RBC Bearings INC

Previous wording

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 governmental trade policies and tariffs relating to our supplies imported from foreign vendors or our finished goods exported to other countries; (g) some of 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 (such as Dodge) or that we may acquire in the future may have liabilities that are not known to us; (m) goodwill and indefinite-lived intangibles comprise a significant portion of our total assets, and if we determine that goodwill 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 he…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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 governmental trade policies and tariffs relating to our supplies imported from foreign vendors or our finished goods exported to other countries; (g) some of 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 (such as Dodge) or that we may acquire in the future may have liabilities that are not known to us; (m) goodwill and indefinite-lived intangibles comprise a significant portion of our total assets, and if we determine that goodwill 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 he…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We are a well-known international manufacturer and maker of highly engineered bearings and precision 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 expertise has enabled us to garner leading positions in many of the product markets in which we primarily compete. With 53 facilities in 11 countries, of which 36 are manufacturing facilities, we have been able to significantly broaden our end markets, products, customer base and geographic reach.

Current wording

We are a leading international manufacturer of highly engineered precision bearings, components and essential systems for the industrial, aerospace and defense industries. Our precision solutions are integral to the manufacture and operation of most machines and 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 expertise has enabled us to garner leading positions in many of the product markets in which we primarily compete. With 54 facilities in 11 countries, of which 38 are manufacturing facilities, we have been able to significantly broaden our end markets, products, customer base and geographic reach.

Previous wording

Our chief operating decision maker makes operating decisions, assesses the performance of the business, and allocates resources under two reportable business segments – Aerospace/Defense and Industrial:

Current wording

Our chief operating decision maker (“CODM”) makes operating decisions, assesses the performance of the business, and allocates resources under two reportable business segments – Aerospace/Defense and Industrial:

Previous wording

Our net sales for the three-month period ended December 30, 2023 increased 6.3% compared to the same period last fiscal year. The increase in net sales was a result of a 22.5% increase in our Aerospace/Defense segment partially offset by a 0.6% decrease in our Industrial segment.

Current wording

Our net sales for the three-month period ended June 29, 2024 increased 5.0% compared to the same period last fiscal year. The increase in net sales was a result of a 23.7% increase in our Aerospace/Defense segment partially offset by a 3.5% decrease in our Industrial segment. Our backlog, as of June 29, 2024 was $825.8 compared to $821.5 as of March 30, 2024.

Previous wording

We are continuing to see the recovery of the commercial aerospace business, which experienced a 19.9% increase in net sales for the three-month period ended December 30, 2023 over the same period last fiscal year. We anticipate this growth to continue through at least the rest of the current fiscal year. Orders have continued to grow as evidenced by our aerospace backlog. Defense sales, which represented approximately 33.2% of segment sales during the quarter, were up 28.2% year over year. We expect this growth to continue as we are gearing up to fulfill the substantial number of marine orders in our backlog.

Current wording

We are continuing to see the expansion of the commercial aerospace business, which experienced a 17.3% increase in net sales for the three-month period ended June 29, 2024 versus the same period last fiscal year. We anticipate this growth to continue through the rest of the current fiscal year and beyond. Orders have continued to grow as evidenced by our backlog. Defense sales, which represented approximately 34.8% of segment sales during the quarter, were up 38.1% quarter over quarter. We expect this growth to continue throughout the current fiscal year and beyond as we are gearing up to fulfill the substantial number of defense orders in our backlog. Though sales in our Industrial segment have decreased compared to the comparable period in the prior year, our margins have continued to improve driven by continuous operational improvements and product mix.

Previous wording

The Company expects net sales to be approximately $405.0 to $415.0 in the fourth quarter of fiscal 2024 compared to $394.4 for the fourth quarter of the prior fiscal year, a growth rate of 2.7% to 5.2%.

Current wording

The Company expects net sales to be approximately $395.0 to $405.0 in the second quarter of fiscal 2025, an increase of 2.4% to 5.0% compared to the second quarter of fiscal 2024.

