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 ~~July 2,~~October 1, 2022

☐ 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)		06478 (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~~RBC	~~Nasdaq NMS~~The New York Stock Exchange
5.00% Series A Mandatory Convertible Preferred Stock, par value $0.01 per share	~~ROLLP~~RBCP	~~Nasdaq NMS~~The New York Stock Exchange

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 ~~July 29,~~November 4, 2022, RBC Bearings Incorporated had ~~28,930,840~~29,017,346 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	2119
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3032
Item 4.	Controls and Procedures	31
	Changes in Internal Control over Financial Reporting	3133

Part II - OTHER INFORMATION		32

Item 1.	Legal Proceedings	3234
Item 1A.	Risk Factors	3234
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3234
Item 3.	Defaults Upon Senior Securities	3335
Item 4.	Mine Safety Disclosures	3335
Item 5.	Other Information	3335
Item 6.	Exhibits	3335

Part I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

RBC Bearings Incorporated

Consolidated Balance Sheets

(dollars in thousands, except per share data)

July 2,
2022

April 2,
2022
(As Restated) ⁽¹⁾

(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 119,587 $ 182,862
Accounts receivable, net of allowance for doubtful accounts of $2,860 as of July 2, 2022 and $2,737 as of April 2, 2022 234,987 247,487
Inventory 542,050 516,140
Prepaid expenses and other current assets 19,456 15,748
Total current assets 916,080 962,237
Property, plant and equipment, net 384,497 386,732
Operating lease assets, net 44,104 44,535
Goodwill 1,876,642 1,902,104
Intangible assets, net 1,500,714 1,511,515
Other noncurrent assets 35,980 38,294
Total assets $ 4,758,017 $ 4,845,417

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 161,834 $ 158,606
Accrued expenses and other current liabilities 158,713 145,252
Current operating lease liabilities 8,333 8,059
Current portion of long-term debt 1,525 1,543
Total current liabilities 330,405 313,460
Long-term debt, less current portion 1,563,805 1,686,798
Long-term operating lease liabilities 35,928 36,680
Deferred income taxes 311,599 315,463
Other noncurrent liabilities 118,639 120,408
Total liabilities 2,360,376 2,472,809

Stockholders’ equity:
Preferred stock, $.01 par value; authorized shares: 10,000,000 as of July 2, 2022 and April 2, 2022, respectively; issued shares: 4,600,000 as of July 2, 2022 and April 2, 2022, respectively 46 46
Common stock, $.01 par value; authorized shares: 60,000,000 as of July 2, 2022 and April 2, 2022, respectively; issued shares: 29,877,876 and 29,807,208 as of July 2, 2022 and April 2, 2022, respectively 299 298
Additional paid-in capital 1,569,539 1,564,261
Accumulated other comprehensive loss (11,750 ) (5,800 )
Retained earnings 917,843 886,155
Treasury stock, at cost, 958,791 shares and 928,322 shares as of July 2, 2022 and April 2, 2022, respectively (78,336 ) (72,352 )

Total stockholders’ equity 2,397,641 2,372,608
Total liabilities and stockholders’ equity $ 4,758,017 $ 4,845,417

⁽¹⁾

~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

	October 1, 2022			April 2, 2022
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	88,495		$	182,862
Accounts receivable, net of allowance for doubtful accounts of $2,986 as of October 1, 2022 and $2,737 as of April 2, 2022		236,527			247,487
Inventory		557,801			516,140
Prepaid expenses and other current assets		28,708			15,748
Total current assets		911,531			962,237
Property, plant and equipment, net		378,291			386,732
Operating lease assets, net		43,263			44,535
Goodwill		1,872,689			1,902,104
Intangible assets, net		1,485,016			1,511,515
Other noncurrent assets		36,270			38,294
Total assets	$	4,727,060		$	4,845,417

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	148,870		$	158,606
Accrued expenses and other current liabilities		147,584			145,252
Current operating lease liabilities		8,283			8,059
Current portion of long-term debt		1,512			1,543
Total current liabilities		306,249			313,460
Long-term debt, less current portion		1,520,602			1,686,798
Long-term operating lease liabilities		35,109			36,680
Deferred income taxes		308,956			315,463
Other noncurrent liabilities		116,007			120,408
Total liabilities		2,286,923			2,472,809

Stockholders’ equity:
Preferred stock, $.01 par value; authorized shares: 10,000,000 as of October 1, 2022 and April 2, 2022, respectively; issued shares: 4,600,000 as of October 1, 2022 and April 2, 2022, respectively		46			46
Common stock, $.01 par value; authorized shares: 60,000,000 as of October 1, 2022 and April 2, 2022, respectively; issued shares: 29,975,914 and 29,807,208 as of October 1, 2022 and April 2, 2022, respectively		300			298
Additional paid-in capital		1,582,455			1,564,261
Accumulated other comprehensive loss		(20,208	)		(5,800	)
Retained earnings		955,895			886,155
Treasury stock, at cost, 958,854 shares and 928,322 shares as of October 1, 2022 and April 2, 2022, respectively		(78,351	)		(72,352	)
Total stockholders’ equity		2,440,137			2,372,608
Total liabilities and stockholders’ equity	$	4,727,060		$	4,845,417

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Operations

(dollars in thousands, except per share data)

(Unaudited)

Three Months Ended

July 2,
2022

July 3,
2021
(As Restated) ⁽¹⁾

Net sales $ 354,080 $ 156,205
Cost of sales 212,928 92,432
Gross margin 141,152 63,773
Operating expenses:
Selling, general and administrative 55,828 31,212
Other, net 20,854 3,248
Total operating expenses 76,682 34,460
Operating income 64,470 29,313
Interest expense, net 15,799 319
Other non-operating (income)/expense 767 (465 )
Income before income taxes 47,904 29,459
Provision for income taxes 10,466 5,421
Net income 37,438 24,038
Preferred stock dividends 5,750 —
Net income available to common stockholders $ 31,688 $ 24,038

Net income per common share available to common stockholders:
Basic $ 1.11 $ 0.96
Diluted $ 1.09 $ 0.95
Weighted average common shares:
Basic 28,670,488 25,021,063
Diluted 28,944,955 25,392,047

~~(1)~~

~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

	Three Months Ended					Six Months Ended
	October 1, 2022		October 2, 2021			October 1, 2022		October 2, 2021
Net sales	$	369,167	$	160,900		$	723,247	$	317,105
Cost of sales		218,020		98,436			430,948		190,868
Gross margin		151,147		62,464			292,299		126,237
Operating expenses:
Selling, general and administrative		57,519		40,223			113,347		71,435
Other, net		21,611		5,667			42,465		8,915
Total operating expenses		79,130		45,890			155,812		80,350
Operating income		72,017		16,574			136,487		45,887
Interest expense, net		18,332		15,770			34,131		16,089
Other non-operating (income)/expense		184		(291	)		951		(756	)
Income before income taxes		53,501		1,095			101,405		30,554
Provision for income taxes		9,699		2,447			20,165		7,868
Net income/(loss)		43,802		(1,352	)		81,240		22,686
Preferred stock dividends		5,750		510			11,500		510
Net income/(loss) available to common stockholders	$	38,052	$	(1,862	)	$	69,740	$	22,176

Net income/(loss) per share available to common stockholders:
Basic	$	1.32	$	(0.07	)	$	2.43	$	0.88
Diluted	$	1.31	$	(0.07	)	$	2.40	$	0.87
Weighted average common shares:
Basic		28,758,403		25,500,393			28,714,445		25,260,728
Diluted		29,093,791		25,500,393			29,020,403		25,632,845

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(Unaudited)

	Three Months Ended					Three Months Ended						Six Months Ended
	July 2, 2022			July 3, 2021 (As Restated)⁽²⁾		October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
Net income	$	37,438		$	24,038
Net income/(loss)						$	43,802		$	(1,352	)	$	81,240		$	22,686
Pension and postretirement liability adjustments, net of taxes ⁽¹⁾		535			318		535			318			1,070			636
Foreign currency translation adjustments		(6,485	)		1,919		(8,993	)		(1,409	)		(15,478	)		510
Total comprehensive income	$	31,488		$	26,275
Total comprehensive income/(loss)						$	35,344		$	(2,443	)	$	66,832		$	23,832

⁽¹⁾

These adjustments were net of tax expense of $148 and ~~$83~~$82 for the three-month periods ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021, ~~respectively.~~

⁽²⁾

~~See Note~~respectively and $296 and $165 for the six-month periods ended October 1, 2022 and October 2, ~~Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~2021, respectively.

