2020, industrial sales decreased 11.0% year over year. The decrease in industrial sales was primarily driven by the marine business. Decreases in energy and mining were offset by increases in the semicon market. Overall, excluding sales associated with the Miami division and Swiss Tool, net sales increased 3.6% year over year. Our backlog as of December 28, 2019 was $477.7 million compared to $428.2 million as of December 29, 2018.

 

Net income for the third quarter of fiscal 2020 was $30.5 million compared to $16.2 million for the same period last year. Net income for the third quarter of fiscal 2020 was affected by $0.9 million of tax benefit associated with share-based compensation and $0.6 million of tax benefit associated with the decrease in the Company’s unrecognized tax positions due to the statute of limitations expiration, partially offset by $0.2 million of inventory purchase accounting costs associated with the acquisition of Swiss Tool, $0.2 million of losses on foreign exchange and $0.1 million of other items. Net income for the third quarter of fiscal 2019 was affected by $12.8 million of loss associated with the sale of the Miami division, $0.9 million of tax loss associated with the repatriation of cash from our foreign operations, $0.6 million of tax benefit associated with share-based compensation, and $1.5 million of tax benefit associated with the decrease in the Company’s unrecognized tax positions due to the statute of limitations expiration.

 

   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
Total net sales   $541.6   $520.4   $21.2    4.1%
Net income   $92.3   $73.8   $18.5    25.1%
Net income per common share: diluted  $3.71   $2.99           
Weighted average common shares: diluted   24,898,635    24,693,015           

 

Net sales increased $21.2 million or 4.1% for the nine-month period ended December 28, 2019 over the same period last year. The increase in net sales was mainly the result of a 10.5% increase in aerospace sales partially offset by a 5.8% decrease in industrial sales. Excluding $11.3 million of sales associated with the Miami division in fiscal 2019, aerospace sales increased 14.6% year over year. The increase in aerospace sales was primarily due to commercial and defense OEM and aftermarket business. Excluding $3.8 million of sales from the Swiss Tool acquisition in fiscal 2020, industrial sales decreased 7.7% year over year. The decrease in industrial sales was primarily due to mining, energy, marine and general industrial markets. Overall, excluding sales associated with the Miami division and Swiss Tool, net sales increased 5.6% year over year.

  

23

 

 

Net income for the nine months ended December 28, 2019 was $92.3 million compared to $73.8 million for the same period last year. The net income of $92.3 million in fiscal 2020 was impacted by $3.9 million of tax benefits associated with share-based compensation and $0.7 million of discrete tax benefits partially offset by $1.0 million of after-tax costs associated with the acquisition of Swiss Tool, $0.5 million of loss on foreign exchange and $0.2 million of other items. The net income of $73.8 million in fiscal 2019 was impacted by $12.8 million of after-tax loss associated with the sale of the Miami division, $0.9 million of tax loss associated with the repatriation of cash from our foreign operations, $0.8 million of after-tax cost associated with the loss on the extinguishment of debt, $5.1 million tax benefit associated with share-based compensation and $1.5 million of tax benefit associated with the decrease in the Company’s unrecognized tax positions due to the statute of limitations expiration.

 

Gross Margin

 

   Three Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Gross Margin   $70.7   $68.1   $2.6    3.8%
Gross Margin %    39.9%   39.7%          

 

Gross margin increased $2.6 million, or 3.8%, in the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019. Gross margin for the third quarter of fiscal 2020 was affected by $0.2 million of inventory purchase accounting adjustments associated with the acquisition of Swiss Tool. The year over year increase was mainly driven by higher sales achieved during the current period.

 

   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Gross Margin   $212.5   $203.7   $8.8    4.3%
Gross Margin %    39.2%   39.1%          

 

Gross margin increased $8.8 million or 4.3% for the first nine months of fiscal 2020 compared to the same period last year. Gross margin for the first nine months of fiscal 2020 was affected by $0.3 million of inventory purchase accounting adjustments associated with the acquisition of Swiss Tool. The increase, year over year, is primarily a result of higher sales achieved during the period.

 

Selling, General and Administrative

 

   Three Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
SG&A   $30.7   $29.1   $1.6    5.4%
% of net sales    17.4%   17.0%          

 

SG&A expenses increased by $1.6 million to $30.7 million for the third quarter of fiscal 2020 as compared to $29.1 million for the third quarter of fiscal 2019. This year over year increase was mainly driven by $1.2 million of additional share-based compensation expense and $0.4 million of personnel-related expenses. As a percentage of sales, SG&A was 17.4% for the third quarter of fiscal 2020 compared to 17.0% for the same period last year.