Previous wording

We believe that operating cash flows and available credit under the Revolving Credit Facility will provide adequate resources to fund internal growth initiatives for the foreseeable future, including at least the next 12 months. As of December 30, 2023, we had cash and cash equivalents of $71.6, of which approximately $39.4 was cash held by our foreign operations.

Current wording

We believe that operating cash flows and available credit under the Revolving Credit Facility will provide adequate resources to fund internal growth initiatives for the foreseeable future, including at least the next 12 months. As of June 29, 2024, we had cash and cash equivalents of $76.8, of which approximately $29.4 was cash held by our foreign operations.

Previous wording

Our net sales for the three-month period ended December 30, 2023 increased 6.3% compared to the same period last fiscal year. Net sales in our Industrial segment decreased 0.6% year over year. While stable overall, we saw strength in food and beverage and mining and metals offset by weakness in semiconductor. Net sales in our Aerospace/Defense segment increased 22.5% year over year, led by commercial aerospace, which was up 19.9% compared to the same period in the prior fiscal year. Defense sales increased 28.2% compared to the same period in the prior fiscal year, driven by marine. The increase in commercial aerospace reflected growth in orders from large OEMs as build rates escalate and our expansion in the aftermarket.

Current wording

Our net sales for the three-month period ended June 29, 2024 increased 5.0% compared to the same period last fiscal year. Net sales in our Industrial segment decreased 3.5% quarter over quarter against a strong comparable quarter in the prior fiscal year. Food and beverage, and mining and metals markets were very strong while semicon and oil and gas sales showed weakness compared to the prior year. Net sales in our Aerospace/Defense segment increased 23.7% quarter over quarter, led by commercial OEM and the aftermarket, which was up 17.3% compared to the same period in the prior year. Defense sales increased 38.1% compared to the same period in the prior year, driven by aerospace and marine. The increase in commercial aerospace reflected recovery in orders from large OEMs as build rates escalate, and our expansion in the aftermarket.

Previous wording

Net income attributable to common stockholders for the third quarter of fiscal 2024 was $40.8 compared to $30.6 for the same period last fiscal year. Net income for the third quarter of fiscal 2023 was affected by approximately $1.2 of pre-tax transition services costs and other costs associated with the Dodge acquisition.

Current wording

Net income attributable to common stockholders for the first quarter of fiscal 2025 was $55.7 compared to $44.3 for the same period last fiscal year.

Previous wording

SG&A for the third quarter of fiscal 2024 was $63.9, or 17.1% of net sales, as compared to $56.8, or 16.1% of net sales, for the same period of fiscal 2023. The increase in SG&A was primarily driven by personnel costs, IT costs and other professional fees.

Current wording

SG&A for the first quarter of fiscal 2025 was $67.6, or 16.6% of net sales, as compared to $64.7, or 16.7% of net sales, for the same period of fiscal 2024. The increase in SG&A was primarily driven by increased personnel costs, IT costs and other professional fees.

Previous wording

Other operating expenses for the third quarter of fiscal 2024 totaled $18.9 compared to $18.8 for the same period last fiscal year. For the third quarter of fiscal 2024, other operating expenses included $17.7 of amortization of intangible assets, $0.1 of restructuring costs and $1.1 of other items. For the third quarter of fiscal 2023, other operating expenses included $1.2 of transition services costs and other costs associated with the Dodge acquisition, $17.4 of amortization of intangible assets, and $0.2 of other items.

Current wording

Other operating expenses for the first quarter of fiscal 2025 totaled $18.9 compared to $18.2 for the same period last fiscal year. For the first quarter of fiscal 2025, other operating expenses included $17.8 of amortization of intangible assets and $1.1 of other items. For the first quarter of fiscal 2024, other operating expenses included $17.5 of amortization of intangible assets and $0.7 of other items.

Previous wording

Other non-operating expense was $0.4 for the nine months ended December 30, 2023 and consisted primarily of post-retirement benefit costs and foreign exchange gains/losses partially offset by $1.6 of insurance proceeds received. Other non-operating expense for the nine months ended December 31, 2022 was $2.5 and consisted primarily of post-retirement benefit costs and foreign exchange gains and losses.