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Stockholders’ Equity

(dollars in thousands)

(Unaudited)

Common Stock Preferred Stock Additional
Paid-in
Capital Accumulated
Other
Comprehensive Retained Earnings

Treasury Stock
Total
Stockholders’
Equity
Shares Amount Shares Amount
(As Restated) ⁽¹⁾
Income/(Loss)
(As Restated) ⁽¹⁾
Shares Amount
(As Restated) ⁽¹⁾

Balance at April 2, 2022 29,807,208 $ 298 4,600,000 $ 46 $ 1,564,261 $ (5,800 ) $ 886,155 (928,322 ) $ (72,352 ) $ 2,372,608
Net income — — — — — — 37,438 — — 37,438
Share-based compensation — — — — 3,819 — — — — 3,819
Preferred stock dividends — — — — — — (5,750 ) — — (5,750 )
Repurchase of common stock — — — — — — — (30,469 ) (5,984 ) (5,984 )
Exercise of equity awards 13,713 1 — — 1,459 — — — — 1,460
Change in net prior service cost and actuarial losses, net of tax expense of $148 — — — — — 535 — — — 535
Issuance of restricted stock, net of forfeitures 56,955 — — — — — — — — —
Currency translation adjustments — — — — — (6,485 ) — — — (6,485 )
Balance at July 2, 2022 29,877,876 $ 299 4,600,000 $ 46 $ 1,569,539 $ (11,750 ) $ 917,843 (958,791 ) $ (78,336 ) $ 2,397,641

⁽¹⁾

~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

	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 2, 2022		29,807,208	$	298		4,600,000	$	46	$	1,564,261	$	(5,800	)	$	886,155			(928,322	)	$	(72,352	)	$	2,372,608
Net income		—		—		—		—		—		—			37,438			—			—			37,438
Share-based compensation		—		—		—		—		3,819		—			—			—			—			3,819
Preferred stock dividends		—		—		—		—		—		—			(5,750	)		—			—			(5,750	)
Repurchase of common stock		—		—		—		—		—		—			—			(30,469	)		(5,984	)		(5,984	)
Exercise of equity awards		13,713		1		—		—		1,459		—			—			—			—			1,460
Change in net prior service cost and actuarial losses, net of tax expense of $148		—		—		—		—		—		535			—			—			—			535
Issuance of restricted stock, net of forfeitures		56,955		—		—		—		—		—			—			—			—			—
Currency translation adjustments		—		—		—		—		—		(6,485	)		—			—			—			(6,485	)
Balance at July 2, 2022		29,877,876	$	299		4,600,000	$	46	$	1,569,539	$	(11,750	)	$	917,843			(958,791	)	$	(78,336	)	$	2,397,641
Net income		—		—		—		—		—		—			43,802			—			—			43,802
Share-based compensation		—		—		—		—		4,354		—			—			—			—			4,354
Preferred stock dividends		—		—		—		—		—		—			(5,750	)		—			—			(5,750	)
Repurchase of common stock		—		—		—		—		—		—			—			(63	)		(15	)		(15	)
Exercise of equity awards		89,509		1		—		—		8,562		—			—			—			—			8,563
Change in net prior service cost and actuarial losses, net of tax expense of $148		—		—		—		—		—		535			—			—			—			535
Issuance of restricted stock, net of forfeitures		8,529		—		—		—		—		—			—			—			—			—
Currency translation adjustments		—		—		—		—		—		(8,993	)		—			—			—			(8,993	)
Balance at October 1, 2022		29,975,914	$	300		4,600,000	$	46	$	1,582,455	$	(20,208	)	$	955,895			(958,854	)	$	(78,351	)	$	2,440,137

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Stockholders’ Equity (continued)

(dollars in thousands)

(Unaudited)

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

Treasury Stock
Total
Stockholders’
Equity
Shares Amount
(As Restated) ⁽¹⁾
Income/(Loss)
(As Restated) ⁽¹⁾
Shares Amount
(As Restated) ⁽¹⁾

Balance at April 3, 2021 26,110,320 $ 261 $ 462,616 $ (10,409 ) $ 843,456 (884,701 ) $ (63,826 ) $ 1,232,098
Net income — — — — 24,038 — — 24,038
Share-based compensation — — 7,182 — — — — 7,182
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 91,056 — — — — — — —
Currency translation adjustments — — — 1,919 — — — 1,919
Balance at July 3, 2021 26,336,894 $ 263 $ 486,477 $ (8,172 ) $ 867,494 (916,273 ) $ (70,090 ) $ 1,275,972

⁽¹⁾

~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

	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		—	$	—	$	462,616	$	(10,409	)	$	843,456			(884,701	)	$	(63,826	)	$	1,232,098
Net income		—			—		—		—		—		—			24,038			—			—			24,038
Share-based compensation		—			—		—		—		7,182		—			—			—			—			7,182
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		—	$	—	$	486,477	$	(8,172	)	$	867,494			(916,273	)	$	(70,090	)	$	1,275,972
Net loss		—			—		—		—		—		—			(1,352	)		—			—			(1,352	)
Share-based compensation		—			—		—		—		16,774		—			—			—			—			16,774
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 tax expense 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	$	1,554,431	$	(9,263	)	$	865,632			(916,679	)	$	(70,182	)	$	2,340,962

See accompanying notes.

RBC Bearings Incorporated

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

Three Months Ended

July 2,
2022

July 3,
2021
(As Restated) ⁽¹⁾

Cash flows from operating activities:
Net income $ 37,438 $ 24,038
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 28,642 8,212
Deferred income taxes (4,102 ) 1,276
Amortization of deferred financing costs 2,298 106
Share-based compensation 3,819 7,182
Loss/(gain) on disposition of assets (15 ) 13
Consolidation, restructuring, and other noncash charges - 467
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 11,402 4,890
Inventory (28,187 ) (4,879 )
Prepaid expenses and other current assets (2,758 ) (2,201 )
Other noncurrent assets (2,608 ) (2,003 )
Accounts payable 3,661 6,285
Accrued expenses and other current liabilities 13,250 2,899
Other noncurrent liabilities (3,805 ) 7,008
Net cash provided by operating activities 59,035 53,293

Cash flows from investing activities:
Purchase of property, plant and equipment (7,857 ) (3,367 )
Proceeds from sale of assets 47 5
Purchase of marketable securities - (29,949 )
Purchase price adjustments for acquisition of business 22,966 -
Net cash provided by/(used in) investing activities 15,156 (33,311 )

Cash flows from financing activities:
Repayments of term loans (125,000 ) (5,753 )
Repayments of notes payable (120 ) (128 )
Principal payments on finance lease obligations (968 ) -
Preferred stock dividends paid (5,750 ) -
Exercise of stock options 1,460 16,681
Repurchase of common stock (5,984 ) (6,264 )
Net cash provided by/(used in) financing activities (136,362 ) 4,536

Effect of exchange rate changes on cash (1,104 ) 167

Cash and cash equivalents:
Increase/(Decrease) during the period (63,275 ) 24,685
Cash and cash equivalents, at beginning of period 182,862 151,086
Cash and cash equivalents, at end of period $ 119,587 $ 175,771

Supplemental disclosures of cash flow information:
Cash paid for:
Income taxes $ 892 $ 606
Interest 19,322 216

⁽¹⁾

~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

	Six Months Ended
	October 1, 2022			October 2, 2021
Cash flows from operating activities:
Net income	$	81,240		$	22,686
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		57,068			16,857
Deferred income taxes		(6,523	)		1,276
Amortization of deferred financing costs		4,338			15,682
Share-based compensation		8,173			23,955
Loss/(gain) on disposition of assets		85			75
Consolidation, restructuring, and other noncash charges		318			2,378
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		9,265			642
Inventory		(45,176	)		(7,173	)
Prepaid expenses and other current assets		(12,954	)		(12,059	)
Other noncurrent assets		5,238			(1,310	)
Accounts payable		(8,664	)		11,248
Accrued expenses and other current liabilities		2,402			14,000
Other noncurrent liabilities		(6,430	)		5,217
Net cash provided by operating activities		88,380			93,474

Cash flows from investing activities:
Capital expenditures		(23,076	)		(6,882	)
Proceeds from sale of assets		510			10
Purchase of marketable securities		-			(29,982	)
Proceeds from sale of marketable securities		-			120,483
Purchase price adjustments for acquisition of business		22,966			-
Net cash (used in)/ provided by investing activities		400			83,629

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		(170,000	)		(8,866	)
Repayments of notes payable		(240	)		(254	)
Principal payments on finance lease obligations		(2,219	)		-
Preferred stock dividends paid		(11,500	)		-
Exercise of stock options		10,023			16,812
Repurchase of common stock		(5,999	)		(6,356	)
Net cash provided by/(used in) financing activities		(179,935	)		1,020,258

Effect of exchange rate changes on cash		(3,212	)		164

Cash and cash equivalents:
Increase/(Decrease) during the period		(94,367	)		1,197,525
Cash and cash equivalents, at beginning of period		182,862			151,086
Cash and cash equivalents, at end of period	$	88,495		$	1,348,611

Supplemental disclosures of cash flow information:
Cash paid for:
Income taxes	$	34,881		$	10,777
Interest		30,101			416

See accompanying notes.

