UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended June 27, 2009
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
(State or other
jurisdiction of incorporation or organization)
|
95-4372080
(I.R.S.
Employer Identification No.)
|
|
|
|
|
One
Tribology Center
Oxford,
CT
(Address
of principal executive offices)
|
06478
(Zip
Code)
|
(203)
267-7001
(Registrant’s
telephone number, including area code)
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 x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T 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 or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
Large
accelerated filer þ Accelerated
filer ¨
Non-accelerated
filer ¨ (Do not
check if a smaller reporting company) Smaller reporting
company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x
As of
July 27, 2009, RBC Bearings Incorporated had 21,706,256 shares of Common Stock
outstanding.
TABLE
OF CONTENTS
|
Part
I - FINANCIAL INFORMATION
|
3
|
|
|
|
|
ITEM
1. Unaudited Consolidated Financial Statements
|
3
|
|
ITEM
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
12
|
|
ITEM
3. Quantitative and Qualitative Disclosures About Market
Risk
|
17
|
|
ITEM
4. Controls and Procedures
|
18
|
|
Changes
in Internal Control over Financial Reporting
|
18
|
|
|
|
|
Part
II - OTHER INFORMATION
|
19
|
|
|
|
|
ITEM
1. Legal Proceedings
|
19
|
|
ITEM
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
19
|
|
ITEM
3. Defaults Upon Senior Securities
|
20
|
|
ITEM
4. Submission of Matters to a Vote of Security
Holders
|
20
|
|
ITEM
5. Other Information
|
20
|
|
ITEM
6. Exhibits
|
20
|
PART
I. FINANCIAL INFORMATION
ITEM 1. Financial
Statements
RBC
Bearings Incorporated
Consolidated
Balance Sheets
(dollars
in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
38,698 |
|
|
$ |
30,557 |
|
|
Short-term
investments
|
|
|
4,730 |
|
|
|
— |
|
|
Accounts
receivable, net of allowance for doubtful accounts of $1,536
at June 27, 2009 and $1,571 at March 28, 2009
|
|
|
49,178 |
|
|
|
63,692 |
|
|
Inventory
|
|
|
137,618 |
|
|
|
134,275 |
|
|
Deferred
income taxes
|
|
|
9,063 |
|
|
|
6,677 |
|
|
Prepaid
expenses and other current assets
|
|
|
5,352
|
|
|
|
8,912
|
|
|
Total
current assets
|
|
|
244,639 |
|
|
|
244,113 |
|
|
Property,
plant and equipment, net
|
|
|
89,365 |
|
|
|
87,697 |
|
|
Goodwill
|
|
|
33,001 |
|
|
|
32,999 |
|
|
Intangible
assets, net of accumulated amortization of $5,296 at June 27,
2009 and $5,035 at March 28, 2009
|
|
|
12,682 |
|
|
|
12,673 |
|
|
Other
assets
|
|
|
4,839
|
|
|
|
4,585
|
|
|
Total
assets
|
|
$ |
384,526
|
|
|
$ |
382,067
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
16,801 |
|
|
$ |
20,525 |
|
|
Accrued
expenses and other current liabilities
|
|
|
14,719 |
|
|
|
16,533 |
|
|
Current
portion of long-term debt
|
|
|
1,151
|
|
|
|
1,151
|
|
|
Total
current liabilities
|
|
|
32,671 |
|
|
|
38,209 |
|
|
Long-term
debt, less current portion
|
|
|
67,000 |
|
|
|
67,000 |
|
|
Deferred
income taxes
|
|
|
6,431 |
|
|
|
6,341 |
|
|
Other
non-current liabilities
|
|
|
14,971
|
|
|
|
14,506
|
|
|
Total
liabilities
|
|
|
121,073 |
|
|
|
126,056 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value; authorized shares: 10,000,000 at June 27, 2009 and
March 28, 2009; none issued and outstanding
|
|
|
— |
|
|
|
— |
|
|
Common
stock, $.01 par value; authorized shares: 60,000,000 at June 27, 2009 and
March 28, 2009; issued and outstanding shares: 21,838,486 shares at June
27, 2009 and March 28, 2009, respectively
|
|
|
218 |
|
|
|
218 |
|
|
Additional
paid-in capital
|
|
|
187,885 |
|
|
|
187,139 |
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(1,698 |
) |
|
|
(3,327 |
) |
|
Retained
earnings
|
|
|
81,209 |
|
|
|
76,142 |
|
|
Treasury
stock, at cost, 132,230 shares at June 27, 2009 and March 28,
2009, respectively
|
|
|
(4,161 |
) |
|
|
(4,161 |
) |
|
Total
stockholders' equity
|
|
|
263,453
|
|
|
|
256,011
|
|
|
Total
liabilities and stockholders' equity
|
|
$ |
384,526
|
|
|
$ |
382,067
|
|
See
accompanying notes.
RBC
Bearings Incorporated
Consolidated
Statements of Operations
(dollars
in thousands, except share and per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
63,732 |
|
|
$ |
92,380 |
|
|
Cost
of sales
|
|
|
43,828
|
|
|
|
61,825
|
|
|
Gross
margin
|
|
|
19,904 |
|
|
|
30,555 |
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
11,619 |
|
|
|
13,127 |
|
|
Other,
net
|
|
|
506
|
|
|
|
382
|
|
|
Total
operating expenses
|
|
|
12,125
|
|
|
|
13,509
|
|
|
Operating
income
|
|
|
7,779 |
|
|
|
17,046 |
|
|
Interest
expense, net
|
|
|
469 |
|
|
|
681 |
|
|
Loss
on early extinguishment of debt
|
|
|
— |
|
|
|
319 |
|
|
Other
non-operating income
|
|
|
(325 |
) |
|
|
(83 |
) |
|
Income
before income taxes
|
|
|
7,635 |
|
|
|
16,129 |
|
|
Provision
for income taxes
|
|
|
2,568
|
|
|
|
5,446
|
|
|
Net
income
|
|
$ |
5,067 |
|
|
$ |
10,683 |
|
|
Net
income per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.23 |
|
|
$ |
0.50 |
|
|
Diluted
|
|
$ |
0.23 |
|
|
$ |
0.49 |
|
|
Weighted
average common shares:
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Basic
|
|
|
21,582,607 |
|
|
|
21,561,375 |
|
|
Diluted
|
|
|
21,691,059 |
|
|
|
21,782,020 |
|
See
accompanying notes.