Current wording

Other non-operating expenses were $0.4 for the first quarter of fiscal 2025 compared to $0.5 for the same period in the prior year and consisted primarily of post-retirement benefit costs and foreign exchange gains and losses.

Previous wording

Income tax expense for the first nine months of fiscal 2024 was $39.4 compared to $31.9 for the same period in the prior fiscal year. Our effective income tax rate for the first nine months of fiscal 2024 was 21.0% compared to 21.3% for the same period in the prior fiscal year. The effective income tax rate for the first nine months of fiscal 2024 of 21.0% included $2.4 of discrete tax benefits associated with stock-based compensation partially offset by $0.2 of other items; the effective income tax rate without these net benefits would have been 22.2%. The effective income tax rate for the first nine months of fiscal 2023 of 21.3% included $3.2 of discrete tax benefits associated with stock-based compensation partially offset by $0.1 of other items; the effective income tax rate without these net benefits and items would have been 23.5%.

Current wording

Income tax expense for the three-month period ended June 29, 2024 was $18.5 compared to $14.0 for the three-month period ended July 1, 2023. Our effective income tax rate for the three-month period ended June 29, 2024 was 23.1% compared to 21.9% for the three-month period ended July 1, 2023. The effective income tax rate for the three-month period ended June 29, 2024 of 23.1% included $0.6 of tax benefits associated with stock-based compensation. The effective income tax rate without discrete items for the three-month period ended June 29, 2024 would have been 23.8%. The effective income tax rate for the three-month period ended July 1, 2023 of 21.9% included $0.4 of tax benefits associated with stock-based compensation and $0.1 of tax benefits associated with other items. The effective income tax rate without discrete items for the three-month period ended July 1, 2023 would have been 22.6%.

Previous wording

Our chief operating decision maker makes operating decisions, assesses the performance of the business, and allocates resources under two operating segments: Aerospace/Defense; and Industrial. We use segment net sales and gross margin as the primary measurements to assess the financial performance of each reportable segment.

Current wording

Our CODM makes operating decisions, assesses the performance of the business, and allocates resources under two operating segments: Aerospace/Defense; and Industrial. We use segment net sales and gross margin as the primary measurements to assess the financial performance of each reportable segment.

Previous wording

Net sales increased $23.7, or 22.5%, for the third quarter of fiscal 2024 compared to the same period last fiscal year. Commercial aerospace, which consisted of $67.2 of OEM and $19.1 of distribution and aftermarket, increased by 19.9% compared to fiscal 2023 when OEM net sales were $57.6 and distribution and aftermarket net sales were $14.4. This was driven by a continuing recovery as build rates and orders escalate in the OEM markets and the aftermarket begins to pick up. Our defense markets, which consisted of $35.9 of OEM and $7.0 of distribution and aftermarket, increased by 28.2% compared to fiscal 2023 when OEM net sales were $27.1 and distribution and aftermarket net sales were $6.4. Sales in our marine business have been strong and we are starting to ramp up shipments on many of our defense orders, most notably, for the Virginia-class and Columbia-class submarines.

Current wording

Net sales increased $28.6, or 23.7%, for the three months ended June 29, 2024 compared to the same period last fiscal year. Our commercial aerospace markets, which consisted of $78.5 of OEM and $18.8 of distribution and aftermarket, increased by 17.3% compared to fiscal 2024 when OEM net sales were $65.6 and distribution and aftermarket net sales were $17.3. This was driven by strong execution on the incremental orders we have seen in recent periods in the OEM markets and expansion in the aftermarket. Our defense markets, which consisted of $40.2 of OEM and $11.6 of distribution and aftermarket, increased by 38.1% compared to fiscal 2024 when OEM net sales were $30.3 and distribution and aftermarket net sales were $7.3. The increase in defense sales was driven by marine, helicopters and missiles.

Previous wording

Gross margin as a percentage of segment net sales was 41.2% for the third quarter of fiscal 2024 compared to 39.5% for the same period last fiscal year. The increase in gross margin as a percentage of net sales was driven by increased sales volumes, notably in the defense aftermarket, product mix and efficiencies achieved at the plants in part due to increased sales volumes.

