UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended October 2, 2021

☐ 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: 001-40840

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

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

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

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

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

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	ROLL	Nasdaq NMS
5.00% Series A Mandatory Convertible Preferred Stock, par value $0.01 per share	ROLLP	Nasdaq NMS

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

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

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

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

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

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

As of November 5, 2021, RBC Bearings Incorporated had 28,870,241 shares of Common Stock and 4,600,000 shares of Preferred Stock outstanding.

TABLE OF CONTENTS

Part I -	FINANCIAL INFORMATION	1

ITEM 1.	Consolidated Financial Statements	1
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	33
ITEM 4.	Controls and Procedures Changes in Internal Control over Financial Reporting	33

Part II -	OTHER INFORMATION	34

ITEM 1.	Legal Proceedings	34
ITEM 1A.	Risk Factors	34
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
ITEM 3.	Defaults Upon Senior Securities	37
ITEM 4.	Mine Safety Disclosures	37
ITEM 5.	Other Information	37
ITEM 6.	Exhibits	38

Part I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

RBC Bearings Incorporated

Consolidated Balance Sheets

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

	October 2, 2021			April 3, 2021
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	1,348,611		$	151,086
Marketable securities		—			90,249
Accounts receivable, net of allowance for doubtful accounts of $1,912 as of October 2, 2021 and $1,792 as of April 3, 2021		109,650			110,472
Inventory		370,745			364,147
Prepaid expenses and other current assets		30,875			12,248
Total current assets		1,859,881			728,202
Property, plant and equipment, net		203,166			208,264
Operating lease assets, net		34,124			35,664
Goodwill		277,758			277,536
Intangible assets, net		150,952			154,399
Other noncurrent assets		41,916			30,195
Total assets	$	2,567,797		$	1,434,260

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	47,594		$	36,336
Accrued expenses and other current liabilities		58,392			43,564
Current operating lease liabilities		5,805			5,726
Current portion of long-term debt		500			2,612
Total current liabilities		112,291			88,238
Long-term debt, less current portion		7,105			13,495
Long-term operating lease liabilities		28,756			29,982
Deferred income taxes		20,202			17,178
Other noncurrent liabilities		62,346			55,416
Total liabilities		230,700			204,309

Stockholders’ equity:
Preferred stock, $.01 par value; authorized shares: 10,000,000 as of October 2, 2021 and April 3, 2021, respectively; issued shares: 4,600,000 and 0 as of October 2, 2021 and April 3, 2021, respectively		46			—
Common stock, $.01 par value; authorized shares: 60,000,000 as of October 2, 2021 and April 3, 2021, respectively; issued shares: 29,787,162 and 26,110,320 as of October 2, 2021 and April 3, 2021, respectively		298			261
Additional paid-in capital		1,524,928			445,073
Accumulated other comprehensive loss		(9,263	)		(10,409	)
Retained earnings		891,270			858,852
Treasury stock, at cost, 916,679 shares and 884,701 shares as of October 2, 2021 and April 3, 2021, respectively		(70,182	)		(63,826	)
Total stockholders’ equity		2,337,097			1,229,951
Total liabilities and stockholders’ equity	$	2,567,797		$	1,434,260

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Operations

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

(Unaudited)

	Three Months Ended					Six Months Ended
	October 2, 2021			September 26, 2020		October 2, 2021			September 26, 2020
Net sales	$	160,900		$	146,335	$	317,105		$	302,828
Cost of sales		98,436			89,739		190,868			186,779
Gross margin		62,464			56,596		126,237			116,049
Operating expenses:
Selling, general and administrative		29,674			26,023		59,476			52,852
Other, net		5,667			4,210		8,915			8,020
Total operating expenses		35,341			30,233		68,391			60,872
Operating income		27,123			26,363		57,846			55,177
Interest expense, net		15,770			343		16,089			768
Other non-operating (income)/expense		(291	)		211		(756	)		253
Income before income taxes		11,644			25,809		42,513			54,156
Provision for income taxes		4,715			5,388		9,585			11,046
Net income		6,929			20,421		32,928			43,110
Preferred stock dividends		510			—		510			—
Net income available to common stockholders	$	6,419		$	20,421	$	32,418		$	43,110

Net income per share available to common stockholders:
Basic	$	0.25		$	0.82	$	1.28		$	1.74
Diluted	$	0.25		$	0.82	$	1.27		$	1.73
Weighted average common shares:
Basic		25,500,393			24,823,658		25,260,728			24,793,245
Diluted		25,775,794			24,957,158		25,544,088			24,944,608

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(Unaudited)

	Three Months Ended					Six Months Ended
	October 2, 2021			September 26, 2020		October 2, 2021		September 26, 2020
Net income	$	6,929		$	20,421	$	32,928	$	43,110
Pension and postretirement liability adjustments, net of taxes ⁽¹⁾		318			259		636		519
Foreign currency translation adjustments		(1,409	)		1,377		510		1,786
Total comprehensive income	$	5,838		$	22,057	$	34,074	$	45,415

⁽¹⁾

These adjustments were net of tax expense of $82 and $79 for the three-month periods ended October 2, 2021 and September 26, 2020, respectively and $165 and $158 for the six-month periods ended October 2, 2021 and September 26, 2020, respectively.