RBC
Bearings Incorporated
Consolidated
Statements of Cash Flows
(dollars
in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
5,067 |
|
|
$ |
10,683 |
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,573 |
|
|
|
2,792 |
|
|
Deferred
income taxes
|
|
|
(2,298 |
) |
|
|
1,077 |
|
|
Amortization
of intangible assets
|
|
|
318 |
|
|
|
374 |
|
|
Amortization
of deferred financing costs
|
|
|
51 |
|
|
|
59 |
|
|
Stock-based
compensation
|
|
|
746 |
|
|
|
552 |
|
|
Loss
on disposition of assets
|
|
|
19 |
|
|
|
30 |
|
|
Loss
on early extinguishment of debt (non-cash portion)
|
|
|
— |
|
|
|
319 |
|
|
Changes
in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
15,160 |
|
|
|
3,139 |
|
|
Inventory
|
|
|
(2,349 |
) |
|
|
(3,981 |
) |
|
Prepaid
expenses and other current assets
|
|
|
3,588 |
|
|
|
3,666 |
|
|
Other
non-current assets
|
|
|
(689 |
) |
|
|
33 |
|
|
Accounts
payable
|
|
|
(3,891 |
) |
|
|
1,249 |
|
|
Accrued
expenses and other current liabilities
|
|
|
(2,008 |
) |
|
|
1,114 |
|
|
Other
non-current liabilities
|
|
|
482
|
|
|
|
607
|
|
|
Net
cash provided by operating activities
|
|
|
16,769 |
|
|
|
21,713 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
(4,270 |
) |
|
|
(4,569 |
) |
|
Purchase
of short-term investments
|
|
|
(4,730 |
) |
|
|
— |
|
|
Acquisition
of businesses, net of cash acquired
|
|
|
— |
|
|
|
(6,579 |
) |
|
Proceeds
from sale of assets
|
|
|
—
|
|
|
|
18
|
|
|
Net
cash used in investing activities
|
|
|
(9,000 |
) |
|
|
(11,130 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net
increase in revolving credit facility
|
|
|
— |
|
|
|
9,000 |
|
|
Repurchase
of common stock
|
|
|
— |
|
|
|
(345 |
) |
|
Retirement
of industrial revenue bonds
|
|
|
— |
|
|
|
(15,500 |
) |
|
Principal
payments on capital lease obligations
|
|
|
(68 |
) |
|
|
(48 |
) |
|
Net
cash used in financing activities
|
|
|
(68 |
) |
|
|
(6,893 |
) |
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
440
|
|
|
|
(152 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents:
|
|
|
|
|
|
|
|
|
|
Increase
during the period
|
|
|
8,141 |
|
|
|
3,538 |
|
|
Cash,
at beginning of period
|
|
|
30,557
|
|
|
|
9,859
|
|
|
Cash,
at end of period
|
|
$ |
38,698
|
|
|
$ |
13,397
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
427 |
|
|
$ |
630 |
|
|
Income
taxes
|
|
$ |
119 |
|
|
$ |
1,112 |
|
See
accompanying notes.
RBC
Bearings Incorporated
Notes
to Unaudited Interim Consolidated Financial Statements
(dollars
in thousands, except share and per share data)
The
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 March 28, 2009 fiscal
year end balance sheet data have been derived from the Company’s audited
financial statements, but do not include all disclosures required by generally
accepted accounting principles in the United States. The interim financial
statements included with this report have been prepared on a consistent basis
with the Company’s audited financial statements and notes thereto included in
the Company’s Annual Report on Form 10-K for the fiscal year ended March 28,
2009.
The
consolidated financial statements include the accounts of RBC Bearings
Incorporated, Roller Bearing Company of America, Inc. (“RBCA”) and its
wholly-owned subsidiaries, Industrial Tectonics Bearings Corporation (“ITB”),
RBC Linear Precision Products, Inc. (“LPP”), RBC Nice Bearings, Inc.
(“Nice”), RBC Precision Products - Bremen, Inc. (“Bremen (MBC)”), RBC
Precision Products - Plymouth, Inc. (“Plymouth”), Tyson Bearings, Inc.
(“Tyson”), Schaublin Holdings S.A. and its wholly-owned subsidiaries
(“Schaublin”), RBC de Mexico S DE RL DE CV (“Mexico”), RBC Oklahoma, Inc.
(“RBC Oklahoma”), RBC Aircraft Products, Inc. (“API”), Shanghai
Representative office of Roller Bearing Company of America, Inc. (“RBC
Shanghai”), RBC Southwest Products, Inc. (“SWP”), All Power Manufacturing Co.
(“All Power”), RBC Bearings U.K. Limited and its wholly-owned subsidiary Phoenix
Bearings Limited (“Phoenix”) and RBC CBS Coastal Bearing Services LLC (“CBS”),
as well as its Transport Dynamics (“TDC”), Heim (“Heim”), Engineered Components
(“ECD”), A.I.D. Company (“AID”), BEMD Company (“BEMD”) and PIC Design (“PIC
Design”) divisions of RBCA. U.S. Bearings (“USB”) is a division of SWP and
Schaublin USA is a division of Nice. All intercompany balances and
transactions have been eliminated in consolidation.