Current wording

Gross margin as a percentage of segment net sales was 42.3% for the first quarter of fiscal 2025 compared to 39.3% for the same period last fiscal year. The increase in gross margin as a percentage of net sales was primarily driven by efficiencies achieved at the plants in part due to increased sales volumes and favorable product mix. This margin profile is expected to continue as the commercial aerospace industry continues to expand and we continue to enhance our manufacturing processes.

Previous wording

Net sales decreased $1.4, or 0.6%, for the third quarter of fiscal 2024 compared to the same period last fiscal year. While stable overall, we saw strength in food and beverage and mining and metals offset by weakness in semiconductor. Industrial OEM sales were $79.4 and $79.4 for the three month periods ended December 30, 2023 and December 31, 2022, respectively. Industrial sales to distribution and the aftermarket were $165.3 and $166.7 for the three month periods ended December 30, 2023 and December 31, 2022, respectively.

Current wording

Net sales decreased $9.4 for the three months ended June 29, 2024 compared to the same period last fiscal year. We saw strength in food and beverage, and mining and metals markets offset by weakness in semiconductor and oil and gas. Industrial OEM sales were $81.8 and $84.7 for the three month periods ended June 29, 2024 and July 1, 2023, respectively. Industrial sales to distribution and the aftermarket were $175.4 and $181.9 for the three month periods ended June 29, 2024 and July 1, 2023, respectively.

Previous wording

Gross margin for the third quarter of fiscal 2024 was 42.8% of net sales, compared to 42.4% in the same period last fiscal year. The improved gross margin was due to product mix and better manufacturing efficiencies.

Current wording

Gross margin for the three months ended June 29, 2024 was 47.0% of net sales, compared to 45.2% in the comparable period in fiscal 2024. The improved gross margin was due to product mix and manufacturing efficiencies achieved at the plants.

Previous wording

Corporate SG&A was $21.4, or 5.7% of net sales, for the third quarter of fiscal 2024, which was relatively flat compared to $20.0, or 5.6% of net sales, for the same period last fiscal year.

Current wording

Corporate SG&A was $23.2, or 5.7% of net sales, for the first quarter of fiscal 2025 compared to $21.6, or 5.6% of net sales, for the same period last fiscal year. The quarter over quarter increase was primarily due to increases in personnel costs and professional fees.

Previous wording

Our capital requirements include manufacturing equipment and materials. In addition, we have historically fueled our growth, in part, through acquisitions, including the Dodge acquisition completed in fiscal 2022 and the Specline acquisition completed in fiscal 2024. We have historically met our working capital, capital expenditure and acquisition funding needs through our net cash flows provided by operations, various debt arrangements and sales of equity to investors. We believe that operating cash flows and available credit under the Revolving Credit Facility (which expires in November 2026) will provide adequate resources to fund internal growth initiatives for the foreseeable future.

Current wording

Our capital requirements include manufacturing equipment and materials. We have historically fueled our growth, in part, through acquisitions, including the Dodge acquisition completed in fiscal 2022 and the Specline acquisition completed in fiscal 2024. We have historically met our working capital, capital expenditure and acquisition funding needs through our net cash flows provided by operations, various debt arrangements and public sales of equity. We believe that operating cash flows and available credit under the Revolving Credit Facility (which expires in November 2026) will provide adequate resources to fund internal growth initiatives for the foreseeable future.

Previous wording

Our ability to meet future working capital, capital expenditure and debt service requirements will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, particularly interest rates, cyclical changes in our end markets, 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.

Current wording

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

Previous wording

As of December 30, 2023, we had cash and cash equivalents of $71.6, of which approximately $39.4 was cash held by our foreign operations. We expect that our undistributed foreign earnings will be reinvested indefinitely for working capital, internal growth, and acquisitions for and by our foreign subsidiaries.

Current wording

As of June 29, 2024, we had cash and cash equivalents of $76.8, of which approximately $29.4 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 subsidiaries.

Previous wording

The Credit Agreement, which was entered into in 2021 with Wells Fargo and the other lenders party thereto, provides the Company with (a) the $1,300.0 Term Loan, which was used to fund a portion of the cash purchase price for the acquisition of Dodge and to pay related fees and expenses, and (b) the $500.0 Revolving Credit Facility. Debt issuance costs associated with the Credit Agreement totaled $14.9 and are being amortized over the life of the Credit Agreement.