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Stockholders’ Equity

(dollars in thousands)

(Unaudited)

	Common Stock					Preferred Stock				Additional Paid-in		Accumulated Other Comprehensive			Retained			Treasury Stock						Total Stockholders’
	Shares			Amount		Shares		Amount		Capital		Income/(Loss)			Earnings			Shares			Amount			Equity
Balance at April 3, 2021		26,110,320		$	261		—	$	—	$	445,073	$	(10,409	)	$	858,852			(884,701	)	$	(63,826	)	$	1,229,951
Net income		—			—		—		—		—		—			25,999			—			—			25,999
Share-based compensation		—			—		—		—		5,772		—			—			—			—			5,772
Repurchase of common stock		—			—		—		—		—		—			—			(31,572	)		(6,264	)		(6,264	)
Exercise of equity awards		135,518			2		—		—		16,679		—			—			—			—			16,681
Change in net prior service cost and actuarial losses, net of tax expense of $83		—			—		—		—		—		318			—			—			—			318
Issuance of restricted stock, net of forfeitures		91,056			—		—		—		—		—			—			—			—			—
Currency translation adjustments		—			—		—		—		—		1,919			—			—			—			1,919
Balance at July 3, 2021		26,336,894		$	263		—	$	—	$	467,524	$	(8,172	)	$	884,851			(916,273	)	$	(70,090	)	$	1,274,376
Net income		—			—		—		—		—		—			6,929			—			—			6,929
Share-based compensation		—			—		—		—		6,224		—			—			—			—			6,224
Preferred stock issuance, net of issuance costs		—			—		4,600,000		46		445,407		—			—			—			—			445,453
Common stock issuance, net of issuance costs		3,450,000			35		—		—		605,642		—			—			—			—			605,677
Preferred stock dividends		—			—		—		—		—		—			(510	)		—			—			(510	)
Repurchase of common stock		—			—		—		—		—		—			—			(406	)		(92	)		(92	)
Exercise of equity awards		1,332			—		—		—		131		—			—			—			—			131
Change in net prior service cost and actuarial losses, net of taxes of $82		—			—		—		—		—		318			—			—			—			318
Issuance of restricted stock, net of forfeitures		(1,064	)		—		—		—		—		—			—			—			—			—
Currency translation adjustments		—			—		—		—		—		(1,409	)		—			—			—			(1,409	)
Balance at October 2, 2021		29,787,162		$	298		4,600,000	$	46	$	1,524,928	$	(9,263	)	$	891,270			(916,679	)	$	(70,182	)	$	2,337,097

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Stockholders’ Equity (continued)

(dollars in thousands)

(Unaudited)

	Common Stock					Additional Paid-in		Accumulated Other Comprehensive			Retained		Treasury Stock						Total Stockholders’
	Shares			Amount		Capital		Income/(Loss)			Earnings		Shares			Amount			Equity
Balance at March 28, 2020		25,881,415		$	259	$	412,400	$	(6,898	)	$	769,219		(838,982	)	$	(56,981	)	$	1,117,999
Net income		—			—		—		—			22,689		—			—			22,689
Share-based compensation		—			—		5,438		—			—		—			—			5,438
Repurchase of common stock		—			—		—		—			—		(31,179	)		(4,391	)		(4,391	)
Exercise of equity awards		4,200			—		231		—			—		—			—			231
Change in net prior service cost and actuarial losses, net of taxes of $79		—			—		—		260			—		—			—			260
Issuance of restricted stock, net of forfeitures		56,157			—		—		—			—		—			—			—
Currency translation adjustments		—			—		—		409			—		—			—			409
Balance at June 27, 2020		25,941,772		$	259	$	418,069	$	(6,229	)	$	791,908		(870,161	)	$	(61,372	)	$	1,142,635
Net income		—			—		—		—			20,421		—			—			20,421
Share-based compensation		—			—		5,231		—			—		—			—			5,231
Repurchase of common stock		—			—		—		—			—		(62	)		(8	)		(8	)
Exercise of equity awards		31,200			1		2,188		—			—		—			—			2,189
Change in net prior service cost and actuarial losses, net of taxes of $79		—			—		—		259			—		—			—			259
Issuance of restricted stock, net of forfeitures		(2,299	)		—		—		—			—		—			—			—
Currency translation adjustments		—			—		—		1,377			—		—			—			1,377
Balance at September 26, 2020		25,970,673		$	260	$	425,488	$	(4,593	)	$	812,329		(870,223	)	$	(61,380	)	$	1,172,104