These
statements reflect all adjustments, accruals and estimates consisting only of
items of a normal recurring nature, which 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
Company operates in four reportable business segments—roller bearings, plain
bearings, ball bearings, other and corporate—in which it manufactures roller
bearing components and assembled parts and designs and manufactures
high-precision roller and ball bearings. The Company sells to a wide variety of
original equipment manufacturers (“OEMs”) and distributors who are widely
dispersed geographically.
The
Company has performed a review of subsequent events through the date of filing
(August 5, 2009) of this Form 10-Q.
The
results of operations for the three month period ended June 27, 2009 are not
necessarily indicative of the operating results for the full year. The three
month periods ended June 27, 2009 and June 28, 2008 each include 13 weeks. The
amounts shown are in thousands, unless otherwise indicated.
Adoption
of Recent Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 157 “Fair Value
Measurements” (“SFAS No. 157”) in order to establish a single definition of fair
value and a framework for measuring fair value that is intended to result in
increased consistency and comparability in fair value measurements. In February
2008, the FASB issued Staff Position FAS 157-2, which delayed by one year the
effective date of SFAS No. 157 for all non-financial assets and non-financial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). The delay
pertains to items including, but not limited to, non-financial assets and
non-financial liabilities initially measured at fair value in a business
combination, reporting units measured at fair value in the first step of
evaluating goodwill for impairment, indefinite-lived intangible assets measured
at fair value for impairment assessment, and long-lived assets measured at fair
value for impairment assessment. The Company completed the adoption
of SFAS No. 157 as of the beginning of its 2010 fiscal year which did not have
an impact on the Company’s results of operations and financial
position.
In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” and
SFAS No. 160, “Accounting and Reporting of Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51.” These
new standards will significantly change the financial accounting and reporting
of business combination transactions and noncontrolling (or minority) interests
in consolidated financial statements.
In
comparison to current practice, the most significant changes to business
combination accounting pursuant to SFAS No. 141(R) include requirements
to:
|
|
·
|
Recognize,
with certain exceptions, 100 percent of the fair values of assets
acquired, liabilities assumed, and noncontrolling interests in
acquisitions of less than a 100 percent controlling interest when the
acquisition constitutes a change in control of the acquired
entity.
|
|
|
·
|
Measure
acquirer shares issued in consideration for a business combination at fair
value on the acquisition date.
|
|
|
·
|
Recognize
contingent consideration arrangements at their acquisition-date fair
values, with subsequent changes in fair value generally reflected in
earnings.
|
|
|
·
|
With
certain exceptions, recognize preacquisition loss and gain contingencies
at their acquisition-date fair
values.
|
|
|
·
|
Capitalize
in-process research and development (IPR&D) assets
acquired.
|
|
|
·
|
Expense,
as incurred, acquisition-related transaction
costs.
|
|
|
·
|
Capitalize
acquisition-related restructuring costs only if the criteria in SFAS No.
146, “Accounting for Costs Associated with Exit or Disposal Activities,”
are met as of the acquisition date.
|
|
|
·
|
Recognize
changes that result from a business combination transaction in an
acquirer’s existing income tax valuation allowances and tax uncertainty
accruals as adjustments to income tax
expense.
|
SFAS No.
160 requires that a noncontrolling interest in a consolidated subsidiary be
displayed in the consolidated statement of financial position as a separate
component of equity because the noncontrolling interests meet the definition of
equity of the consolidated entity. SFAS No. 141(R) is required to be adopted
concurrently with SFAS No. 160 and is effective for business combination
transactions for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008, which for
the Company is fiscal 2010. Early adoption is prohibited. The
adoption of SFAS No. 141(R) and SFAS No. 160 did not have an impact on the
Company’s results of operations and financial position.
In
December 2008, the FASB issued FASB Staff Position, or FSP, No. FAS 132(R)-1,
“Employers’ Disclosures about Postretirement Benefit Plan Assets,” which
requires enhanced disclosures about plan assets in an employer’s defined benefit
pension or other postretirement plans. These disclosures are intended
to provide users of financial statements with a greater understanding of how
investment allocation decisions are made, the major categories of plan assets,
the inputs and valuation techniques used to measure the fair value of plan
assets and significant concentrations of risk within plan assets. FSP
No. FAS 132(R)-1 will apply to the Company’s plan asset disclosures in its
fiscal year ending April 3, 2010. The Company is currently evaluating
the disclosure implications of this pronouncement, however the adoption of it
will not have an impact on the Company’s results of operations and financial
position.
In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about
Fair Value of Financial Instruments,” which requires disclosures about the fair
value of financial instruments for interim reporting periods. This
requirement is effective beginning with the Company’s quarter ending June 27,
2009. However, the adoption of it does not have an impact on the
Company’s results of operations and financial position.
In May
2009, the FASB issued SFAS No. 165, “Subsequent Events.” SFAS No. 165
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. SFAS No. 165 is effective for the Company
beginning with the quarter ending June 27, 2009. However, it does not
have an impact on the Company’s results of operations and financial
position.
Pending
Accounting Pronouncements
In June
2009, the FASB issued Statement of Financial Accounting Standards No. 168, “The
FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted
Accounting Principles a Replacement of FASB Statement No. 162” (“FAS 168”).
