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 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.

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 52 facilities in 11 countries, of which 37 are manufacturing facilities, we have been able to significantly broaden our end markets, products, customer base and geographic reach.

Previous 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.

Current wording

Our net sales for the three-month period ended September 28, 2024 increased 3.2% compared to the same period last fiscal year. The increase in net sales was a result of a 12.5% increase in our Aerospace/Defense segment partially offset by a 1.4% decrease in our Industrial segment. Our backlog, as of September 28, 2024 was $864.0 compared to $821.5 as of March 30, 2024.

Previous 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.

Current wording

We are continuing to see the expansion of our commercial aerospace business, which experienced a 10.3% increase in net sales for the three-month period ended September 28, 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 33.3% of segment sales during the quarter, were up 17.3% 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 $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.

Current wording

The Company expects net sales to be approximately $390.0 to $400.0 in the third quarter of fiscal 2025, an increase of 4.3% to 7.0% compared to the third 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 June 29, 2024, we had cash and cash equivalents of $76.8, of which approximately $29.4 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 September 28, 2024, we had cash and cash equivalents of $89.1, of which approximately $22.8 was cash held by our foreign subsidiaries.

Previous 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.

Current wording

Our net sales for the three-month period ended September 28, 2024 increased 3.2% compared to the same period last fiscal year. Net sales in our Industrial segment decreased 1.4% quarter over quarter. While stable overall, we saw strength in the mining and metals and warehousing markets offset by weakness in semicon and oil and gas sales compared to the prior year. Net sales in our Aerospace/Defense segment increased 12.5% quarter over quarter, led by defense sales, which increased 17.3% compared to the same period in the prior year, driven by aerospace and marine. Aerospace commercial OEM and the aftermarket were up 10.3% compared to the same period in the prior year. Net sales during the quarter ended September 28, 2024 were adversely effected by a temporary stoppage of shipping and receiving activities at certain of our facilities due to local flooding caused by Hurricane Helene, as well as a shipping slowdown to one of our commercial aerospace OEM customers that is experiencing a labor strike. We estimate the impact to net sales from these events to have been between $4.0 and $5.0 during the quarter.

Previous 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.

Current wording

Net income attributable to common stockholders for the second quarter of fiscal 2025 was $48.5 compared to $45.9 for the same period last fiscal year.

Previous 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.

Current wording

SG&A for the second quarter of fiscal 2025 was $69.5, or 17.5% of net sales, as compared to $60.5, or 15.7% of net sales, for the same period of fiscal 2024. The increase in SG&A was primarily driven by increased personnel costs, stock compensation costs, travel costs and other professional fees.

Previous 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.

Current wording

Other operating expenses for the second quarter of fiscal 2025 totaled $18.2 compared to $18.0 for the same period last fiscal year. For the second quarter of fiscal 2025, other operating expenses included $17.9 of amortization of intangible assets and $0.5 of restructuring costs offset by $0.2 of other items. For the second quarter of fiscal 2024, other operating expenses included $17.6 of amortization of intangible assets, $0.3 of restructuring costs and $0.1 of other items.

Previous wording

Interest expense, net, consists of interest charged on the Company’s debt agreements and amortization of deferred financing fees, offset by interest income (see “Liquidity and Capital Resources” below). Interest expense, net, was $17.2 for the first quarter of fiscal 2025 compared to $20.5 for the same period last fiscal year. The decrease in interest expense between the periods is directly related to the debt reduction efforts made by the Company over the past fiscal year. The interest rate swap that we entered into during fiscal 2023 (see “Liquidity and Capital Resources” below) has enabled us to manage interest costs as approximately 79% of our debt bears interest at a fixed rate, after giving effect to the interest rate swap agreement in place.

Current wording

Interest expense, net, consists of interest charged on the Company’s debt arrangements and amortization of deferred financing fees, offset by interest income (see “Liquidity and Capital Resources” below). Interest expense, net, was $15.6 for the second quarter of fiscal 2025 compared to $20.1 for the same period last fiscal year. The decrease in interest expense between the periods was related to the debt reduction efforts made by the Company over the past fiscal year, the Interest Rate Swap (which has enabled us to manage interest costs as approximately 82% of our debt bears interest at a fixed rate, after giving effect to the Interest Rate Swap), and the Cross Currency Swap. See “Liquidity and Capital Resources” below for more information regarding the Interest Rate Swap and the Cross Currency Swap.

Previous 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.

Current wording

Other non-operating expenses were $1.1 for the second quarter of fiscal 2025 compared to $0.8 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 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%.

Current wording

Income tax expense for the three-month period ended September 28, 2024 was $15.2 compared to $15.2 for the three-month period ended September 30, 2023. Our effective income tax rate for the three-month period ended September 28, 2024 was 21.9% compared to 22.7% for the three-month period ended September 30, 2023. The effective income tax rate for the three-month period ended September 28, 2024 of 21.9% included $1.1 of tax benefits associated with stock-based compensation which was slightly offset by $0.1 of other tax expenses. The effective income tax rate without discrete items for the three-month period ended September 28, 2024 would have been 23.4%. The effective income tax rate for the three-month period ended September 30, 2023 of 22.7% included $0.1 of tax benefits associated with stock-based compensation. The effective income tax rate without discrete items for the three-month period ended September 30, 2023 would have been 22.8%.