  

24

 

  

   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
SG&A   $91.6   $88.0   $3.6    4.0%
% of net sales    16.9%   16.9%          

 

SG&A expenses increased by $3.6 million to $91.6 million for the first nine months of fiscal 2020 compared to $88.0 million for the same period last year. This increase is primarily due to $3.3 million of additional share-based compensation and $0.3 million of other costs.

 

Other, Net

 

   Three Months Ended 
   December 28,
2019
   December 29,
2018
  

$

Change

  

%

Change

 
                 
Other, net   $2.5   $19.1   $(16.6)   (86.8)%
% of net sales    1.4%   11.2%          

 

Other operating expenses for the third quarter of fiscal 2020 totaled $2.5 million compared to $19.1 million for the same period last year. For the third quarter of fiscal 2020, other operating expenses were comprised mainly of $2.5 million of amortization of intangible assets and $0.1 million of restructuring costs partially offset by $0.1 million of other income. For the third quarter of fiscal 2019, other operating expenses were comprised mainly of $16.8 million of costs associated with the sale of the Miami division and $2.4 million of amortization of intangible assets, partially offset by $0.1 million of other income.

 

   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Other, net  $7.7   $23.9   $(16.2)   (67.9)%
% of net sales   1.4%   4.6%          

 

Other operating expenses for the first nine months of fiscal 2020 totaled $7.7 million compared to $23.9 million for the same period last year. For the first nine months of fiscal 2020, other operating expenses were comprised mainly of $7.1 million in amortization of intangibles, $0.9 million of costs associated with the acquisition of Swiss Tool, and $0.2 million of restructuring costs, partially offset by $0.5 million of other income. For the first nine months of fiscal 2019, other operating expenses were comprised mainly of $16.8 million of costs associated with the sale of the Miami division and $7.3 million in amortization of intangibles, offset by $0.2 million of other income.

 

Interest Expense, Net

 

   Three Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Interest expense, net  $0.5   $1.2   $(0.7)   (61.1)%
% of net sales   0.3%   0.7%          

  

25

 

 

Interest expense, net, generally consists of interest charged on the Company’s bank credit facilities and amortization of deferred financing fees, offset by interest income (see “Liquidity and Capital Resources – Liquidity” below). Interest expense, net was $0.5 million for the third quarter of fiscal 2020 compared to $1.2 million for the same period last year. The Company had total debt of $22.8 million at December 28, 2019 compared to $114.6 million at December 29, 2018.

 

   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Interest expense, net  $1.5   $4.4   $(2.9)   (65.9)%
% of net sales   0.3%   0.8%          

 

Interest expense, net was $1.5 million for the first nine months of fiscal 2020 compared to $4.4 million for the first nine months of fiscal 2019.

 

Income Taxes

 

   Three Months Ended 
   December 28,
2019
   December 29,
2018
 
         
Income tax expense (benefit)   $6.3   $2.8 
Effective tax rate    17.0%   15.0%

 

Income tax expense for the three-month period ended December 28, 2019 was $6.3 million compared to $2.8 million for the three-month period ended December 29, 2018. Our effective income tax rate for the three-month period ended December 28, 2019 was 17.0% compared to 15.0% for the three-month period ended December 29, 2018. The effective income tax rate for the three-month period ended December 28, 2019 of 17.0% includes $0.9 million of tax benefit associated with share-based compensation and $0.6 million tax benefit associated with the decrease in the Company’s unrecognized tax positions related to statute of limitations expiration. The effective income tax rate without these benefits for the three-month period ended December 28, 2019 would have been 20.9%. The effective income tax rate for the three-month period ended December 29, 2018 of 15.0% includes $4.0 million of tax benefit associated with the sale of the Miami division. The third quarter provision for fiscal 2019 was also impacted by $1.5 million of tax benefit associated with the decrease in the Company’s unrecognized tax positions, pertaining primarily to the consolidation and restructuring of the Company’s U.K. manufacturing facility. The third quarter provision for fiscal 2019 also includes $0.9 million of tax expense associated with withholding tax on a one-time repatriation of cash from the Company’s foreign operations and $0.6 million of tax benefit associated with share based compensation. The effective income tax rate without this benefit and other items for the three-month period ended December 29, 2018 would have been 22.3%.