This Standard establishes the FASB Accounting Standards Codification™ (the
“Codification”) as the source of authoritative accounting principles recognized
by the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with U.S. GAAP. The Codification does not
change current U.S. GAAP, but is intended to simplify user access to all
authoritative U.S. GAAP by providing all the authoritative literature related to
a particular topic in one place. The Codification is effective for interim and
annual periods ending after September 15, 2009, and as of the effective date,
all existing accounting standard documents will be superseded. The Codification
is effective for the Company in the second quarter of 2009, and
accordingly, its Quarterly Report on Form 10-Q for the quarter ending
September 26, 2009 and all subsequent public filings will reference the
Codification as the sole source of authoritative literature. The new
pronouncement will not have an impact on the Company's results of operations or
financial position.
1.
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, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
5,067
|
|
|
$ |
10,683
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic net income per common share—weighted-average
shares
|
|
|
21,582,607 |
|
|
|
21,561,375 |
|
|
Effect
of dilution due to employee stock options
|
|
|
108,452
|
|
|
|
220,645
|
|
|
Denominator
for diluted net income per common share — weighted-average
shares
|
|
|
21,691,059 |
|
|
|
21,782,020 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income per common share
|
|
$ |
0.23 |
|
|
$ |
0.50 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income per common share
|
|
$ |
0.23 |
|
|
$ |
0.49 |
|
Basic
weighted-average common shares do not include 123,649 unvested restricted stock
shares.
At June
27, 2009, 860,700 employee stock options have been excluded from the calculation
of diluted earnings per share, as the inclusion of these shares would be
anti-dilutive. No such options were excluded at June 28,
2008.
2. 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.
3.
Short-term Investments
Short-term
investments include corporate bonds that are classified as available-for-sale
expected to be sold within the next twelve months. These bonds, with
maturity dates ranging from March 2011 to November 2012, were measured at fair
value by using quoted prices in active markets for identical assets and are
classified as Level 1 of the valuation hierarchy of SFAS 157. The
impact on results of operations and financial position was not
significant.
4. Inventory
Inventories
are stated at the lower of cost or market, using the first-in, first-out method,
and are summarized below:
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$ |
11,213 |
|
|
$ |
11,325 |
|
|
Work
in process
|
|
|
39,974 |
|
|
|
39,155 |
|
|
Finished
goods
|
|
|
86,431
|
|
|
|
83,795
|
|
|
|
|
$ |
137,618
|
|
|
$ |
134,275
|
|
5. Comprehensive
Income
Total
comprehensive income is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
5,067 |
|
|
$ |
10,683 |
|
|
Net
prior service cost and actuarial losses (gains), net of
taxes
|
|
|
16 |
|
|
|
(14 |
) |
|
Change
in fair value of derivatives, net of taxes
|
|
|
126 |
|
|
|
504 |
|
|
Foreign
currency translation adjustments
|
|
|
1,487
|
|
|
|
(744 |
) |
|
Total
comprehensive income
|
|
$ |
6,696 |
|
|
$ |
10,429 |
|
6. Debt
The
balances payable under all borrowing facilities are as follows:
|
|
|
|
|
|
|
|
|
KeyBank
Credit Agreement, five-year senior secured revolving credit
facility; amounts outstanding bear interest at LIBOR plus a specified
margin (LIBOR 0.3125% and 0.5% at June 27, 2009 and March 28, 2009,
respectively)
|
|
$ |
67,000 |
|
|
$ |
67,000 |
|
|
Note
Payable, payable through September
2009
|
|
|
1,151
|
|
|
|
1,151
|
|
|
Total
Debt
|
|
|
68,151 |
|
|
|
68,151 |
|
|
Less:
Current Portion
|
|
|
1,151
|
|
|
|
1,151
|
|
|
Long-Term
Debt
|
|
$ |
67,000
|
|
|
$ |
67,000
|
|
The current portion of long-term
debt includes $401 notes payable related to the acquisitions of AID and BEMD and
a $750 note payable related to the All Power acquisition as of June 27, 2009 and
March 28, 2009, respectively.
On
January 8, 2008, the Company entered into an interest rate swap agreement with a
total notional value of $30,000 to hedge a portion of its variable rate debt.
Under the terms of the agreement, the Company pays interest at a fixed rate
(3.64%) and receives interest at variable rates. The maturity date of
the interest swap is June 24, 2011. The fair value of this swap at June 27, 2009
was a liability of $1,489, included in other current liabilities, and was
measured using observable market inputs such as the current market price (as
provided by the financial institution with which the swap has been
executed), the Company’s own credit
risk and its counterparty’s credit risks as appropriate. Based on these
inputs, the swap is classified within Level 2 of the valuation hierarchy of SFAS
No. 157. This instrument is designated and qualifies as a cash flow hedge.
Accordingly, the gain or loss on both the hedging instrument and the hedged item
attributable to the hedged risk are recognized in other comprehensive
income.
7. Income
Taxes
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 March 31, 2002. The Company is no
longer subject to U.S. federal tax examination by the Internal Revenue Service
for years ending before March 31, 2004.
The
Company does not expect any material changes to the unrecognized tax benefits
within the next twelve months. There have been no material changes to
the total amount of unrecognized tax benefits during the three months ended June
27, 2009.
The
effective income tax rates for the three month periods ended June 27, 2009 and
June 28, 2008 were 33.6% and 33.8%, respectively. The effective income tax rates
are below the U.S. statutory rate due to foreign income taxed at lower rates and
a special manufacturing deduction in the U.S.
8. 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 with
similar economic characteristics and that meet all other required criteria,
including nature of the products and production processes, distribution patterns
and classes of customers, are aggregated as reportable segments. Certain other
operating segments do not exhibit the common attributes mentioned above and do
not meet the quantitative thresholds for separate disclosure, and their
information is combined and disclosed as "Other". There is also a segment
reflecting corporate charges.
The
Company has four reportable business segments engaged in the manufacture and
sale of the following:
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.
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.
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.