Current wording

The Credit Agreement, which was entered into in fiscal 2022, provides the Company with (a) the $1,300.0 Term Loan, which was used to fund a portion of the purchase price for the acquisition of Dodge and to pay related fees and expenses, and (b) the $500.0 Revolving Credit Facility. Debt issuance costs associated with the Credit Agreement totaled $14.9 and are being amortized over the life of the Credit Agreement.

Previous wording

Prior to December 2022, amounts outstanding under the Facilities (i.e., the Term Loan and the Revolving Credit Facility) generally bore interest at either, at the Company’s option, (a) a base rate determined by reference to the higher of (i) Wells Fargo’s prime lending rate, (ii) the federal funds effective rate plus 1/2 of 1.00% and (iii) the one-month LIBOR rate plus 1.00% or (b) the LIBOR rate plus a specified margin, depending on the type of borrowing being made. The applicable margin was based on the Company’s consolidated ratio of total net debt to consolidated EBITDA (as defined within the Credit Agreement) from time to time. In December 2022 the Credit Agreement was amended to replace LIBOR with SOFR (i.e., the secured overnight financing rate administered by the Federal Reserve Bank of New York) so that borrowings under the Facilities denominated in U.S. dollars bear interest at a rate per annum equal to Term SOFR (as defined in the Credit Agreement) plus a credit spread adjustment of 0.10% plus a margin ranging from 0.75% to 2.00% depending on the Company’s consolidated ratio of total net debt to consolidated EBITDA. The Facilities are subject to a SOFR floor of 0.00%. As of December 30, 2023, the Company’s margin was 1.25% for SOFR loans, the commitment fee rate was 0.20%, and the letter of credit fee rate was 1.25%. A portion of the Term Loan is subject to a fixed-rate interest swap as discussed under “Interest Rate Swap” below.

Current wording

Initially, amounts outstanding under the Facilities generally bore interest at either, at the Company’s option, (a) a base rate determined by reference to the higher of (i) Wells Fargo’s prime lending rate, (ii) the federal funds effective rate plus 1/2 of 1.00% and (iii) the one-month LIBOR rate plus 1.00% or (b) the LIBOR rate plus a specified margin, depending on the type of borrowing being made. The applicable margin was based on the Company’s consolidated ratio of total net debt to consolidated EBITDA (as defined within the Credit Agreement) from time to time. In December 2022, the Credit Agreement was amended to replace LIBOR with the secured overnight financing rate administered by the Federal Reserve Bank of New York (i.e., SOFR) so that borrowings under the Facilities denominated in U.S. dollars bear interest at a rate per annum equal to Term SOFR (as defined in the Credit Agreement) plus a credit spread adjustment of 0.10% plus a margin ranging from 0.75% to 2.00% depending on the Company’s consolidated ratio of total net debt to consolidated EBITDA. The Facilities are subject to a SOFR floor of 0.00%. As of June 29, 2024, the Company’s margin was 1.00% for SOFR loans, the commitment fee rate was 0.175%, and the letter of credit fee rate was 1.00%. A portion of the Term Loan is subject to the Swap.

Previous wording

The Term Loan matures in November 2026 and amortizes in quarterly installments with the balance payable on the maturity date. The Company can elect to prepay some or all of the outstanding balance from time to time without penalty, which will offset future quarterly amortization installments. Due to prepayments previously made, the required future principal payments on the Term Loan are $0 for fiscal 2024, $0 for fiscal 2025, $0 for fiscal 2026, and $750.0 for fiscal 2027. The Revolving Credit Facility expires in November 2026, at which time all amounts outstanding under the Revolving Credit Facility will be payable.

Current wording

The Term Loan matures in November 2026 and amortizes in quarterly installments with the balance payable on the maturity date. The Company can elect to prepay some or all of the outstanding balance from time to time without penalty, which will offset future quarterly amortization installments. Due to prepayments previously made, the required future principal payments on the Term Loan are $0 for fiscal 2025, $0 for fiscal 2026, and $615.0 for fiscal 2027. The Revolving Credit Facility expires in November 2026, at which time all amounts outstanding under the Revolving Credit Facility will be payable.