RBC Bearings Incorporated

Notes to Unaudited Interim Consolidated Financial Statements

(dollars in thousands, except 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 (“SEC”). 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/A for the fiscal year ended April 2, 2022. 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/A.

The results of operations for the ~~three-month period~~three- and six-month periods ended ~~July 2,~~October 1, 2022 are not necessarily indicative of the operating results for the entire fiscal year ending April 1, 2023. The ~~three-month~~three- and six-month periods ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021 each included 13 ~~weeks.~~weeks and 26 weeks, respectively. The amounts shown are in thousands, unless otherwise indicated.

2. Significant Accounting Policies

~~Restatement~~

On August 2, 2022, the Audit Committee of the Board of Directors of the Company, in consultation with the Company’s management, concluded that the previously issued consolidated financial statements as of and for the years ended April 2, 2022, April 3, 2021, and March 28, 2020 and the consolidated financial statements for the quarters therein (the “Affected Periods”) included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 26, 2022 contained an error related to the accounting of non-cash stock-based compensation granted to the Company’s CEO and COO. As a result of this error, the Audit Committee determined that the Company’s consolidated financial statements for the Affected Periods included in the 2022 Annual Report on Form 10-K should not be relied upon and should be restated by adjusting selling, general and administrative expenses to reflect non-cash stock-based compensation that should have been recognized in each of the Affected Periods. Any previously issued or filed reports, press releases, earnings releases and investor presentations or other communications describing the Company’s previously issued consolidated financial statements and other related financial information covering the Affected Periods should no longer be relied upon.

The need for the restatement arose out of the Company’s reexamination of the timing of the Company’s recognition of stock-based compensation, a non-cash item, for awards granted to the CEO and COO in light of their employment agreements as then in effect, which historically included provisions that (i) would accelerate the vesting of all the CEO’s then-unvested shares of restricted stock and stock options in the event that he voluntarily resigns from employment or provides the Company with notice that his employment agreement will not renew, and (ii) would accelerate the vesting of all the COO’s then-unvested shares of restricted stock and stock options in the event that he provides the Company with notice that his employment agreement will not renew. Historically, the Company recognized stock-based compensation for restricted stock awards granted to the CEO and COO over the three-year vesting period and option awards over the five-year vesting period stated in the agreements underlying these awards, but U.S. GAAP requires stock-based compensation for awards to be recognized over the shorter service period effectively provided by the above-referenced provisions in the CEO and COO’s respective employment agreements.

The CEO and COO’s employment agreements have been amended to remove the provisions referred to above (which the Company, the CEO and COO consider to be a technical mistake causing the employment agreements to not reflect the parties’ mutual agreement) so the Company will recognize stock-based compensation for restricted stock and option awards granted in the future to the CEO and COO over the full three- and five-year vesting periods, respectively, rather than over the shorter service period applicable to the prior awards.

The following unaudited tables present the impact of the restatement on the Company’s previously reported consolidated statements of operations and balance sheets for the quarterly period ended July 3, 2021. The values as previously reported were derived from the Company’s Original Form 10-Q previously filed with the Securities and Exchange Commission:

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

Three Months Ended July 3, 2021
As
Previously
Reported Restatement
Impacts
As
Restated

Selling, general and administrative $ 29,802 $ 1,410 $ 31,212
Total operating expenses $ 33,050 $ 1,410 $ 34,460
Operating income $ 30,723 $ (1,410 ) $ 29,313
Income before income taxes $ 30,869 $ (1,410 ) $ 29,459
Provision for income taxes $ 4,870 $ 551 $ 5,421
Net income $ 25,999 $ (1,961 ) $ 24,038
Preferred stock dividends — — —
Net income available to common stockholders $ 25,999 $ (1,961 ) $ 24,038

Net income per common share available to common stockholders:
Basic $ 1.04 $ (0.08 ) $ 0.96
Diluted $ 1.03 $ (0.08 ) $ 0.95
Weighted average common shares:
Basic 25,021,063 — 25,021,063
Diluted 25,308,723 83,324 25,392,047

As of July 3, 2021
As
Previously
Reported Restatement
Impacts
As
Restated

Deferred income taxes $ 17,956 $ (1,596 ) $ 16,360
Total liabilities $ 216,223 $ (1,596 ) $ 214,627
Additional paid-in capital $ 467,524 $ 18,953 $ 486,477
Retained earnings $ 884,851 $ (17,357 ) $ 867,494
Total stockholders’ equity $ 1,274,376 $ 1,596 $ 1,275,972

The following tables present the impact of the restatement on the Company’s previously reported consolidated balance sheet as of April 2, 2022. The values as previously reported were derived from the Company’s Original Form 10-K.

As of April 2, 2022
As
Previously
Reported Restatement
Impacts
As
Restated

Deferred income taxes $ 316,224 $ (761 ) $ 315,463
Total liabilities $ 2,473,570 $ (761 ) $ 2,472,809
Additional paid-in capital $ 1,537,749 $ 26,512 $ 1,564,261
Retained earnings $ 911,906 $ (25,751 ) $ 886,155
Total stockholders’ equity $ 2,371,847 $ 761 $ 2,372,608

The Company’s significant accounting policies are detailed in “Note 2 - Summary of Significant Accounting Policies” of our Annual Report on Form 10-K/A for the year ended April 2, 2022.

Significant changes to our accounting policies as a result of adopting new accounting standards are discussed below.

Recent Accounting Standards Adopted

Not applicable.

Recent Accounting Standards Yet to Be Adopted

In March 2020, the Financial Accounting Standards Board ~~(FASB)~~(“FASB”) issued Accounting Standards Update ~~(ASU)~~(“ASU”) 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The objective of the standard is to address operational challenges likely to arise in accounting for contract modifications and hedge accounting due to reference rate reform. The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The standard update is effective for all entities as of March 12, 2020 through December 31, 2022. This guidance is available immediately and may be implemented in any period prior to the guidance expiration on December 31, 2022. The Company will adopt this ASU during the third quarter of our fiscal year. The impact of the adoption of this standard update is ~~currently assessing which~~dependent on the Company's contracts modifications as a result of ~~its various contracts will require an update for a new~~ reference rate ~~and will determine~~reform; however, the ~~timing for implementation~~Company does not expect the adoption of ~~this guidance after completing that analysis.~~the amendments associated with hedging relationships to have a material impact on the Company's consolidated financial statements.