 

   Nine Months Ended 
   December 28,
2019
   December 29,
2018
 
         
Income tax expense (benefit)   $18.9   $12.6 
Effective tax rate    17.0%   14.6%

 

Income tax expense for the nine-month period ended December 28, 2019 was $18.9 million compared to $12.6 million for the nine-month period ended December 29, 2018. Our effective income tax rate for the nine-month period ended December 28, 2019 was 17.0% compared to 14.6% for the nine-month period ended December 29, 2018. The effective income tax rate for the nine-month period ended December 28, 2019 of 17.0% includes $3.9 million of tax benefit associated with share-based compensation and $0.5 million tax benefit associated with the decrease in the Company’s unrecognized tax positions related to statute of limitations expiration and $0.2 million of tax benefit associated with other permanent adjustments from filing the Company’s fiscal 2018 foreign tax returns. The effective income tax rate without these benefits for the nine-month period ended December 28, 2019 would have been 21.2%. The effective income tax rate for the nine-month period ended December 29, 2018 of 14.6% includes a benefit of $4.0 million associated with the sale of the Miami division. The effective tax rate was also impacted by $1.5 million of tax benefit associated with the decrease in the Company’s unrecognized tax positions, pertaining primarily to the consolidation and restructuring of the Company’s U.K. manufacturing facility. The effective rate was also impacted by $0.9 million of tax expense associated with withholding tax on a one-time repatriation of cash from the Company’s foreign operations and $5.1 million of tax benefit associated with share-based compensation. The effective income tax rate without this benefit and other items for the nine-month period ended December 29, 2018 would have been 21.6%.

  

26

 

 

Acquisition

 

On August 15, 2019, the Company, through its Schaublin SA subsidiary, acquired all of the outstanding shares of Vianel Holding AG (“Swiss Tool”) for a purchase price of approximately $33.8 million (CHF 33.0 million), subject to a working capital adjustment. Swiss Tool, which is based in Bürglen, Switzerland, owns Swiss Tool Systems AG and other subsidiaries which collectively develop and manufacture high precision boring and turning solutions for metal cutting machines under the Swiss Tool Systems name. The preliminary purchase price allocation is as follows: accounts receivable ($1.3 million), inventory ($6.0 million), other current assets ($0.6 million), fixed assets ($3.5 million), intangible assets ($13.3 million), operating lease assets ($2.9 million), other non-current assets ($0.2 million), accounts payable ($0.6 million), other current liabilities ($0.9 million), operating lease liabilities ($2.9 million), deferred tax liabilities ($3.4 million) and noncurrent liabilities ($2.0 million). The purchase price allocation, which resulted in goodwill of approximately $16.0 million, is not deductible for tax purposes and is subject to change pending final valuation of the asset and liabilities, including intangible assets and deferred income taxes. Swiss Tool is included in the Engineered Products reporting segment.

 

Segment Information

 

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

 

Plain Bearings Segment

 

   Three Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Total net sales   $86.9   $79.3   $7.6    9.5%
                     
Gross margin   $35.0   $31.9   $3.1    9.7%
Gross margin %    40.3%   40.3%          
                     
SG&A   $6.7   $6.5   $0.2    3.9%
% of segment net sales    7.7%   8.2%          

 

Net sales increased $7.6 million, or 9.5%, for the three months ended December 28, 2019 compared to the same period last year. The 9.5% increase was primarily driven by an increase of 15.4% in our aerospace markets partially offset by a 7.0% decrease in our industrial markets. The increase in aerospace was primarily due to commercial and defense, both OEM and aftermarket. The decrease in industrial sales was due to mining and general industrial markets.

  

27

 

 

Gross margin as a percent of sales was 40.3% for the third quarter of fiscal 2020 compared to 40.3% for the same period last year.

 

   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Total net sales   $264.4   $235.3   $29.1    12.3%
                     
Gross margin   $104.8   $93.4   $11.4    12.2%
Gross margin %    39.7%   39.7%          
                     
SG&A   $19.8   $19.0   $0.8    4.1%
% of segment net sales    7.5%   8.1%          

 

Net sales increased $29.1 million, or 12.3%, for the nine months ended December 28, 2019 compared to the same period last year. The 12.3% increase was primarily driven by an increase of 18.7% in our aerospace markets partially offset by a 5.4% decrease in the industrial markets. The increase in aerospace was primarily due to commercial and defense, both OEM and aftermarket. The decrease in industrial sales was mostly driven by the mining, energy, and general industrial markets.