Previous wording

As of December 30, 2023, $750.0 was outstanding under the Term Loan, $3.7 of the Revolving Credit Facility was being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs, and $18.0 of the Revolving Credit Facility had been used to fund the purchase of the business assets of Specline. The Company had the ability to borrow up to an additional $478.3 under the Revolving Credit Facility as of December 30, 2023.

Current wording

As of June 29, 2024, $615.0 was outstanding under the Term Loan, $3.7 of the Revolving Credit Facility was being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs, and $18.0 of the Revolving Credit Facility had been used to fund the purchase of the business assets of Specline, Inc in fiscal 2024. The Company had the ability to borrow an additional $478.3 under the Revolving Credit Facility as of June 29, 2024.

Previous wording

In 2021, RBCA issued $500.0 aggregate principal amount of 4.375% Senior Notes due 2029. The net proceeds from the issuance of the Senior Notes were approximately $492.0 after deducting initial purchasers’ discounts and commissions and offering expenses.

Current wording

In fiscal 2022, RBCA issued $500.0 aggregate principal amount of Senior Notes. The net proceeds from the issuance of the Senior Notes were approximately $492.0, after deducting initial purchasers’ discounts and commissions and offering expenses, and were used to fund a portion of the cash purchase price for the acquisition of Dodge.

Previous wording

The Senior Notes are guaranteed jointly and severally on a senior unsecured basis by RBC Bearings and certain of RBCA’s existing and future wholly-owned domestic subsidiaries that also guarantee the Credit Agreement.

Current wording

The Senior Notes are guaranteed jointly and severally on a senior unsecured basis by RBC Bearings and RBCA’s domestic subsidiaries that also guarantee the Credit Agreement.

Previous wording

One of our foreign subsidiaries, Schaublin, entered into a credit agreement in 2019 with Credit Suisse (Switzerland) Ltd. to provide Schaublin with a CHF 15.0 (approximately $15.4 USD) revolving credit facility, which was terminated in October 2022. Schaublin now has a CHF 5.0 (approximately $5.8 USD) revolving credit facility with Credit Suisse to provide future working capital, if necessary. As of December 30, 2023, $0.1 of the new facility was being utilized to provide a bank guarantee. Fees associated with the new facility are nominal.

Current wording

The Foreign Credit Line provides Schaublin SA with a CHF 5.0 (approximately $5.8 USD) credit line with Credit Suisse (Switzerland) Ltd. to provide future working capital, if necessary. As of June 29, 2024, $2.2 had been borrowed from the Foreign Credit Line and $0.1 was being utilized to provide a bank guarantee. Fees associated with the Foreign Credit Line are nominal.

Previous wording

To hedge against this risk, on October 28, 2022, the Company entered into the Swap with a third-party financial counterparty under the Credit Agreement. The Swap was executed to protect the Company from interest rate volatility on our variable-rate Term Loan. The Swap became effective on December 30, 2022 and is comprised of a $600.0 notional with a maturity of three years. RBC receives a variable rate based on one-month Term SOFR and pays a fixed rate of 4.455%. The notional on the Swap amortizes as follows:

Current wording

To hedge against this risk, in fiscal 2023, the Company entered into the Swap with a third-party financial counterparty under the Credit Agreement. The Swap was executed to protect the Company from interest rate volatility on our variable-rate Term Loan. The Swap became effective December 30, 2022 and is comprised of a $600.0 notional with a maturity of three years. The notional was $400.0 as of June 29, 2024. We receive a variable rate based on one-month Term SOFR and pay a fixed rate of 4.455%. As of June 29, 2024, approximately 79% of our debt bore interest at a fixed rate after giving effect to the Swap in place. The notional on the Swap will amortize as follows:

Previous wording

During the first nine months of fiscal 2024, we generated cash of $195.2 from operating activities compared to $149.3 during the same period of fiscal 2023. The increase of $45.9 was the result of an increase in net income of $30.8, a favorable change in non-cash activity of $2.6, and the favorable impact of the net change in operating assets and liabilities of $12.5. The unfavorable change in operating assets and liabilities is detailed in the table below. The change in non-cash activity was driven by a $2.3 increase in stock-based compensation, a $3.8 increase in depreciation and amortization, a $0.3 increase in consolidation and restructuring charges, and a $0.7 increase in loss on asset dispositions, partially offset by $3.9 less amortization of deferred financing costs, $0.3 less noncash operating lease expense and an unfavorable change in deferred taxes of $0.3.