Previous 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.

Current wording

Net sales increased $15.9, or 12.5%, for the three months ended September 28, 2024 compared to the same period last fiscal year. Our commercial aerospace markets, which consisted of $75.4 of OEM and $20.1 of distribution and aftermarket, increased by 10.3% compared to fiscal 2024 when OEM net sales were $67.5 and distribution and aftermarket net sales were $19.2. 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 $35.5 of OEM and $12.2 of distribution and aftermarket, increased by 17.3% compared to fiscal 2024 when OEM net sales were $34.9 and distribution and aftermarket net sales were $5.7. The increase in defense sales was driven by marine, helicopters and missiles.

Previous 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.

Current wording

Gross margin as a percentage of segment net sales was 41.0% for the second quarter of fiscal 2025 compared to 39.5% 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.

Previous 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.

Current wording

Net sales decreased $3.6 for the three months ended September 28, 2024 compared to the same period last fiscal year. We saw strength in the mining and metals, logistics and warehousing, grain, food and beverage and power generation markets offset by weakness in the semiconductor and oil and gas markets. Industrial OEM sales were $82.7 and $84.7 for the three month periods ended September 28, 2024 and September 30, 2023, respectively. Industrial sales to distribution and the aftermarket were $172.0 and $173.6 for the three month periods ended September 28, 2024 and September 30, 2023, respectively.

Previous 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.

Current wording

Gross margin for the three months ended September 28, 2024 was 46.0% of net sales, compared to 44.8% 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

Gross margin was 45.3% of net sales for the first quarter of fiscal 2025 compared to 43.4% for the first quarter of fiscal 2024. The increase in gross margin as a percentage of net sales was driven by manufacturing efficiencies and a favorable product mix in both the Industrial and Aerospace/Defense segments.

Current wording

Gross margin for the first six months of fiscal 2025 was 46.5% of net sales, compared to 45.0% in the same period last fiscal year. The increase in gross margin was driven by manufacturing efficiencies and product mix.

Previous 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.

Current wording

Corporate SG&A was $26.0, or 6.5% of net sales, for the second quarter of fiscal 2025 compared to $19.6, or 5.1% of net sales, for the same period last fiscal year. The quarter over quarter increase was primarily due to increases in professional fees, stock compensation costs, travel costs and personnel costs.

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 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.

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 our ability to pass through raw material 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

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, relocate, consolidate or otherwise dispose of that facility or operations. Although we believe our operations would not be materially impaired by such dispositions, relocations or consolidations, we could incur significant cash or non-cash charges in connection with them.

Current wording

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, relocate, consolidate or otherwise dispose of that facility or operations. Although we believe our operations would not be materially adversely affected by such dispositions, relocations or consolidations, we could incur significant cash or non-cash charges in connection with them.

Previous 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.

Current wording

As of September 28, 2024, we had cash and cash equivalents of $89.1, of which approximately $22.8 was cash held by our foreign subsidiaries. We expect that our undistributed foreign earnings will be re-invested indefinitely for working capital, internal growth, and acquisitions for and by certain of our foreign subsidiaries.

Previous 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.

Current wording

Initially, amounts outstanding under the Facilities generally bore interest, at the Company’s option, at either, (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 in 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 September 28, 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 Interest Rate 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 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.

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 $600.0 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

The Credit Agreement requires the Company to comply with various covenants, including the following financial covenants: (a) a maximum Total Net Leverage Ratio (as defined within the Credit Agreement) of 5.00:1.00, which maximum Total Net Leverage Ratio shall decrease during certain subsequent test periods as set forth in the Credit Agreement (provided that, no more than once during the term of the Facilities, such maximum ratio applicable at such time may be increased by the Company by 0.50:1.00 for a period of twelve (12) months after the consummation of a material acquisition); and (b) a minimum Interest Coverage Ratio of 2.00:1.00. As of June 29, 2024 the Company was in compliance with all debt covenants.

Current wording

The Credit Agreement requires the Company to comply with various covenants, including the following financial covenants: (a) a maximum Total Net Leverage Ratio (as defined in the Credit Agreement) of 5.00:1.00, which maximum Total Net Leverage Ratio shall decrease during certain subsequent test periods as set forth in the Credit Agreement (provided that, no more than once during the term of the Facilities, such maximum ratio applicable at such time may be increased by the Company by 0.50:1.00 for a period of 12 months after the consummation of a material acquisition); and (b) a minimum Interest Coverage Ratio of 2.00:1.00. As of September 28, 2024 the Company was in compliance with all debt covenants.

Previous 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.

Current wording

As of September 28, 2024, $600.0 was outstanding under the Term Loan and $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. The Company had the ability to borrow an additional $496.3 under the Revolving Credit Facility as of September 28, 2024. On September 30, 2024, the Company paid $32.0 on the Term Loan.