 

Gross margin as a percent of sales was 39.7% for the first nine months of fiscal 2020 compared to 39.7% for the same period last year.

 

Roller Bearings Segment

 

   Three Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Total net sales   $31.8   $34.8   $(3.0)   (8.6)%
                     
Gross margin   $14.0   $14.6   $(0.6)   (4.0)%
Gross margin %    44.1%   42.0%          
                     
SG&A   $1.6   $1.6   $0.0    4.7%
% of segment net sales    5.1%   4.5%          

 

Net sales decreased $3.0 million, or 8.6% for the three months ended December 28, 2019 compared to the same period last year. Our industrial markets decreased 15.1%, while our aerospace markets decreased 2.4%. The decrease in industrial sales was primarily in our mining and energy markets while the decrease in aerospace was primarily in our defense OEM market.

 

Gross margin for the three months ended December 28, 2019 was $14.0 million, or 44.1% of sales, compared to $14.6 million, or 42.0% of sales, in the comparable period in fiscal 2019. This increase in the gross margin percentage was primarily due to product mix during the period.

  

28

 

 

   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Total net sales  $101.3   $107.7   $(6.4)   (6.0)%
                     
Gross margin   $42.0   $45.9   $(3.9)   (8.5)%
Gross margin %    41.4%   42.6%          
                     
SG&A   $4.9   $4.7   $0.2    3.2%
% of segment net sales    4.8%   4.4%          

 

Net sales decreased $6.4 million, or 6.0%, for the nine months ended December 28, 2019 compared to the same period last year. Our industrial markets decreased 14.4% while our aerospace markets increased by 2.8%. The decrease in industrial sales was primarily due to mining, energy and general industrial market activity while the increase in aerospace was driven by the commercial OEM and distribution markets.

 

Gross margin for the nine months ended December 28, 2019 was $42.0 million, or 41.4% of sales, compared to $45.9 million, or 42.6% of sales, in the comparable period in fiscal 2019. This decrease in the gross margin percentage was primarily due to product mix during the period.

 

Ball Bearings Segment

 

   Three Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Total net sales   $18.5   $16.7   $1.8    10.5%
                     
Gross margin   $8.2   $6.9   $1.3    19.3%
Gross margin %    44.3%   41.0%          
                     
SG&A   $1.6   $1.7   $(0.1)   (3.5)%
% of segment net sales    8.6%   9.9%          

 

Net sales increased $1.8 million, or 10.5%, for the third quarter of fiscal 2020 compared to the same period last year. Our industrial markets increased 10.4% while our aerospace markets increased 10.7% during the period. The increase in industrial sales was a result of the semicon and general industrial markets. The increase in aerospace sales was primarily in the defense OEM market.

 

Gross margin as a percent of sales increased to 44.3% for the third quarter of fiscal 2020 compared to 41.0% for the same period last year. The increase in margin percentage was a result of increased sales and cost efficiencies achieved during the period.

  

29

 

 

   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Total net sales   $53.6   $52.8   $0.8    1.5%
                     
Gross margin   $23.5   $21.5   $2.0    9.0%
Gross margin %    43.8%   40.8%          
                     
SG&A   $4.8   $4.9   $(0.1)   (1.3)%
% of segment net sales    9.0%   9.2%          

 

Net sales increased $0.8 million, or 1.5%, for the nine months ended December 28, 2019 compared to the same period last year. Our industrial market sales decreased 3.4% while sales to our aerospace markets increased 14.3%. The decrease in industrial sales was mainly driven by the general industrial markets while the increase in aerospace sales was primarily driven by the defense OEM market.

 

Gross margin as a percent of sales increased to 43.8% for the nine months ended December 28, 2019 compared to 40.8% for the same period last year. The increase was primarily due to cost efficiencies achieved during the period.

 

Engineered Products Segment

 

   Three Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Total net sales   $39.8   $40.6   $(0.8)   (1.8)%
                     
Gross margin   $13.5   $14.7   $(1.2)   (8.5)%
Gross margin %    33.8%   36.2%          
                     
SG&A   $4.4   $4.8   $(0.4)   (8.0)%
% of segment net sales    11.1%   11.8%          

 

Net sales decreased $0.8 million, or 1.8%, for the third quarter of fiscal 2020 compared to the same period last year. Our industrial sales decreased 12.0% while our aerospace sales increased 5.4%. Excluding $2.9 million of sales associated with our Miami division sold in fiscal 2019, aerospace sales increased 20.3%. The increase in aerospace sales was primarily driven by the defense OEM market. Excluding $2.4 million of sales associated with the acquisition of Swiss Tool in fiscal 2020, industrial sales decreased 25.9% year over year. The decrease in industrial sales was driven by the marine and general industrial markets. Overall, excluding sales associated with the Miami division and Swiss Tool, net sales decreased 0.5% compared to the same period last year.