Current wording

During the first three months of fiscal 2025, we generated cash of $97.4 from operating activities compared to $61.7 during the same period of fiscal 2024. The increase of $35.7 was the result of an increase in net income of $11.4 and a favorable change in operating assets and liabilities of $25.2, partially offset by the unfavorable impact of non-cash activity of $0.9. The favorable change in operating assets and liabilities is detailed in the table below. The change in non-cash activity was driven by $1.1 more in stock-based compensation and $0.3 more in depreciation and amortization, offset by $1.5 more in deferred taxes, $0.3 less in amortization of deferred financing costs, $0.3 less in consolidation and restructuring charges and $0.2 less in losses on asset dispositions.

Previous wording

The following table summarizes the impact of operating assets and liabilities for fiscal 2024 versus fiscal 2023.

Current wording

The following table summarizes the impact on cash flow from operating assets and liabilities for the first quarter of fiscal 2025 versus the first quarter of fiscal 2024.

Previous wording

During the first nine months of fiscal 2024, we used $42.7 for investing activities as compared to $1.6 in the first nine months of fiscal 2023. This increase in cash used was primarily attributable to $18.7 of cash used to acquire the business assets of Specline during fiscal 2024 and $28.3 of favorable Dodge acquisition purchase price adjustment during the first nine months of fiscal 2023, partially offset by a $5.9 decrease in capital expenditures during fiscal 2024.

Current wording

During the first three months of fiscal 2025, we used $9.0 for investing activities as compared to $6.5 used in the first three months of fiscal 2024. This increase in cash used was primarily attributable to a $2.3 increase in capital expenditures and $0.2 decrease in proceeds from the sale of assets.

Previous wording

Our capital expenditures were $23.7 for the first nine months of fiscal 2024 compared to $29.6 for the same period in the prior fiscal year. We expect to make additional capital expenditures of $10.0 to $15.0 during the remainder of fiscal 2024 in connection with our existing business. We expect to fund these capital expenditures principally through existing cash and internally generated funds. We may also make substantial additional capital expenditures in connection with acquisitions.

Current wording

Our capital expenditures were $9.0 for the three-month period ended June 29, 2024 compared to $6.7 for the three-month period ended July 1, 2023. We expect to make additional capital expenditures of $40.0 to $50.0 during the remainder of fiscal 2025 in connection with our existing business. We expect to fund these capital expenditures principally through existing cash and internally generated funds. We may also make substantial additional capital expenditures in connection with acquisitions.

Previous wording

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 Annual Report describe the significant accounting estimates and policies used in preparation of our consolidated financial statements. Actual results in these areas could differ from management’s estimates. There were no significant changes in our critical accounting estimates during the first nine months of fiscal 2024.

Current wording

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 Annual Report describe the significant accounting estimates and policies used in preparation of our consolidated financial statements. Actual results in these areas could differ from management’s estimates. There were no significant changes in our critical accounting estimates during the first three months of fiscal 2025.

Previous wording

The Company has $3.7 of outstanding standby letters of credit, all of which are under the Revolving Credit Facility. We also have a contractual obligation for licenses related to the implementation and upgrade of an enterprise resource planning (ERP) system for Dodge. These license costs of $10.5 for the ERP system are being incurred over the five-year period from the execution of the license agreement in May 2022.

Current wording

The Company has $3.7 of outstanding standby letters of credit, all of which are under the Revolving Credit Facility. We also have a contractual obligation for licenses related to the implementation and upgrade of an enterprise resource planning (“ERP”) system. The remaining contractual obligation related to these ERP license costs of $7.6 will end in June of 2026.