Other new pronouncements issued but not effective until after April 1, 2023 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 following table disaggregates total revenue by end market which is how we view our reportable segments (see Note 12):

	Three Months Ended
	July 2, 2022		July 3, 2021		Three Months Ended				Six Months Ended
					October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Aerospace/Defense	$	99,399	$	90,365	$	103,548	$	92,915	$	202,947	$	183,280
Industrial		254,681		65,840		265,619		67,985		520,300		133,825
	$	354,080	$	156,205
Total					$	369,167	$	160,900	$	723,247	$	317,105

The following table disaggregates total revenue by geographic origin:

	Three Months Ended
	July 2, 2022		July 3, 2021		Three Months Ended				Six Months Ended
					October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
United States	$	310,630	$	139,790	$	324,774	$	144,074	$	635,404	$	283,864
International		43,450		16,415		44,393		16,826		87,843		33,241
	$	354,080	$	156,205
Total					$	369,167	$	160,900	$	723,247	$	317,105

The following table illustrates the approximate percentage of revenue recognized for performance obligations satisfied over time versus the amount of revenue recognized for performance obligations satisfied at a point in time:

	Three Months Ended
	July 2, 2022			July 3, 2021			Three Months Ended						Six Months Ended
							October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
Point-in-time		98	%		96	%		98	%		96	%		98	%		96	%
Over time		2	%		4	%		2	%		4	%		2	%		4	%
		100	%		100	%
Total								100	%		100	%		100	%		100	%

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of orders meeting the definition of a contract for which work has not been performed or has been partially performed and excludes unexercised contract options. The duration of the majority of our contracts, as defined by ASC Topic 606, is less than one year. The Company has elected to apply the practical expedient, which allows companies to exclude remaining performance obligations with an original expected duration of one year or less. The aggregate amount of the transaction price allocated to remaining performance obligations for such contracts with a duration of more than one year was approximately ~~$274,610~~$305,457 at ~~July 2,~~October 1, 2022. The Company expects to recognize revenue on approximately ~~64%~~63% and ~~89%~~91% of the remaining performance obligations over the next 12 and 24 months, respectively, with the remainder recognized thereafter.

Contract Balances

The timing of revenue recognition, invoicing and cash collections affect accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities) on the consolidated balance sheets. These assets and liabilities are reported on the consolidated balance sheets on an individual contract basis at the end of each reporting period.

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

As of ~~July 2,~~October 1, 2022 and April 2, 2022, current contract assets were ~~$4,875~~$4,707 and $3,882, respectively, and included within prepaid expenses and other current assets on the consolidated balance sheets. The increase in contract assets was primarily due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations prior to billing partially offset by amounts billed to customers during the period. As of ~~July 2,~~October 1, 2022 and April 2, 2022, the Company did not have any contract assets classified as noncurrent on the consolidated balance sheets.

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

As of ~~July 2,~~October 1, 2022 and April 2, 2022, current contract liabilities were ~~$21,009~~$22,414 and $19,556, respectively, and included within accrued expenses and other current liabilities on the consolidated balance sheets. The increase in current contract liabilities was primarily due to advance payments received and the reclassification of a portion of advance payments received from the noncurrent portion of contract liabilities partially offset by revenue recognized on customer contracts. For the three and six months ended ~~July 2,~~October 1, 2022, the Company recognized revenues of ~~$3,868~~$3,606 and $7,474, respectively, that were included in the contract liability balance as of April 2, 2022. For the three and six months ended ~~July 3,~~October 2, 2021, the Company recognized revenues of ~~$4,650~~$2,129 and $6,779, respectively, that were included in the contract liability balance at April 3, 2021.

As of ~~July 2,~~October 1, 2022 and April 2, 2022, noncurrent contract liabilities were ~~$10,732~~$9,295 and $10,401, respectively, and included within other noncurrent liabilities on the consolidated balance sheets. The ~~increase~~decrease in noncurrent contract liabilities was primarily due to advance payments received ~~partially~~ offset by the reclassification of a portion of advance payments received to the current portion of contract liabilities.

Variable Consideration

The amount of consideration to which the Company expects to be entitled in exchange for the goods and services is not generally subject to significant variations. However, the Company does offer certain customers rebates, prompt payment discounts, end-user discounts, the right to return eligible products, and/or other forms of variable consideration. The Company estimates this variable consideration using the expected value amount, which is based on historical experience. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company adjusts the estimate of revenue at the earlier of when the amount of consideration the Company expects to receive changes or when the consideration becomes fixed. Accrued customer rebates were ~~$38,779~~$38,829 and $35,234 at ~~July 2,~~October 1, 2022 and April 2, 2022, respectively, and are included within accrued expenses and other current liabilities on the consolidated balance sheets.

4. Accumulated Other Comprehensive Income (Loss)

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

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

	Currency Translation			Pension and Postretirement Liability			Total			Currency Translation			Pension and Postretirement Liability			Total
Balance at April 2, 2022	$	860		$	(6,660	)	$	(5,800	)	$	860		$	(6,660	)	$	(5,800	)
Other comprehensive income (loss) before reclassifications		(6,485	)		—			(6,485	)		(15,478	)		—			(15,478	)
Amounts recorded in/reclassified from accumulated other comprehensive income (loss)		—			535			535			—			1,070			1,070
Net current period other comprehensive income (loss)		(6,485	)		535			(5,950	)		(15,478	)		1,070			(14,408	)
Balance at July 2, 2022	$	(5,625	)	$	(6,125	)	$	(11,750	)
Balance at October 1, 2022										$	(14,618	)	$	(5,590	)	$	(20,208	)

5. Net ~~Income~~Income/(Loss) Per Share Available to Common Stockholders

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

Diluted net ~~income~~income/(loss) per share available to common stockholders is computed by dividing net ~~income~~income/(loss) available to common stockholders by the sum of the weighted-average number of common shares and dilutive common share equivalents then outstanding using the treasury stock method. Common share equivalents consist of the incremental common shares issuable upon the exercise of stock options and the conversion of 5.00% Series A Mandatory Convertible Preferred Stock (“MCPS”) to common shares. The MCPS ~~were~~was issued on September 24, 2021.

We exclude outstanding stock options, stock awards and the MCPS from the calculations if the effect would be anti-dilutive. The dilutive effect of the MCPS is calculated using the if-converted method. The if-converted method assumes that these securities were converted to shares of common stock at the later of the September 24, 2021 issuance date or the beginning of the reporting period to the extent that the effect is dilutive. If the effect is anti-dilutive, we calculate net ~~income~~income/(loss) per share available to common stockholders by adjusting net ~~income~~income/(loss) in the numerator for the effect of the cumulative MCPS dividends for the respective period.

For the ~~three-month period~~three- and six-month periods ended ~~July 2,~~October 1, 2022, the effect of assuming the conversion of the 4,600,000 shares of MCPS into shares of common stock was anti-dilutive, and therefore excluded from the calculation of diluted earnings per share available to common stockholders. Accordingly, net ~~income~~income/(loss) was reduced by cumulative MCPS dividends, as presented in our consolidated statement of operations, for purposes of calculating net ~~income~~income/(loss) available to common stockholders.

For the three months ended ~~July 2,~~October 1, 2022, ~~202,894~~90,796 employee stock options and ~~29,054~~485 restricted shares were excluded from the calculation of diluted earnings per share available to common stockholders. For the six months ended October 1, 2022, 110,692 employee stock options and 9,780 restricted shares were excluded from the calculation of diluted earnings per share available to common stockholders. The inclusion of these employee stock options and restricted shares would have been anti-dilutive.

For the three months ended ~~July 3,~~October 2, 2021, ~~160,600~~no employee stock options or restricted shares were excluded from the calculation of diluted earnings per share available to common stockholders. For the six months ended October 2, 2021, 159,925 employee stock options and no restricted shares were excluded from the calculation of diluted earnings per share available to common stockholders. The inclusion of these employee stock options would have been anti-dilutive.

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~~income/(loss) per share available to common stockholders.

Three Months Ended

July 2,
2022

July 3,
2021
(As Restated) ⁽¹⁾

Net income $ 37,438 $ 24,038
Preferred stock dividends 5,750 —
Net income available to common stockholders $ 31,688 $ 24,038

Denominator for basic net income per share available to common stockholders — weighted-average shares outstanding 28,670,488 25,021,063
Effect of dilution due to employee stock awards 274,467 370,984
Denominator for diluted net income per share available to common stockholders — weighted-average shares outstanding 28,944,955 25,392,047

Basic net income per share available to common stockholders $ 1.11 $ 0.96

Diluted net income per share available to common stockholders $ 1.09 $ 0.95

⁽¹⁾

~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

	Three Months Ended					Six Months Ended
	October 1, 2022		October 2, 2021			October 1, 2022		October 2, 2021

Net income/(loss)	$	43,802	$	(1,352	)	$	81,240	$	22,686
Preferred stock dividends		5,750		510			11,500		510
Net income/(loss) available to common stockholders	$	38,052	$	(1,862	)	$	69,740	$	22,176

Denominator for basic net income/(loss) per share available to common stockholders — weighted-average shares outstanding		28,758,403		25,500,393			28,714,445		25,260,728

Effect of dilution due to employee stock awards		335,388		—			305,958		372,117
Denominator for diluted net income/(loss) per share available to common stockholders — weighted-average shares outstanding		29,093,791		25,500,393			29,020,403		25,632,845

Basic net income/(loss) per share available to common stockholders	$	1.32	$	(0.07	)	$	2.43	$	0.88

Diluted net income/(loss) per share available to common stockholders	$	1.31	$	(0.07	)	$	2.40	$	0.87

6. Fair Value

Fair value is defined as the price that would be expected to be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The FASB provides accounting rules that classify the inputs used to measure fair value into the following hierarchy:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3 – Unobservable inputs for the asset or liability.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The carrying amounts reported in the balance sheet for cash and cash equivalents, accounts receivable, prepaids and other current assets, accounts payable and accruals and other current liabilities approximate their fair value due to their short-term nature.