 

Gross margin as a percent of sales decreased to 33.8% for the third quarter of fiscal 2020 compared to 36.2% for the same period last year. Gross margin for the third quarter of fiscal 2020 was affected by $0.2 million of inventory purchase accounting adjustments associated with the acquisition of Swiss Tool. This decrease as a percent of sales is primarily due to product mix.

  

30

 

 

   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
Total net sales   $122.4   $124.5   $(2.1)   (1.7)%
                     
Gross margin   $42.2   $42.9   $(0.7)   (1.5)%
Gross margin %    34.5%   34.4%          
                     
SG&A   $13.1   $15.2   $(2.1)   (13.7)%
% of segment net sales    10.7%   12.2%          

 

Net sales decreased $2.1 million, or 1.7%, for the nine months ended December 28, 2019 compared to the same period last year. Our aerospace sales decreased 3.7%, which was partially offset by a 1.4% increase in industrial sales during the period. Excluding $11.3 million of sales associated with our Miami division sold in fiscal 2019, aerospace sales increased 13.1% year over year. The increase in aerospace sales was primarily driven by the commercial and defense OEM markets. Excluding $3.8 million of sales associated with the acquisition of Swiss Tool in fiscal 2020, industrial sales decreased 6.5% year over year. The decrease in industrial sales was driven by the marine and general industrial markets. Overall, excluding sales associated with the Miami division and Swiss Tool, net sales increased 4.7% year over year.

 

Gross margin as a percent of sales increased to 34.5% for the nine months ended December 28, 2019 compared to 34.4% for the same period last year. Gross margin for the first nine months of fiscal 2020 was affected by $0.3 million of inventory purchase accounting adjustments associated with the acquisition of Swiss Tool.

 

Corporate

 

   Three Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
SG&A   $16.4   $14.7   $1.7    11.6%
% of total net sales    9.2%   8.5%          

  

Corporate SG&A increased $1.7 million for the three months ended December 28, 2019 compared to the same period last year due to $1.2 million of additional share-based compensation expenses and $0.7 million of additional personnel-related costs partially offset by a reduction of $0.2 million of other costs.

 

   Nine Months Ended 
   December 28,
2019
   December 29,
2018
   $
Change
   %
Change
 
                 
SG&A   $49.0   $44.2   $4.8    10.7%
% of total net sales    9.0%   8.5%          

 

Corporate SG&A increased $4.8 million for the nine months ended December 28, 2019 compared to the same period last year due to $3.3 million of additional share-based compensation expenses and $2.2 million of additional personnel-related costs partially offset by a reduction of $0.7 million of professional costs.

  

31

 

 

Liquidity and Capital Resources

 

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

 

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

 

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

 

Liquidity

 

As of December 28, 2019, we had cash and cash equivalents of $60.3 million of which approximately $13.5 million was cash held by our foreign operations. We expect that our undistributed foreign earnings will be re-invested indefinitely for working capital, internal growth and acquisitions for and by our foreign entities.

 

Domestic Credit Facility

 

On January 31, 2019, the Company amended the 2015 credit agreement with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer, and the other lenders party thereto (the “2015 Credit Agreement”). The 2015 Credit Agreement as so amended (the “Amended Credit Agreement”) now provides the Company with a $250.0 million revolving credit facility (the “Revolver”) in place of the revolver provided in the 2015 Credit Agreement. The Revolver expires on January 31, 2024. Debt issuance costs associated with the Amended Credit Agreement totaled $0.9 million and will be amortized through January 31, 2024 along with the unamortized debt issuance costs remaining from the 2015 Credit Agreement.

 

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

 

The Amended Credit Agreement requires the Company to comply with various covenants, including among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.50 to 1. The Amended Credit Agreement allows the Company to, among other things, make distributions to shareholders, repurchase its stock, incur other debt or liens, or acquire or dispose of assets provided that the Company complies with certain requirements and limitations of the Amended Credit Agreement. As of December 28, 2019, the Company was in compliance with all such covenants.