Previous wording

The Senior Notes will mature on October 15, 2029. The Company may redeem some or all of the Senior Notes at any time on or after October 15, 2024 at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Company may also redeem up to 40% of the Senior Notes using the proceeds of certain equity offerings completed before October 15, 2024, at a redemption price equal to 104.375% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to October 15, 2024, the Company may redeem some or all of the Senior Notes at a price equal to 100% of the principal amount, plus a “make–whole” premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. If the Company sells certain of its assets or experiences specific kinds of changes in control, the Company must offer to purchase the Senior Notes.

Current wording

The Senior Notes will mature on October 15, 2029. The Company may redeem some or all of the Senior Notes at any time on or after October 15, 2024 at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. If the Company sells certain of its assets or experiences specific kinds of changes in control, the Company must offer to purchase the Senior Notes.

Previous 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.

Current wording

The Foreign Credit Line is a CHF 5.0 (approximately $5.9 USD) credit line with Credit Suisse (Switzerland) Ltd. to provide our Swiss subsidiary, Schaublin SA, future working capital, if necessary. As of September 28, 2024, $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, 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:

Current wording

To hedge against this risk, in fiscal 2023, the Company entered into the Interest Rate Swap with a third-party financial counterparty under the Credit Agreement. The Interest Rate Swap was executed to protect the Company from interest rate volatility on our variable-rate Term Loan. The Interest Rate 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 September 28, 2024. We receive a variable rate based on one-month Term SOFR and pay a fixed rate of 4.455%. As of September 28, 2024, approximately 82% of our debt bore interest at a fixed rate after giving effect to the Interest Rate Swap in place. The notional on the Interest Rate Swap amortizes as follows:

Previous wording

The Swap has been designated as a cash flow hedge of the variability of the first unhedged interest payments (the hedged transactions) paid over the hedging relationship’s specified time period of three years attributable to the borrowing’s contractually specified interest index on the hedged principal of its general borrowing program or replacement or refinancing thereof.

Current wording

The Interest Rate Swap has been designated as a cash flow hedge of the variability of the first unhedged interest payments (the hedged transactions) paid over the hedging relationship’s specified time period of three years attributable to the borrowing’s contractually specified interest index on the hedged principal of its general borrowing program or replacement or refinancing thereof.

Previous 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.

Current wording

During the first six months of fiscal 2025, we generated cash of $140.4 from operating activities compared to $114.8 during the same period of fiscal 2024. The increase of $25.6 was the result of an increase in net income of $13.9 and a favorable change in operating assets and liabilities of $12.7, partially offset by the unfavorable impact of non-cash activity of $1.0. The favorable change in operating assets and liabilities is detailed in the table below. The change in non-cash activity was driven by $4.0 more in stock-based compensation and $0.5 more in depreciation and amortization, offset by $3.7 more in deferred taxes, $0.6 less in amortization of deferred financing costs, $0.6 less in consolidation and restructuring charges, $0.3 less in losses on asset dispositions and $0.3 less in noncash operating lease expense.

Previous 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.

Current wording

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

Previous 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.

Current wording

During the first six months of fiscal 2025, we used $25.2 for investing activities as compared to $32.5 used in the first six months of fiscal 2024. This decrease in cash used was primarily attributable to a $18.7 decrease in business acquisition costs while capital expenditures increased $11.0 period over period.

Previous wording

During the first three months of fiscal 2025, we used cash of $74.7 for financing activities compared to $63.6 in the first three months of fiscal 2024. This increase in cash used was primarily attributable to $10.0 more payments made on outstanding debt, $0.1 more principal payments made on finance lease obligations and $1.2 more repurchases of common stock, partially offset by $0.2 more exercises of stock-based awards.

Current wording

During the first six months of fiscal 2025, we used cash of $89.0 for financing activities compared to $90.4 in the first six months of fiscal 2024. This decrease in cash used was primarily attributable to $22.2 more exercises of stock-based awards and $4.5 received from proceeds related to the Swiss Tool mortgage, partially offset by $18.0 less in proceeds received in drawdowns from our revolving credit facility, $5.4 more payments made on outstanding debt, $0.5 more principal payments made on finance lease obligations and $1.4 more repurchases of common stock.

Previous 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.

Current wording

Our capital expenditures were $25.2 for the first six months of fiscal 2025 compared to $14.2 for the same period in the prior fiscal year. We expect to make additional capital expenditures of $20.0 to $25.0 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

The Company’s fixed contractual obligations and commitments are primarily comprised of our debt obligations disclosed in Part I, Item 1- Note 10 of this report. We also have lease obligations which are materially consistent with what we disclosed in our Annual Report.

Current wording

The Company’s fixed contractual obligations and commitments are primarily comprised of our debt obligations disclosed in Note 10 in Part I, Item 1 of this report. We also have lease obligations which are materially consistent with what we disclosed in our Annual Report.

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 three months of fiscal 2025.

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 six months of fiscal 2025.