~~The Company also measures certain assets at fair value, using Level 3 inputs, as~~As a result of the occurrence of triggering events such as purchase accounting for ~~acquisitions.~~

~~No other material~~acquisitions, the Company does measure certain assets ~~were measured at fair value~~and liabilities based on ~~a nonrecurring basis during the three months ended July 2, 2022 and July~~Level 3 ~~2021, respectively.~~inputs.

Financial Instruments:

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, trade accounts payable, short-term borrowings and long-term debt. Due to their short-term nature, the carrying value of cash and cash equivalents, accounts receivable, trade accounts payable, accrued expenses and short-term borrowings are a reasonable estimate of their fair value. Long-term assets held on our balance sheet related to benefit plan obligations are measured at fair value. Due to the nature of fair value calculations for variable-rate debt, the carrying value of the Company’s long-term variable-rate debt is a reasonable estimate of its fair value. The fair value of the Company’s long-term fixed-rate debt, based on quoted market prices, was ~~$431,875~~$421,745 and $463,750 at ~~July 2,~~October 1, 2022 and April 2, 2022, respectively. The carrying value of this debt was ~~$492,608~~$492,822 at ~~July 2,~~October 1, 2022 and $492,396 at April 2, 2022. The fair value of long-term fixed-rate debt was measured using Level 2 inputs. The Company does not believe it has significant concentrations of risk associated with the counterparties to its financial instruments.

7. Inventory

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

	July 2, 2022		April 2, 2022		October 1, 2022		April 2, 2022
Raw materials	$	119,036	$	112,651	$	118,612	$	112,651
Work in process		125,383		122,983		128,860		122,983
Finished goods		297,631		280,506		310,329		280,506
	$	542,050	$	516,140	$	557,801	$	516,140

8. Goodwill and Intangible Assets

Goodwill

Goodwill balances, by segment, consist of the following:

	Aerospace/ Defense		Industrial			Total			Aerospace/ Defense		Industrial			Total
April 2, 2022	$	194,124	$	1,707,980		$	1,902,104		$	194,124	$	1,707,980		$	1,902,104
Acquisition ⁽¹⁾		—		(22,912	)		(22,912	)		—		(22,912	)		(22,912	)
Translation adjustments		—		(2,550	)		(2,550	)		—		(6,503	)		(6,503	)
July 2, 2022	$	194,124	$	1,682,518		$	1,876,642
October 1, 2022									$	194,124	$	1,678,565		$	1,872,689

⁽¹⁾

Purchase accounting adjustments to goodwill associated with the acquisition of Dodge discussed further in Note 13.

Intangible Assets

		July 2, 2022				April 2, 2022						October 1, 2022				April 2, 2022
	Weighted Average Useful Lives(Years)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Weighted Average Useful Lives (Years)		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Product approvals	24	$	50,878	$	17,162	$	50,878	$	16,680		24	$	50,878	$	17,645	$	50,878	$	16,680
Customer relationships and lists	24		1,294,095		66,795		1,294,577		53,376		24		1,293,729		80,225		1,294,577		53,376
Trade names	25		216,327		17,357		216,340		15,073		25		216,317		19,639		216,340		15,073
Distributor agreements	5		722		722		722		722		5		722		722		722		722
Patents and trademarks	16		12,456		6,739		12,342		6,607		16		13,017		6,878		12,342		6,607
Domain names	10		437		437		437		437		10		437		437		437		437
Other	3		16,779		6,049		9,720		4,887		5		14,469		3,288		9,720		4,887
			1,591,694		115,261		1,585,016		97,782				1,589,569		128,834		1,585,016		97,782
Non-amortizable repair station certifications	n/a		24,281		—		24,281		—		n/a		24,281		—		24,281		—
Total	24	$	1,615,975	$	115,261	$	1,609,297	$	97,782		24	$	1,613,850	$	128,834	$	1,609,297	$	97,782

Amortization expense for definite-lived intangible assets during the three-month periods ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021 were ~~$17,304~~$16,755 and ~~$2,584,~~$2,825, respectively. ~~This is~~Amortization expense for definite-lived intangible assets during the six-month periods ended October 1, 2022 and October 2, 2021 were $34,059 and $5,409, respectively. These amounts are included in other, net on the Company’s consolidated statements of operations. Estimated amortization expense for the remainder of fiscal 2023 and the five succeeding fiscal years and thereafter is as follows:

Remainder of Fiscal 2023	$	52,609	$	34,307
Fiscal 2024		69,734		68,040
Fiscal 2025		69,685		67,926
Fiscal 2026		66,757		66,634
Fiscal 2027		63,509		65,591
Fiscal 2028		63,506		64,832
Fiscal 2029 and thereafter		1,090,633		1,093,405

9. Accrued Expenses and Other Current Liabilities

The significant components of accrued expenses and other current liabilities are as follows:

	July 2, 2022		April 2, 2022		October 1, 2022		April 2, 2022
Employee compensation and related benefits	$	34,510	$	34,697	$	35,982	$	34,697
Taxes		26,532		11,706		8,447		11,706
Contract liabilities		21,009		19,556		22,414		19,556
Accrued rebates		38,779		35,234		38,829		35,234
Workers compensation and insurance		1,633		1,144
Workers’ compensation and insurance						1,067		1,144
Acquisition costs		2,864		4,568		2,487		4,568
Current finance lease liabilities		4,537		3,863		4,686		3,863
Accrued preferred stock dividends		4,919		4,919		4,919		4,919
Interest		5,166		10,987		10,685		10,987
Audit fees		254		599		464		599
Legal		850		450		925		450
Returns and warranties						8,409		7,889
Other		17,660		17,529		8,270		9,640
	$	158,713	$	145,252	$	147,584	$	145,252

10. Debt

Domestic Credit Facility

On November 1, 2021 RBC Bearings Incorporated, our top holding company, and our Roller Bearing Company of America, Inc. subsidiary (“RBCA”) entered into a Credit Agreement (the “New Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer and the other lenders party thereto, and terminated the Company’s prior Credit Agreement, which was entered into with Wells Fargo in 2015 (the “2015 Credit Agreement”). The New Credit Agreement provides the Company with (a) a $1,300,000 term loan facility (the “Term Loan Facility”), which was used to fund a portion of the cash purchase price for the acquisition of Dodge and to pay related fees and expenses, and (b) a $500,000 revolving credit facility (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Facilities”). Debt issuance costs associated with the New Credit Agreement totaled $14,947 and will be amortized over the life of the New Credit Agreement.

Amounts outstanding under the Facilities generally bear 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 is based on the Company’s consolidated ratio of total net debt to consolidated EBITDA from time to time. Currently, the Company’s margin is 0.50% for base rate loans and 1.50% for LIBOR rate loans. The Facilities are subject to a “LIBOR” floor of 0.00% and contain “hard-wired” LIBOR replacement provisions as set forth in the New Credit Agreement. As of ~~July 2,~~October 1, 2022, the Company’s commitment fee rate is 0.20% and the letter of credit fee rate iswas 1.50%.

The Term Loan Facility ~~and the Revolving Credit Facility~~ will mature on November 2, ~~2026.~~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. Commencing one full fiscal quarter after the execution of the New Credit Agreement, the Term Loan Facility~~penalty, which will ~~amortize in~~offset future quarterly ~~installments with the balance payable on the Maturity Date unless otherwise extended in accordance with the terms of the Term Loan Facility.~~amortization installments. The required future principal payments on the Term Loan Facility are ~~approximately~~ $0 for the remainder of fiscal 2023, $0 for fiscal 2024, ~~$2,500~~and $0 for fiscal 2025, ~~$130,000~~due to prepayments previously made, and approximately $87,500 for fiscal 2026, and $942,500 for fiscal 2027. The Revolving Credit Facility will mature on November 2, 2026, at which time all amounts outstanding under the Revolving Credit Facility will be payable.