 

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

  

32

 

 

Approximately $3.9 million of the Revolver is being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs. As of December 28, 2019, $1.6 million in unamortized debt issuance costs remain. The Company has the ability to borrow up to an additional $246.2 million under the Revolver as of December 28, 2019.

 

Foreign Term Loan and Revolving Credit Facility

 

On August 15, 2019, one of our foreign divisions, Schaublin SA (“Schaublin”), entered into two separate credit agreements (the “Schaublin Credit Agreements”) with Credit Suisse (Switzerland) Ltd. to (i) finance the acquisition of Swiss Tool, which is discussed in further detail in Note 13, and (ii) provide future working capital. The Schaublin Credit Agreements provided Schaublin with a CHF 15.0 million (approximately $15.4 million) term loan (the “Foreign Term Loan”), which expires on August 15, 2024 and a CHF 15.0 million (approximately $15.4 million) revolving credit facility (the “Foreign Revolver”), which continues in effect until terminated by either Schaublin or Credit Suisse. Debt issuance costs associated with the Schaublin Credit Agreements totaled CHF 0.3 million (approximately $0.3 million) and will be amortized throughout the life of the credit agreements.

 

Amounts outstanding under the Foreign Term Loan and the Foreign Revolver generally bear interest at LIBOR plus a specified margin. The applicable margin is based on Schaublin’s ratio of total net debt to consolidated EBITDA at each measurement date. Currently, Schaublin’s margin is 2.00%.

 

The Foreign Credit Agreements require Schaublin to comply with various covenants, which are tested annually on March 31. These covenants include, among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 3.00 to 1 as of March 31, 2020 and not greater than 2.50 to 1 as of March 31, 2021 and thereafter. Schaublin is also required to maintain an economic equity of CHF 20.0 million at all times. The Foreign Credit Agreements allow Schaublin to, among other things, incur other debt or liens and acquire or dispose of assets provided that Schaublin complies with certain requirements and limitations of the Foreign Credit Agreements. As of December 28, 2019, Schaublin was in compliance with all such covenants.

 

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

 

As of December 28, 2019, there was approximately $3.2 million outstanding under the Foreign Revolver and approximately $15.4 million outstanding under the Foreign Term Loan. As of December 28, 2019, approximately $0.2 million in unamortized debt issuance costs remain. Schaublin has the ability to borrow up to an additional $12.2 million under the Foreign Revolver as of December 28, 2019.

 

Schaublin’s required future annual principal payments for the next five years and thereafter are $0 for fiscal 2020, approximately $6.2 million for fiscal 2021, approximately $3.1 million for each year from fiscal 2022 through fiscal 2024 and approximately $3.1 million thereafter.

 

Other Notes Payable

 

On October 1, 2012, Schaublin purchased the land and building that it occupied and had been leasing for approximately $14.9 million. Schaublin obtained a 20-year fixed-rate mortgage of approximately $9.9 million at an interest rate of 2.9%. The balance of the purchase price of approximately $5.1 million was paid from cash on hand. The balance on this mortgage as of December 28, 2019 was approximately $6.1 million.

  

33

 

 

Cash Flows

 

Nine-month Period Ended December 28, 2019 Compared to the Nine-month Period Ended December 29, 2018

 

The following table summarizes our cash flow activities:

 

   FY20   FY19   $ Change 
Net cash provided by (used in):            
Operating activities   $111.2   $79.0   $32.2 
Investing activities    (61.1)   (5.0)   (56.1)
Financing activities    (20.7)   (44.4)   23.7 
Effect of exchange rate changes on cash    1.0    (2.1)   3.1 
Increase in cash and cash equivalents   $30.4   $27.5   $2.9 

 

During the first nine months of fiscal 2020, we generated cash of $111.2 million from operating activities compared to generating cash of $79.0 million during the same period of fiscal 2019. The increase of $32.2 million for fiscal 2020 was mainly a result of the favorable impact of a net change in operating assets and liabilities of $26.3 million and an increase in net income of $18.5 million offset by non-cash charges of $12.6 million. The favorable change in operating assets and liabilities was primarily the result of an increase in the amount of cash being provided by working capital items as detailed in the table below, while the reduction of non-cash charges resulted from a decrease of $16.8 million related to the sale of the Miami division in the third quarter of fiscal 2019, $1.0 million from extinguishment of debt in the prior year, $0.3 million of amortization of intangible assets and $0.4 million of amortization of deferred financing costs offset by an increase of $1.1 million in deferred taxes, $1.3 million of depreciation, $3.3 million of share-based compensation charges, and $0.2 million of other non-cash charges.