Other. Other
consists of four minor operating locations that do not fall into the above
segmented categories. The Company produces precision ground ball bearing screws
that offer repeatable positioning accuracy in machine tools, transfer lines,
robotic handling and semiconductor equipment. The Company’s precision machine
tool collets provide effective part holding and accurate part
location during machining operations. Additionally, the Company provides
machining for integrated bearing assemblies and aircraft components for the
commercial and defense aerospace markets and tight-tolerance, precision
mechanical components for use in the motion control industry.
Corporate. Corporate
consists of expenses incurred at the corporate office.
Segment
performance is evaluated based on segment net sales and operating income. Items
not allocated to segment operating income include corporate administrative
expenses and certain other amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
External Sales
|
|
|
|
|
|
|
|
Roller
|
|
$ |
15,568 |
|
|
$ |
24,957 |
|
|
Plain
|
|
|
31,000 |
|
|
|
43,715 |
|
|
Ball
|
|
|
12,242 |
|
|
|
15,046 |
|
|
Other
|
|
|
4,922 |
|
|
|
8,662 |
|
|
|
|
$ |
63,732 |
|
|
$ |
92,380 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
|
|
|
|
|
|
|
Roller
|
|
$ |
4,620 |
|
|
$ |
7,088 |
|
|
Plain
|
|
|
5,773 |
|
|
|
11,087 |
|
|
Ball
|
|
|
2,200 |
|
|
|
3,610 |
|
|
Other
|
|
|
52 |
|
|
|
981 |
|
|
Corporate
|
|
|
(4,866 |
) |
|
|
(5,720 |
) |
|
|
|
$ |
7,779 |
|
|
$ |
17,046 |
|
|
|
|
|
|
|
|
|
|
|
|
Geographic
External Sales
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$ |
54,244 |
|
|
$ |
77,098 |
|
|
Foreign
|
|
|
9,488 |
|
|
|
15,282 |
|
|
|
|
$ |
63,732 |
|
|
$ |
92,380 |
|
|
Intersegment
Sales
|
|
|
|
|
|
|
|
|
|
Roller
|
|
$ |
1,963 |
|
|
$ |
2,466 |
|
|
Plain
|
|
|
354 |
|
|
|
651 |
|
|
Ball
|
|
|
1,656 |
|
|
|
1,981 |
|
|
Other
|
|
|
4,102 |
|
|
|
4,683 |
|
|
|
|
$ |
8,075 |
|
|
$ |
9,781 |
|
All
intersegment sales are eliminated in consolidation.
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 industry is highly competitive, and this
competition could reduce our profitability or limit our ability to grow; (b) the
loss of a major customer could result in a material reduction in our revenues
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 and profitability; (d) future reductions or
changes in U.S. government spending could negatively affect our business; (e)
fluctuating supply and costs of raw materials and energy resources could
materially reduce our revenues, cash flow from operations and profitability; (f)
our products are subject to certain approvals, and the loss of such approvals
could materially reduce our revenues and profitability; (g) restrictions in our
indebtedness agreements could limit our growth and our ability to respond to
changing conditions; (h) work stoppages and other labor problems could
materially reduce our ability to operate our business; (i) our business is
capital intensive and may consume cash in excess of cash flow from our
operations; (j) unexpected equipment failures, catastrophic events or capacity
constraints may 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) the costs and
difficulties of integrating acquired businesses could impede our future growth;
(m) we depend heavily on our senior management and other key personnel, the loss
of whom could materially affect our financial performance and prospects; (n) our
international operations are subject to risks inherent in such activities; (o)
currency translation risks may have a material impact on our results of
operations; (p) we may be required to make significant future contributions to
our pension plan; (q) we may incur material losses for product liability and
recall related claims; (r) environmental regulations impose substantial costs
and limitations on our operations, and environmental compliance may be more
costly than we expect; (s) our intellectual property and other proprietary
rights 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; (t) cancellation of orders in our backlog
of orders could negatively impact our revenues; (u) 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; and (v) provisions in our charter
documents may prevent or hinder efforts to acquire a controlling interest in us.
Additional information regarding these and other risks and uncertainties is
contained in our periodic filings with the SEC, including, without limitation,
the risks identified under the heading “Risk Factors” set forth in the Annual
Report on Form 10-K for the year ended March 28, 2009. 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.
Overview
We are an
international manufacturer and marketer of highly engineered precision plain,
roller and ball bearings. Bearings, which 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 bearing categories, we
focus primarily on highly technical or regulated bearing products for
specialized markets that require sophisticated design, testing and manufacturing
capabilities. We believe our unique expertise has enabled us to garner leading
positions in many of the product markets in which we primarily compete. We have
been providing bearing solutions to our customers since 1919. Over the past ten
years, we have significantly broadened our end markets, products, customer base
and geographic reach. We currently have 24 facilities, of which 22 are
manufacturing facilities, in four countries.
Demand
for bearings generally follows the market for products in which bearings are
incorporated and the economy as a whole. Purchasers of bearings include
industrial equipment and machinery manufacturers, producers of commercial and
military aerospace equipment such as missiles and radar systems, agricultural
machinery manufacturers, construction and specialized equipment manufacturers
and automotive and commercial truck manufacturers. The markets for our products
are cyclical, and general market conditions could negatively impact our
operating results. We have endeavored to mitigate the cyclicality of our product
markets by entering into sole-source relationships and long-term purchase
orders, 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.
Outlook
Backlog,
as of June 27, 2009, was $170.9 million versus $239.9 million as of June 28,
2008. Management believes that operating cash flows and available credit under
the credit facility will provide adequate resources to fund internal and
external growth initiatives for the foreseeable future.