The New Credit Agreement requires the Company to comply with various covenants, including the following financial ~~covenants beginning with the test period ending December 31, 2021:~~covenants: (a) a maximum Total Net Leverage Ratio of 5.50:1.00, which maximum Total Net Leverage Ratio shall decrease during certain subsequent test periods as set forth in the New 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 ~~Borrower~~Company by 0.50:1.00 for a period of ~~twelve (12)~~12 months after the consummation of a material acquisition), and (b) a minimum Interest Coverage Ratio of 2.00:1.00. As of October 1, 2022, the Company was in compliance with all debt covenants.

The New Credit Agreement allows the Company to, among other things, make distributions to ~~shareholders,~~stockholders, repurchase its stock, incur other debt or liens, or acquire or dispose of assets provided that the Company complies with certain requirements and limitations of the New Credit Agreement.

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

As of ~~July 2,~~October 1, 2022, ~~$1,075,000~~$1,030,000 was outstanding under the Term Loan Facility and approximately $3,675 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 the Company had the ability to borrow up to an additional $496,325 under the Revolving Credit Facility.

Senior Notes

On October 7, 2021, RBCA issued $500,000 aggregate principal amount of 4.375% Senior Notes due 2029 (the “Senior Notes”). The net proceeds from the issuance of the Senior Notes were approximately $491,992 after deducting initial purchasers’ discounts and commissions and offering expenses. On November 1, 2021, the Company used the proceeds to fund a portion of the cash purchase price for the acquisition of Dodge.

The Senior Notes were issued pursuant to an indenture with Wilmington Trust, National Association, as trustee (the “Indenture”). The Indenture contains covenants limiting the ability of the Company to (i) incur additional indebtedness or guarantee indebtedness, (ii) declare or pay dividends, redeem stock or make other distributions to stockholders, (iii) make investments, (iv) create liens or use assets as security in other transactions, (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of its assets, (vi) enter into transactions with affiliates, and (vii) sell or transfer certain assets. These covenants contain various exceptions, limitations and qualifications. At any time that the Senior Notes are rated investment grade, certain of these covenants will be suspended.

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

Interest on the Senior Notes accrues at a rate of 4.375% and is payable semi–annually in cash in arrears on April 15 and October 15 of each ~~year, commencing April 15, 2022.~~year.

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.

Foreign Term Loan and Revolving Credit Facility

On August 15, 2019, one of our foreign subsidiaries, Schaublin SA (“Schaublin”), entered into two separate credit agreements (the “Foreign Credit Agreements”) with Credit Suisse (Switzerland) Ltd. to (i) finance the acquisition of Swiss Tool, and (ii) provide future working capital. The Foreign Credit Agreements provided Schaublin with a CHF 15,000 (approximately $15,383) term loan (the “Foreign Term Loan”), which was extinguished in February 2022 and a CHF 15,000 (approximately $15,383) revolving credit facility (the “Foreign Revolver”), which ~~continues in effect until~~was terminated ~~by either Schaublin or Credit Suisse. Debt issuance costs associated with the Foreign Credit Agreements totaled CHF 270 (approximately $277).~~as of October 1, 2022.

~~Amounts outstanding under~~A summary of the ~~Foreign Revolver generally bear interest at LIBOR plus a specified margin. The applicable margin~~Company’s debt is ~~based on Schaublin’s ratio of total net debt to consolidated EBITDA at each measurement date. Currently, Schaublin’s margin is 1.00%.~~presented in the table below:

The Foreign Credit Agreements require Schaublin to comply with various covenants, which are tested annually on March 31. These covenants include, among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 2.50 to 1 as of March 31, 2021 and thereafter. Schaublin is also required to maintain an economic equity of CHF 20,000 at all times. The Foreign Credit Agreements allow Schaublin to, among other things, incur other debt or liens and acquire or dispose of assets provided that Schaublin complies with certain requirements and limitations of the Foreign Credit Agreements. As of July 2, 2022, Schaublin was in compliance with all such covenants.

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

As of July 2, 2022, the Foreign Term Loan has been paid, with no balance outstanding. There were no amounts outstanding under the Foreign Revolver. Schaublin has the ability to borrow up to an additional $15,626 under the Foreign Revolver as of July 2, 2022.

July 2,
2022

April 2,
2022

Revolver and term loan facilities $ 1,075,000 $ 1,200,000
Senior notes 500,000 500,000
Debt issuance costs (18,597 ) (20,895 )
Other 8,927 9,236
Total debt 1,565,330 1,688,341
Less: current portion 1,525 1,543
Long-term debt $ 1,563,805 $ 1,686,798

	October 1, 2022			April 2, 2022
Revolver and term loan facilities	$	1,030,000		$	1,200,000
Senior notes		500,000			500,000
Debt issuance costs		(16,557	)		(20,895	)
Other		8,671			9,236
Total debt		1,522,114			1,688,341
Less: current portion		1,512			1,543
Long-term debt	$	1,520,602		$	1,686,798

11. Income Taxes

The Company files income tax returns in numerous U.S. and foreign jurisdictions, with returns subject to examination for varying periods, but generally back to and including the year ending ~~April 2, 2005.~~March 30, 2019, although certain tax credits generated in earlier years are open under statute from March 29, 2008. The Company is no longer subject to U.S. federal tax examination by the Internal Revenue Service for years ending before March ~~31, 2018.~~30, 2019.

The effective income tax rates for the three-month periods ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021, were ~~21.8%~~18.1% and ~~18.4%~~⁽¹⁾223.5%, respectively. In addition to discrete items, the effective income tax rates for these periods are different from the U.S. statutory rates due to the foreign-derived intangible income provision and U.S. credit for increasing research activities, which decrease the rate, and state income taxes, foreign income taxes, and nondeductible stock-based compensation, that increase the rate.

The effective income tax rate for the three-month period ended ~~July 2,~~October 1, 2022 of ~~21.8%~~18.1% includes ~~$600~~$2,372 of tax ~~benefit~~benefits associated with share-based compensation ~~along with $32~~and $174 of ~~tax benefit for the release of unrecognized tax positions associated with a statute of limitations expiration.~~other items. The effective income tax rate without discrete items for the three-month period ended ~~July 2,~~October 1, 2022 would have been ~~23.1%~~22.9%. The effective income tax rate for the three-month period ended ~~July 3,~~October 2, 2021 of ~~18.4%~~⁽¹⁾223.5% includes ~~$2,139~~$91 of tax ~~benefit~~benefits associated with share-based compensation ~~along with $160~~offset by the establishment of ~~tax benefit~~a $1,853 valuation allowance for ~~the release~~capital loss carryforwards we do not expect to recognize and $100 of ~~unrecognized tax positions associated with a statute of limitations expiration.~~other items. The effective income tax rate without discrete items for the three-month period ended ~~July 3,~~October 2, 2021 would have been ~~26.2%~~⁽¹⁾53.5%. The Company believes it is reasonably possible that some of its unrecognized tax positions may be effectively settled within the next ~~twelve~~12 months due to the closing of audits and the statute of limitations expiring in varying jurisdictions. The decrease in the Company’s unrecognized tax positions, ~~reserve,~~ pertaining primarily to federal and state credits and state tax, is estimated to be approximately ~~$1,607 over the next twelve months.~~$3,068.

⁽¹⁾

~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

Income tax expense for the six-month period ended October 1, 2022 was $20,165 compared to $7,868 for the six-month period ended October 2, 2021. Our effective income tax rate for the six-month period ended October 1, 2022 was 19.9% compared to 25.8% for the six-month period ended October 2, 2021. The effective income tax rate for the six-month period ended October 1, 2022 of 19.9% includes $2,971 of tax benefits associated with share-based compensation partially offset by $187 of other items. The effective income tax rate without these benefits and other items for the six-month period ended October 1, 2022 would have been 23.0%. The effective income tax rate for the six-month period ended October 2, 2021 of 25.8% includes $2,231 of tax benefits associated with share-based compensation offset by the establishment of a $1,853 valuation allowance for capital loss carryforwards we don’t expect to recognize and $60 of other items. The effective income tax rate without these benefits and other items for the six-month period ended October 2, 2021 would have been 27.2%.