 

The following chart summarizes the favorable change in operating assets and liabilities of $26.3 million for fiscal 2020 versus fiscal 2019 and the unfavorable change of $41.0 million for fiscal 2019 versus fiscal 2018.

  

   FY20   FY19 
Cash provided by (used in):        
Accounts receivable   $13.4   $(3.8)
Inventory    11.2    (19.9)
Prepaid expenses and other current assets    1.1    1.4 
Other non-current assets    (4.1)   1.0 
Accounts payable    0.4    (9.4)
Accrued expenses and other current liabilities    (1.0)   0.2 
Other non-current liabilities    5.3    (10.5)
Total change in operating assets and liabilities:  $26.3   $(41.0)

 

During fiscal 2020, we used $61.1 million for investing activities as compared to $5.0 million for fiscal 2019. This increase in cash used was attributable to the $33.8 million acquisition of Swiss Tool in fiscal 2020, a reduction of $1.6 million in proceeds received in fiscal 2020 from the sale of assets and $22.3 million in proceeds received from the sale of the Miami division in fiscal 2019. This was partially offset by a decrease of $1.6 million in capital expenditures.

 

During fiscal 2020, we used $20.7 million from financing activities compared to using $44.4 million for fiscal 2019. This decrease in cash used was primarily attributable to proceeds received from borrowings of $24.8 million for the acquisition of Swiss Tool and $14.6 million less payments made on outstanding debt, partially offset by $8.6 million fewer proceeds from the exercise of stock options, $6.8 million of additional treasury stock purchases, and $0.3 million of finance fees paid in connection with the credit facilities.

  

34

 

 

Capital Expenditures

 

Our capital expenditures were $27.6 million for the nine-month period ended December 28, 2019. We expect to make additional capital expenditures of $5.0 to $10.0 million during the remainder of fiscal 2020 in connection with our existing business. We expect to fund fiscal 2020 capital expenditures principally through existing cash and internally generated funds. We may also make substantial additional capital expenditures in connection with acquisitions.

 

Other Matters

 

Critical Accounting Policies and Estimates

 

Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We believe the most complex and sensitive judgments, because of their significance to the Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Notes to the Consolidated Financial Statements in our fiscal 2019 Annual Report on Form 10-K describe the significant accounting estimates and policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management’s estimates. There have been no significant changes in our critical accounting estimates during the first nine months of fiscal 2020 other than those described in Note 2 of the unaudited interim consolidated financial statements.

 

Off-Balance Sheet Arrangements

 

As of December 28, 2019, we had no significant off-balance sheet arrangements other than $3.9 million of outstanding standby letters of credit, all of which were under the Revolver.

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

 

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

 

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

 

Foreign Currency Exchange Rates. Our Swiss operations utilize the Swiss franc as the functional currency, our French and German operations utilize the euro as the functional currency and our Polish operations utilize the Polish zloty as the functional currency. As a result, we are exposed to risk associated with fluctuating currency exchange rates between the U.S. dollar and these currencies. Foreign currency transaction gains and losses are included in earnings. Approximately 10% of our net sales were impacted by foreign currency fluctuations for the three-month period ended December 28, 2019 compared to 8% for the same period in the prior year. Approximately 9% of our net sales were impacted by foreign currency fluctuations for the nine-month period ended December 28, 2019 compared to 8% for the same period in the prior year. We expect that this proportion is likely to increase as we seek to increase our penetration of foreign markets, particularly within the aerospace and defense markets. Foreign currency transaction exposure arises primarily from the transfer of foreign currency from one subsidiary to another within the group, and to foreign currency denominated trade receivables. Unrealized currency translation gains and losses are recognized upon translation of the foreign operations’ balance sheets to U.S. dollars. Because our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our earnings. We periodically enter into derivative financial instruments in the form of forward exchange contracts to reduce the effect of fluctuations in exchange rates on certain third-party sales transactions denominated in non-functional currencies. Based on the accounting guidance related to derivatives and hedging activities, we record derivative financial instruments at fair value. For derivative financial instruments designated and qualifying as cash flow hedges, the effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive income, and is reclassified into earnings when the hedged transaction affects earnings. As of December 28, 2019, we had no derivatives.