Results
of Operations
The
following table sets forth the various components of our consolidated statements
of operations, expressed as a percentage of net sales, for the periods indicated
that are used in connection with the discussion herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
Net
sales
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
Gross
margin
|
|
|
31.2 |
|
|
|
33.1 |
|
|
Selling,
general and administrative
|
|
|
18.2 |
|
|
|
14.2 |
|
|
Other,
net
|
|
|
0.8 |
|
|
|
0.4 |
|
|
Operating
income
|
|
|
12.2 |
|
|
|
18.5 |
|
|
Interest
expense, net
|
|
|
0.7 |
|
|
|
0.7 |
|
|
Loss
on early extinguishment of debt
|
|
|
— |
|
|
|
0.3 |
|
|
Other
non-operating income
|
|
|
(0.5 |
) |
|
|
— |
|
|
Income
before income taxes
|
|
|
12.0 |
|
|
|
17.5 |
|
|
Provision
for income taxes
|
|
|
4.0 |
|
|
|
5.9 |
|
|
Net
income
|
|
|
8.0 |
% |
|
|
11.6 |
% |
Three
Month Period Ended June 27, 2009 Compared to Three Month Period Ended June 28,
2008
Net Sales. Net
sales for the three month period ended June 27, 2009 were $63.7 million,
a decrease of $28.7 million, or 31.0%, compared to
$92.4 million for the same period in the prior year. During the three month
period ended June 27, 2009, we experienced a net sales decline in all four of
our business segments, driven by lower demand across our end markets
due to the weak economic climate. Our net sales to our diversified industrial
customers fell 46.3% in the first quarter of fiscal 2010 compared to the same
period last fiscal year. This is mainly the result of the overall
decline in the global industrial markets. Net sales to aerospace and
defense customers decreased 18.1% in the first quarter of fiscal 2010 compared
to the same period last fiscal year, mainly driven by a slowdown in the business
jet market and inventory liquidations by aircraft distributors.
The Plain
Bearings segment achieved net sales of $31.0 million for the three month
period ended June 27, 2009, a decrease of $12.7 million, or 29.1%, compared to
$43.7 million for the same period in the prior fiscal year. The weak
economy contributed to an overall net sales decline in this segment, with a $5.5
million decrease in net sales to diversified industrial customers combined with
a $7.2 million decline in net sales to aerospace and defense
customers.
The
Roller Bearings segment achieved net sales of $15.6 million for the three
month period ended June 27, 2009, a decrease of $9.4 million, or 37.6%,
compared to $25.0 million for the same period in the prior fiscal year. The
weak economic performance of the industrial sector contributed $7.9 million of
this net sales decline combined with a $1.5 million decrease in net sales to
aerospace and defense customers.
The Ball
Bearings segment achieved net sales of $12.2 million for the three month period
ended June 27, 2009, a decrease of $2.8 million, or 18.6%, compared to
$15.0 million for the same period in the prior year. All of this
decline was attributable to the impact of the economic downturn on the
industrial sector, with net sales to the aerospace and defense sector remaining
flat compared to the same period in fiscal 2009.
The Other
segment, which is focused mainly on the sale of machine tool collets and
precision mechanical components, achieved net sales of $4.9 million for the
three month period ended June 27, 2009, a decrease of $3.8 million, or 43.2%,
compared to $8.7 million for the same period last year. Of this decrease,
$3.2 million was attributable to lower sales of tool collets in Europe for the
machine tool industry and $0.6 due to the general industrial decline for
mechanical components.
Gross
Margin. Gross margin was $19.9 million, or 31.2% of net
sales, for the three month period ended June 27, 2009, versus
$30.6 million, or 33.1% of net sales, for the comparable period in fiscal
2009. The decrease in our gross margin as a percentage of net sales was
primarily the result of the current economic downturn combined with start-up
costs for our large bearing product lines.
Selling, General and
Administrative. SG&A expenses decreased by
$1.5 million, or 11.5%, to $11.6 million for the three month period
ended June 27, 2009 compared to $13.1 million for the same period in fiscal
2009. As a percentage of net sales, SG&A increased to 18.2% for the three
month period ended June 27, 2009 compared to 14.2% for the three month period
ended June 28, 2008. The decrease of $1.5 million was primarily attributable to
personnel-related cost reductions of $1.5 million and lower outside service fees
of $0.2 million offset by $0.2 million of incremental stock compensation
expense.
Other, net. Other,
net for the three month period ended June 27, 2009 was $0.5 million, an
increase of $0.1 million, compared to the same period last fiscal
year. For the three month period ended June 27, 2009, other, net
consisted of $0.3 million of amortization of intangibles and $0.2 million of
restructuring costs, mainly severance costs. For the three month
period ended June 28, 2008, other, net consisted of $0.4 million of amortization
of intangibles and $0.1 million of facility moving costs offset by other
miscellaneous income of $0.1 million.
Operating Income. The
decrease in operating income in all four of our business segments was driven
primarily by a decrease in volume due to the current economic climate. Our
operating income as a percentage of net sales declined in three of our four
business segments as a result of the current economic downturn and start-up
costs for our large bearing product lines. Operating income was
$7.8 million, or 12.2% of net sales, for the three month period ended June
27, 2009 compared to $17.0 million, or 18.5% of net sales, for the three
month period ended June 28, 2008. Operating income for the Plain Bearings
segment was $5.8 million for the three month period ended June 27, 2009, or
18.6% of net sales, compared to $11.1 million for the same period last
year, or 25.4% of net sales. Our Roller Bearings segment achieved an operating
income for the three month period ended June 27, 2009 of $4.6 million, or
29.7% of net sales, compared to $7.1 million, or 28.4% of net sales, for
the three month period ended June 28, 2008. Our Ball Bearings segment
achieved an operating income of $2.2 million, or 18.0% of net sales, for
the three month period ended June 27, 2009, compared to $3.6 million, or
24.0% of net sales, for the same period in fiscal 2009. Our Other segment
achieved an operating income of $0.1 million, or 1.1% of net sales, for the
three month period ended June 27, 2009, compared to $1.0 million, or 11.3%
of net sales, for the same period in fiscal 2009.