12. Reportable Segments

The Company operates through operating segments and reports its financial results based on how its chief operating decision maker makes operating decisions, assesses the performance of the business, and allocates resources. These reportable operating segments are Aerospace/Defense and Industrial and are described below.

Aerospace/Defense. This segment represents the end markets for the Company’s highly engineered bearings and precision components used in commercial aerospace, defense aerospace, and sea and ground defense applications.

Industrial. This segment represents the end markets for the Company’s highly engineered bearings and precision components used in various industrial applications including: power transmission; construction, mining, energy and specialized equipment manufacturing; semiconductor production equipment manufacturing; agricultural machinery, commercial truck and automotive manufacturing; and tool holding.

~~Financial information for fiscal 2022 has been recast to conform to the new segment presentation.~~

Segment performance is evaluated based on segment net sales and gross margin. Items not allocated to segment operating income include corporate administrative expenses and certain other amounts. Identifiable assets by reportable segment consist of those directly identified with the segment’s operations.

Three Months Ended

July 2,
2022

July 3,
2021
(As Restated) ⁽¹⁾

Net External Sales
Aerospace/Defense $ 99,399 $ 90,365
Industrial 254,681 65,840
$ 354,080 $ 156,205
Gross Margin
Aerospace/Defense $ 38,600 $ 38,632
Industrial 102,552 25,141
$ 141,152 $ 63,773
Selling, General & Administrative Expenses
Aerospace/Defense $ 7,468 $ 7,248
Industrial 29,972 5,747
Corporate 18,388 18,217
$ 55,828 $ 31,212
Operating Income
Aerospace/Defense $ 29,504 $ 29,590
Industrial 53,295 19,386
Corporate (18,329 ) (19,663 )
$ 64,470 $ 29,313

	Three Months Ended						Six Months Ended
	October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
Net External Sales
Aerospace/Defense	$	103,548		$	92,915		$	202,947		$	183,280
Industrial		265,619			67,985			520,300			133,825
	$	369,167		$	160,900		$	723,247		$	317,105
Gross Margin
Aerospace/Defense	$	41,033		$	36,580		$	79,633		$	75,212
Industrial		110,114			25,884			212,666			51,025
	$	151,147		$	62,464		$	292,299		$	126,237
Selling, General & Administrative Expenses
Aerospace/Defense	$	7,472		$	7,287		$	14,940		$	14,535
Industrial		30,101			5,918			60,073			11,665
Corporate		19,946			27,018			38,334			45,235
	$	57,519		$	40,223		$	113,347		$	71,435
Operating Income
Aerospace/Defense	$	31,480		$	26,521		$	60,984		$	56,111
Industrial		60,050			19,813			113,345			39,199
Corporate		(19,513	)		(29,760	)		(37,842	)		(49,423	)
	$	72,017		$	16,574		$	136,487		$	45,887

July 2,
2022

April 2,
2022

Total Assets
Aerospace/Defense $ 805,312 $ 776,505
Industrial 3,932,291 3,920,957
Corporate 20,414 147,955
$ 4,758,017 $ 4,845,417

⁽¹⁾

~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~


	October 1, 2022		April 2, 2022
Total Assets
Aerospace/Defense	$	789,204	$	776,505
Industrial		3,824,386		3,920,957
Corporate		113,470		147,955
	$	4,727,060	$	4,845,417

13. Dodge Acquisition

On November 1, 2021, the Company completed the acquisition of Dodge for approximately $2,908,241, net of cash acquired and subject to certain adjustments. The purchase price was paid with (i) $1,285,761 of borrowing under the Term Loan Facility, net of issuance costs, (ii) $1,050,811 of net proceeds from common stock and MCPS offerings, (iii) $494,200 of net proceeds from the Senior Notes offering, and (iv) approximately $77,469 of cash on hand. Since the close of the transaction, purchase price adjustments totaling $22,966 have been recorded.

In the acquisition, the Company purchased 100% of the capital stock of certain entities, including Dodge Mechanical Power Transmission Company Inc. (now known as Dodge Industrial, Inc.), and certain other assets relating to ABB Asea Brown Boveri Ltd.’s mechanical power transmission business.

With offices in Greenville, South Carolina, Dodge is a leading manufacturer of mounted bearings, gearings and mechanical products with market-leading brand recognition. Dodge manufactures a complete line of mounted bearings, enclosed gearing and power transmission components across a diverse set of industrial end markets. Dodge primarily operates across the construction and mining aftermarket, and the food & beverage, warehousing and general machinery verticals, with sales predominately in the Americas.

Acquisition costs incurred for the fiscal year ended April 2, 2022 totaled $22,598 and were recorded as period expenses and included within other, net within the consolidated statements of operations. ~~For~~Remaining acquisition-related costs incurred for the three and six months ended ~~July 2,~~October 1, 2022 ~~$82 of acquisition costs have been incurred.~~were immaterial. This acquisition was accounted for as a purchase transaction. The ~~preliminary~~ purchase price allocation ~~is subject to change pending a final valuation~~will be completed during the third quarter of fiscal 2023 as we finalize the ~~assets~~impact from taxes and ~~liabilities acquired.~~other minor items. The assets acquired and liabilities assumed were recorded based on their fair values at the date of acquisition as follows:

	November 1, 2021			November 1, 2021
Cash and cash equivalents	$	81,868		$	81,868
Accounts receivable		83,533			83,533
Inventory		136,376			136,376
Prepaid expenses and other current assets		1,261			1,261
Property, plant and equipment		165,109			165,109
Operating lease assets		9,768			9,768
Goodwill		1,601,881			1,601,881
Other intangible assets		1,385,082			1,385,082
Other noncurrent assets		3,672			3,672
Accounts payable		(69,757	)		(69,757	)
Accrued rebates		(30,184	)		(30,184	)
Accrued expenses and other current liabilities		(44,766	)		(44,766	)
Deferred tax liabilities		(299,711	)		(299,711	)
Other noncurrent liabilities		(56,989	)		(56,989	)
Net assets acquired		2,967,143			2,967,143
Less cash received		81,868			81,868
Net consideration	$	2,885,275		$	2,885,275

The goodwill associated with this acquisition is the result of expected synergies from combining the operations of the acquired business with the ~~Company’s~~Company's operations, and intangible assets that do not qualify for separate recognition, such as an assembled workforce. $44,941 of the acquired goodwill is deductible for tax purposes.

The fair value of the identifiable intangible assets of $1,385,082, consisting primarily of customer relationships and trade names, was determined using the income approach. Specifically, a multi-period, excess earnings method was utilized for the customer relationships and the relief-from-royalty method was utilized for the trade name. The fair value of the customer relationships, $1,185,000, is being amortized based on the economic pattern of benefit over a period of 24 years; the fair value of the trade ~~name,~~names, $200,000, is being amortized on a straight-line basis over a 26-year term. These amortization periods represent the estimated useful lives of the assets.

The results of operations for Dodge have been included in the Company’s financial statements for the period subsequent to the completion of the acquisition on November 1, 2021. Dodge contributed ~~$177,473~~$192,267 of revenue and ~~$30,494~~$38,152 of operating income for the three months ended ~~July 2,~~October 1, 2022. Dodge contributed $369,740 of revenue and $68,646 of operating income for the six months ended October 1, 2022.

Upon closing, the Company entered into a transition services agreement ~~(“TSA”~~("TSA") with ABB, pursuant to which ABB agreed to support the information technology, human resources and benefits, finance, tax and treasury functions of the Dodge business for six to ~~twelve~~12 months. ~~The Company has the option to extend the support period for up to a maximum of an additional year for certain IT services. RBC has the right to terminate individual~~Substantially all services ~~at any point over the renewal term. All services are expected to be~~ terminated ~~by the end of the second quarter of fiscal 2023.~~on November 1, 2022. Costs associated with the TSA were ~~$3,705~~$3,999 and $7,704 for the three and six months ended ~~July 2,~~October 1, 2022, respectively, and are included in other, net on the Company’s consolidated statement of operations. Since the purchase of the Dodge business on November 1, 2021, costs associated with the TSA were ~~$11,708~~$15,707 through ~~July 2,~~October 1, 2022.