 

35

 

 

ITEM 4. Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of December 28, 2019. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 28, 2019, our disclosure controls and procedures were (1) designed to ensure that information relating to our Company required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported to our Chief Executive Officer and Chief Financial Officer within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, and (2) effective, in that they provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

Changes in Internal Control over Financial Reporting

 

No change in our internal control over financial reporting occurred during the three-month period ended December 28, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

  

36

 

 

PART II - OTHER INFORMATION

 

ITEM 1. Legal Proceedings

 

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

 

ITEM 1A. Risk Factors

 

There have been no material changes to our risk factors and uncertainties since the most recent filing of our Form 10-K. For a discussion of the Risk Factors, refer to Part I, Item 2, “Cautionary Statement As To Forward-Looking Information,” contained in this report and Part I, Item 1A, “Risk Factors,” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2019.

 

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

 

Unregistered Sales of Equity Securities

 

None.

  

Use of Proceeds

 

Not applicable.

   

37

 

 

Issuer Purchases of Equity Securities

 

On May 21, 2019, the Board authorized us to repurchase up to $100.0 million of our common stock from time to time on the open market, in block trade transactions, and through privately negotiated transactions, in compliance with SEC Rule 10b-18 depending on market conditions, alternative uses of capital, and other relevant factors. Purchases may be commenced, suspended, or discontinued at any time without prior notice. This repurchase authorization terminates and replaces the $50.0 million stock repurchase program authorized by the Board in 2013.

  

Total share repurchases under the 2019 plan for the three months ended December 28, 2019 are as follows:

  

Period  Total number
of shares
purchased
   Average
price paid
per share
   Number of
shares
purchased
as part of the
publicly
announced
program
   Approximate
dollar value
of shares still
available to be
purchased
under the
program
(000’s)
 
09/29/2019 – 10/26/2019    -   $-    -   $96,786 
10/27/2019 – 11/23/2019    93    163.40    93    96,771 
11/24/2019 – 12/28/2019    10,156    165.90    10,156   $95,086 
Total    10,249   $165.88    10,249      

 

The 2013 plan was terminated on May 21, 2019, therefore, there were no share repurchases during the three months ended December 28, 2019 under the 2013 plan.

 

ITEM 3. Defaults Upon Senior Securities

 

Not applicable.

  

ITEM 4. Mine Safety Disclosures

 

Not applicable.

 

ITEM 5. Other Information

 

On January 31, 2020, the Company sold its property located in Houston, Texas for approximately $8.0 million. The transaction will be recorded in the fourth quarter of fiscal 2020.

  

38

 

 

ITEM 6. Exhibits

 

Exhibit
Number

 

Exhibit Description

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

  

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

  

39

 

 

SIGNATURES

 

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

 

  RBC Bearings Incorporated
  (Registrant)
     
  By:

/s/ Michael J. Hartnett

    Name:  Michael J. Hartnett
    Title: Chief Executive Officer
    Date: February 4, 2020
       
  By: /s/ Daniel A. Bergeron
    Name: Daniel A. Bergeron
    Title: Chief Financial Officer and Chief Operating Officer
    Date: February 4, 2020

 

40

 

 

EXHIBIT INDEX

 

Exhibit
Number

 

Exhibit Description

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

 

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

 

 

41

 

 

Exhibit 31.01

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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

 

I, Michael J. Hartnett, certify that:

 

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

 

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

 

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

 

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

 

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

 

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

 

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

 

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

 

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

 

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

 

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

 

Date: February 4, 2020 By: /s/ Michael J. Hartnett
    Michael J. Hartnett
    President and Chief Executive Officer

 

Exhibit 31.02

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

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

 

I, Daniel A. Bergeron, certify that:

 

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

 

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

 

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

 

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

 

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

 

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

 

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

 

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

 

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

 

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

 

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

 

Date: February 4, 2020 By: /s/ Daniel A. Bergeron
    Daniel A. Bergeron
    Vice President, Chief Financial Officer and
Chief Operating Officer

 

Exhibit 32.01

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO

18 U.S.C SECTION 1350

 

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

 

(i) the Quarterly Report on Form 10-Q for the period ended December 28, 2019 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

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

 

Date: February 4, 2020

 

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

Exhibit 32.02

 

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

 

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

 

(i) the Quarterly Report on Form 10-Q for the period ended December 28, 2019 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

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

 

Dated: February 4, 2020

 

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