Interest Expense,
net. Interest expense, net decreased by $0.2 million, or
31.1%, to $0.5 million in the three month period ended June 27, 2009, compared
to $0.7 million in the same period last fiscal year, mainly driven by lower
interest rates.
Loss on Early Extinguishment of
Debt. For the three month period ended June 28, 2008, loss on
extinguishment of debt was $0.3 million for the non-cash write-off of deferred
financing fees associated with the paydown of $15.5 million of industrial
revenue bonds.
Income Before Income
Taxes. Income before taxes decreased by $8.5 million, to
$7.6 million for the three month period ended June 27, 2009 compared to
$16.1 million for the three month period ended June 28, 2008.
Income
Taxes. Income tax expense for the three month period ended
June 27, 2009 was $2.6 million compared to $5.4 million for the three
month period ended June 28, 2008. Our effective income tax rate for the three
month period ended June 27, 2009 was 33.6% compared to 33.8% for the three month
period ended June 28, 2008. The effective income tax rates are below
the U.S. statutory rate due to foreign income taxed at lower rates and a special
manufacturing deduction in the U.S.
Net Income. Net
income decreased by $5.6 million to $5.1 million for the three month
period ended June 27, 2009 compared to $10.7 million for the three month
period ended June 28, 2008.
Liquidity
and Capital Resources
Liquidity
Our
credit agreement (the “KeyBank Credit Agreement”) provides the Company with a
$150.0 million five-year senior secured revolving credit facility which can be
increased by up to $75.0 million, in increments of $25.0 million, under
certain circumstances and subject to certain conditions (including the receipt
from one or more lenders of the additional commitment).
Amounts
outstanding under the KeyBank Credit Agreement generally bear interest at the
prime rate, or LIBOR plus a specified margin, depending on the type of borrowing
being made. The applicable margin is based on our consolidated ratio of net debt
to adjusted EBITDA from time to time. Currently, our margin is 0.0% for prime
rate loans and 0.625% for LIBOR rate loans. Amounts outstanding under the
KeyBank Credit Agreement are due and payable on its expiration date
(June 24, 2011). We may elect to prepay some or all of the outstanding
balance from time to time without penalty.
The
KeyBank Credit Agreement allows us to, among other things, make distributions to
shareholders, repurchase our stock, incur other debt or liens, or acquire or
dispose of assets provided that we comply with certain requirements and
limitations of the credit agreement. Our obligations under the KeyBank Credit
Agreement are secured by a pledge of substantially all of our and RBCA’s assets
and a guaranty by us of RBCA’s obligations. Capital expenditures
(excluding acquisitions) in any fiscal year, previously limited to an amount not
to exceed $20.0 million was amended to increase the limit to an amount not to
exceed $30.0 million. As of June 27, 2009, $67.0 million was
outstanding under the KeyBank Credit Agreement. Approximately $6.6
million of the KeyBank Credit Agreement is being utilized to provide letters of
credit to secure our obligations relating to certain insurance programs. As of
June 27, 2009, we had the ability to borrow up to an additional $76.4 million
under the KeyBank Credit Agreement.
On
October 27, 2008, Schaublin entered into a new bank credit facility with Credit
Suisse (the “Swiss Credit Facility”) which replaced the prior bank credit
facility of December 8, 2003 and its amendment of November 8,
2004. This facility provides for up to 4.0 million Swiss francs, or
$3.7 million, of revolving credit loans and letters of
credit. Borrowings under the Swiss Credit Facility bear interest at
Credit Suisse’s prevailing prime bank rate. As of June 27, 2009,
there were no borrowings under the Swiss Credit Facility.
On June
15, 2007, our board of directors authorized us to repurchase up to $10.0 million
of our common stock from time to time on the open market, through block trades,
or in privately negotiated transactions depending on market conditions,
alternative uses of capital and other factors. Purchases may be
commenced, suspended or discontinued at any time without prior notice. As of
June 27, 2009, 94,874 shares have been repurchased under this plan for an
aggregate cost of $3.1 million.
On May 1,
2008, the Company voluntarily paid off the Series 1999 Industrial Revenue Bond
(“IRB”), the prinicipal amount of which was $4.8 million. In addition, on June
2, 2008, the Company voluntarily paid off the Series 1994 A and B IRBs, the
principal amounts of which were $7.7 million and $3.0 million, respectively. The
Company recorded a non-cash pre-tax charge of approximately $0.3 million in the
three month period ended June 28, 2008 to write off deferred financing costs
associated with the voluntary payoff of the IRBs.
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.
Cash
Flows
Three
Month Period Ended June 27, 2009 Compared to the Three Month Period Ended June
28, 2008
In the
three month period ended June 27, 2009, we generated cash of $16.8 million
from operating activities compared to $21.7 million for the three month
period ended June 28, 2008. The decrease of $4.9 million was mainly a
result of a decrease in net income of $5.6 million, a positive change in
operating assets and liabilities of $4.5 million and a decrease in non-cash
charges of $3.8 million.
Cash used
for investing activities for the three month period ended June 27, 2009 included
$4.3 million related to capital expenditures compared to $4.6 million for the
three month period ended June 28, 2008. Of this amount, $2.8 million was
associated with the building of a new wind bearing facility in
Texas. Cash used for investing activities also included $4.7 million
for the purchase of short-term investments.
Financing
activities used $0.1 million in the three month period ended June 27, 2009
compared to $6.9 million for the three month period ended June 28,
2008.