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

	Six Months Ended
	October 2, 2021			September 26, 2020
Cash flows from operating activities:
Net income	$	32,928		$	43,110
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		11,448			11,744
Deferred income taxes		2,993			4,051
Amortization of intangible assets		5,409			5,089
Amortization of deferred financing costs		15,682			259
Share-based compensation		11,996			10,669
Loss/(gain) on disposition of assets		75			588
Consolidation, restructuring, and other noncash charges		2,378			2,416
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		642			21,267
Inventory		(7,173	)		(4,981	)
Prepaid expenses and other current assets		(12,059	)		(2,812	)
Other noncurrent assets		(1,310	)		(6,885	)
Accounts payable		11,248			(11,554	)
Accrued expenses and other current liabilities		14,000			(4,137	)
Other noncurrent liabilities		5,217			5,655
Net cash provided by operating activities		93,474			74,479

Cash flows from investing activities:
Purchase of property, plant and equipment		(6,882	)		(6,008	)
Proceeds from sale of assets		10			10
Purchase of marketable securities		(29,982	)		-
Proceeds from sale of marketable securities		120,483			-
Acquisition of business		-			245
Net cash provided by/(used in) investing activities		83,629			(5,753	)

Cash flows from financing activities:
Proceeds received from issuance of common stock		605,677			-
Proceeds received from issuance of preferred stock		445,453			-
Finance fees paid in connection with credit facilities and term loans		(32,208	)		-
Repayments of term loans		(8,866	)		(3,287	)
Repayments of notes payable		(254	)		(249	)
Exercise of stock options		16,812			2,420
Repurchase of common stock		(6,356	)		(4,399	)
Net cash provided by/(used in) financing activities		1,020,258			(5,515	)

Effect of exchange rate changes on cash		164			(114	)

Cash and cash equivalents:
Increase during the period		1,197,525			63,097
Cash and cash equivalents, at beginning of period		151,086			103,255
Cash and cash equivalents, at end of period	$	1,348,611		$	166,352

Supplemental disclosures of cash flow information:
Cash paid for:
Income taxes	$	10,777		$	6,559
Interest		416			516

See accompanying notes.

RBC Bearings Incorporated

Notes to Unaudited Interim Consolidated Financial Statements

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

1. Basis of Presentation

The interim consolidated financial statements included herein have been prepared by RBC Bearings Incorporated, a Delaware corporation (collectively with its subsidiaries, the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The interim financial statements included with this report have been prepared on a consistent basis with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 3, 2021. We condensed or omitted certain information and footnote disclosures normally included in our annual audited financial statements, which we prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP). As used in this report, the terms “we,” “us,” “our,” “RBC” and the “Company” mean RBC Bearings Incorporated and its subsidiaries, unless the context indicates another meaning.

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

The results of operations for the three- and six-month periods ended October 2, 2021 are not necessarily indicative of the operating results for the entire fiscal year ending April 2, 2022. The three- and six-month periods ended October 2, 2021 and September 26, 2020 each include 13 weeks and 26 weeks, respectively. The amounts shown are in thousands, unless otherwise indicated.

2. Significant Accounting Policies

The Company’s significant accounting policies are detailed in “Note 2 - Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended April 3, 2021. Significant changes to our accounting policies as a result of adopting new accounting standards are discussed below.

Recent Accounting Standards Adopted

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The objective of this standard update is to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This ASU also attempts to improve consistent application of and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This standard update is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted this ASU effective April 4, 2021 and the impact of adoption was not material to the Company’s financial position, results of operations or liquidity.

In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in this ASU simplify the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this ASU in fiscal 2022.

The adoption of this ASU did not have a material impact on our financial position, results of operations or liquidity. Adoption of this ASU did simplify the accounting of the 5.00% Series A Mandatory Convertible Preferred Stock (“MCPS”) referred to in Note 5 by removing the requirement to assess the financial instrument for beneficial conversion features and clarifying how diluted EPS should be calculated using the “if-converted” method. Refer to Note 6 for further details regarding the “if-converted” method.

Other new pronouncements issued but not effective until after April 3, 2021 are not expected to have a material impact on our financial position, results of operations or liquidity.

3. Revenue from Contracts with Customers

Disaggregation of Revenue

The Company operates in four business segments with similar economic characteristics, including nature of the products and production processes, distribution patterns and classes of customers. Revenue is disaggregated within these business segments by our two principal end markets: aerospace and industrial. Comparative information of the Company’s overall revenues for the three- and six-month periods ended October 2, 2021 and September 26, 2020 are as follows:

Principal End Markets

	Three Months Ended
	October 2, 2021						September 26, 2020
	Aerospace		Industrial		Total		Aerospace		Industrial		Total
Plain	$	49,503	$	24,576	$	74,079	$	51,040	$	20,013	$	71,053
Roller		8,892		18,

SEC Form 10-Q filed by RBC Bearings Incorporated