Capital
Expenditures
Our
capital expenditures were $4.3 million for the three month period ended June 27,
2009. Of this amount, $2.8 million was associated with the building of a new
wind bearing facility in Texas. We expect to make capital expenditures of
approximately $8.0 to $10.0 million during fiscal 2010 in connection with
our existing business and the expansion into the large bearing market segment.
We intend to fund our fiscal 2010 capital expenditures principally through
existing cash, internally generated funds and borrowings under our KeyBank
Credit Agreement. We may also make substantial additional capital expenditures
in connection with acquisitions.
Obligations
and Commitments
As of
June 27, 2009, there was no material change in debt and interest, capital lease,
operating lease or pension and postretirement obligations as compared to such
obligations and liabilities as of March 28, 2009.
ITEM
3. Quantitative and Qualitative Disclosures About Market
Risk
Quantitative
and Qualitative Disclosure 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
are exposed to market risk from changes in the interest rates on a significant
portion of our outstanding indebtedness. Outstanding balances under our KeyBank
Credit Agreement generally bear interest at the prime rate or LIBOR (the London
inter-bank offered rate for deposits in U.S. dollars for the applicable LIBOR
period) plus a specified margin, depending on the type of borrowing being made.
The applicable margin is based on our consolidated ratio of net debt to adjusted
EBITDA from time to time. As of June 27, 2009, our margin is 0.0% for prime rate
loans (prime rate at June 27, 2009 was 3.25%) and 0.625% for LIBOR rate loans
(one month LIBOR rate at June 27, 2009 was 0.3125%).
Our
interest rate risk management objective is to limit the impact of interest rate
changes on our net income and cash flow. To achieve our objective, we regularly
evaluate the amount of our variable rate debt as a percentage of our aggregate
debt. As of June 27, 2009, our average outstanding variable rate debt, after
taking into account the average outstanding notional amount of our interest rate
swap agreement, was 54% of our average outstanding debt. We manage a significant
portion of our exposure to interest rate fluctuations in our variable rate debt
through an interest rate swap agreement. This agreement effectively converts
interest rate exposure from variable rates to fixed rates of
interest.
Based on
the aggregate amount of our variable rate indebtedness of $37.0 million, a 100
basis point change in interest rates would have changed our interest expense by
approximately $0.4 million per year, after taking into account the $30.0
million notional amount of our interest rate swap agreement at June 27,
2009.
Foreign Currency Exchange
Rates. As a result of increased sales in Europe, our exposure
to risk associated with fluctuating currency exchange rates between the U.S.
dollar, the Euro, the Swiss Franc and the British Pound Sterling has increased.
Our Swiss operations utilize the Swiss Franc as the functional currency, our
French operations utilize the Euro as the functional currency and our English
operations utilize the British Pound Sterling as the functional currency.
Foreign currency transaction gains and losses are included in earnings.
Approximately 15% of our net sales were denominated in foreign currencies in the
the first quarter of fiscal 2010 compared to 17% in the comparable period last
fiscal 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 subsidiaries’ 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 currently do not have exchange rate hedges
in place to reduce the risk of an adverse currency exchange movement. Although
currency fluctuations have not had a material impact on our financial
performance in the past, such fluctuations may materially affect our financial
performance in the future. The impact of future exchange rate fluctuations on
our results of operations cannot be accurately predicted.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements.
ITEM
4. Controls and Procedures
Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act”)) as of June 27, 2009. Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of June 27, 2009, our disclosure controls and procedures were
(1) designed to ensure that information relating to our Company required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported to our Chief Executive Officer and
Chief Financial Officer within the time periods specified in the rules and forms
of the U.S. Securities and Exchange Commission, and (2) effective, in that they
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.
Changes
in Internal Control over Financial Reporting
No change
in our internal control over financial reporting occurred during the three month
period ended June 27, 2009 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).
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 during the
three month period ended June 27, 2009. For a discussion of the Risk Factors,
refer to Part I, Item 1A, “Risk Factors,” contained in the Company’s Annual
Report on Form 10-K for the period ended March 28, 2009.
ITEM
2. Unregistered Sales of Equity Securities and Use of
Proceeds
Unregistered
Sales of Equity Securities
None.
Use of Proceeds
Not
applicable.
Issuer Purchases of Equity
Securities
On June
15, 2007, our board of directors authorized us to repurchase up to $10.0 million
of our common stock from time to time on the open market, through block trades,
or in privately negotiated transactions depending on market conditions,
alternative uses of capital and other factors. Purchases may be
commenced, suspended or discontinued at any time without prior notice. The new
program, which does not have an expiration date, replaced a $7.5 million program
that expired on March 31, 2007.
Total
share repurchases for the three months ended June 27, 2009 are as
follows:
|
|
|
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)
|
|
|
03/29/2009–04/25/2009
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
6,889 |
|
|
04/26/2009–05/23/2009
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,889 |
|
|
05/24/2009–06/27/2009
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
6,889 |
|
|
Total
|
|
|
—
|
|
|
|
— |
|
|
|
—
|
|
|
|
|
|
ITEM
3. Defaults Upon Senior Securities
Not
applicable.
ITEM
4. Submission of Matters to a Vote of Security Holders
Not
applicable.
ITEM
5. Other Information
Not
applicable.
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).*
|
*
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.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
RBC
Bearings Incorporated
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
By:
|
/s/ Michael J.
Hartnett
|
|
|
|
Name:
|
Michael
J. Hartnett
|
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
|
Date:
|
August 5,
2009
|
|
|
|
|
|
|
|
By:
|
/s/ Daniel A.
Bergeron
|
|
|
|
Name:
|
Daniel
A. Bergeron
|
|
|
|
Title:
|
Chief
Financial Officer
|
|
|
|
Date:
|
August 5,
2009
|
|
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).*
|
*
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.