14. Subsequent Events

On October 28, 2022, the Company entered into a three-year USD-denominated interest rate swap (“the Swap”) from a third-party financial counterparty under the New Credit Agreement (see Note 10). The Swap was executed to protect the Company from interest rate volatility on our variable-rate Term Loan Facility. The Swap has an effective date of December 30, 2022 and is comprised of a $600,000 notional with a maturity of three years. RBC will receive a variable rate based on one-month USD-SOFR CME Term and will pay a fixed rate of 4.455%. The notional on the Swap will amortize as follows:

Year 1: $600,000

Year 2: $400,000

Year 3: $100,000

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

Cautionary Statement as to Forward-Looking Information

The objective of the discussion and analysis is to provide material information relevant to an assessment of the financial condition and results of operations of the registrant including an evaluation of the amounts and certainty of cash flows from operations and from outside sources.

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

The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation: (a) the bearing and engineered products industries are highly competitive, and this competition could reduce our profitability or limit our ability to grow; (b) the loss of a major customer, or a material adverse change in a major customer’s business, could result in a material reduction in our revenues, cash flows and profitability; (c) our results have been and are likely to continue to be impacted by the COVID-19 pandemic; (d) 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; (e) future reductions or changes in U.S. government spending could negatively affect our business; (f) 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; (g) 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; (h) 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; (i) the retirement of commercial aircraft could reduce our revenues, cash flows and profitability; (j) work stoppages and other labor problems could materially reduce our ability to operate our business; (k) unexpected equipment failures, catastrophic events or capacity constraints could increase our costs and reduce our sales due to production curtailments or shutdowns; (l) we may not be able to continue to make the acquisitions necessary for us to realize our growth strategy; (m) 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; (n) 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; (o) we depend heavily on our senior management and other key personnel, the loss of whom could materially affect our financial performance and prospects; (p) our international operations are subject to risks inherent in such activities; (q) currency translation risks may have a material impact on our results of operations; (r) we are subject to changes in legislative, regulatory and legal developments involving income and other taxes; (s) we may be required to make significant future contributions to our pension plan; (t) we may incur material losses for product liability and recall-related claims; (u) environmental and health and safety laws and regulations impose substantial costs and limitations on our operations, and environmental compliance may be more costly than we expect; (v) our intellectual property and proprietary information are valuable, and any inability to protect them could adversely affect our business and results of operations; in addition, we may be subject to infringement claims by third parties; (w) cancellation of orders in our backlog could negatively impact our revenues, cash flows and profitability; (x) 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; (y) litigation could adversely affect our financial condition; (z) changes in accounting standards or changes in the interpretations of existing standards could affect our financial results; (aa) risks associated with utilizing information technology systems could adversely affect our operations; (bb) our quarterly performance can be affected by the timing of government product inspections and approvals; (cc) we may not be able to efficiently integrate Dodge into our operations; (dd) we may fail to realize some or all of the anticipated benefits of the Dodge acquisition or those benefits may take longer to realize than expected; (ee) we incurred substantial debt in order to complete the Dodge acquisition, which could constrain our business and exposes us to the risk of defaults under our debt instruments; and (ff) increases in interest rates would increase the cost of servicing the Term Loan Facility and could reduce our profitability. 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/A for the year ended April 2, 2022. 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 a well-known international manufacturer and maker of ~~highly-engineered~~highly engineered bearings and precision components. Our precision solutions are integral to the manufacture and operation of most machines and mechanical systems, reduce wear to moving parts, facilitate proper power transmission, and reduce damage and energy loss caused by friction. While we manufacture products in all major bearings categories, we focus primarily on the higher end of the bearing and engineered component markets where we believe our value-added manufacturing and engineering capabilities enable us to differentiate ourselves from our competitors and enhance profitability. We believe our expertise has enabled us to garner leading positions in many of the product markets in which we primarily compete. With 56 facilities in 10 countries, of which 37 are manufacturing facilities, we have been able to significantly broaden our end markets, products, customer base and geographic reach.

Previously we operated under four reportable business segments – Plain Bearings, Roller Bearings, Ball Bearings, and Engineered Products – but the Dodge acquisition has resulted in a change in the internal organization of the Company and how our chief operating decision maker makes operating decisions, assesses the performance of the business, and allocates resources so that we now operate under two reportable business segments – Aerospace/Defense and Industrial:

●

Industrial. This segment represents the end markets for the Company’s highly engineered bearings, gearings and precision components used in various industrial applications including: power transmission; construction, mining, energy and specialized equipment manufacturing; semiconductor production equipment manufacturing; agricultural machinery, commercial truck and automotive manufacturing; and tool holding.

Financial information for fiscal 2022 has been recast to conform to the new segment presentation.

The markets for our products are cyclical, and we have endeavored to mitigate this cyclicality by entering into single and sole-source relationships and long-term purchase agreements, through diversification across multiple market segments within the Aerospace/Defense and Industrial segments, by increasing sales to the aftermarket, and by focusing on developing highly customized solutions.

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

●

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

●

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

●

Increasing aftermarket sales. We believe that increasing our aftermarket sales of replacement parts will further enhance the continuity and predictability of our revenues and enhance our profitability. Such sales include sales to third party distributors and sales to OEMs for replacement products and aftermarket services. The acquisition of Dodge has had a profound impact on our sales volumes to distributors and other aftermarket customers. We will further increase the percentage of our revenues derived from the replacement market by continuing to implement several initiatives.

●

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

Outlook

~~Outlook~~

Our net sales for the three-month period ended ~~July 2,~~October 1, 2022 increased ~~126.7%~~129.4% compared to the same period last fiscal year; excluding Dodge sales in the ~~first~~second quarter of fiscal 2023, net sales were up ~~13.1%~~9.9% period over period. The increase in net sales was a result of a ~~286.8%~~290.7% increase in our Industrial segment and ~~10.0%~~11.4% increase in our Aerospace/Defense segment. Excluding sales from Dodge, our Industrial segment increased ~~17.3%~~7.9% year over year. Our backlog, as of ~~July 2,~~October 1, 2022, was ~~$635.7~~$653.2 million compared to $603.1 million as of April 2, 2022.

We are continuing to see the recovery of the commercial aerospace business, which ~~has~~ increased by ~~18.9%~~31.3% for the three-month period ended October 1, 2022 versus the same period last year. We anticipate this recovery to ~~accelerate~~continue throughout the rest of the fiscal year and beyond. Orders have continued to grow as evidenced by our backlog. Defense sales, which represented approximately ~~35.0%~~32.3% of segment sales ~~this period,~~during the quarter, were down ~~3.4%~~15.3% year over year. This is in part due to the timing of delivery on parts that require government approval and/or completion of certain milestone achievements prior to invoicing.

The increase in our industrial sales reflects a pattern of sustained growth over the last year, with strong results in several areas. ~~Mining increased by more than 25.0% year over year.~~ Our oil and gas business ~~this~~during the quarter ~~showed the start~~continued a pattern of ~~a strong recovery~~growth which is expected to continue into future periods. Other notable strengths in industrial were in semiconductor and general industrial markets. ~~The increase in our global industrial sales was negatively impacted by the Covid related shut downs in China, where Dodge has a plant in Shanghai.~~

The Company expects net sales to be approximately ~~$355~~$348.0 million to ~~$365~~$360.0 million in the ~~second~~third quarter of fiscal 2023.

We experienced strong cash flow generation during the ~~first~~second quarter of fiscal 2023 (as discussed in the section “Liquidity and Capital Resources” below). We expect this trend to continue throughout the fiscal year as customer demand continues to be significant. We believe that operating cash flows and available credit under the Revolving Credit Facility ~~and Foreign Revolver~~ will provide adequate resources to fund internal growth initiatives for the foreseeable future, including at least the next 12 months. As of ~~July 2,~~October 1, 2022, we had cash and cash equivalents of ~~$119.6~~$88.5 million, of which approximately ~~$24.8~~$25.2 million was cash held by our foreign operations.

Results of Operations

(dollars in millions)

	Three Months Ended									Three Months Ended
	July 2, 2022		July 3, 2021 (As Restated) ⁽¹⁾		$ Change		% Change			October 1, 2022		October 2, 2021			$ Change		% Change
Total net sales	$	354.1	$	156.2	$	197.9		126.7	%	$	369.2	$	160.9		$	208.3		129.4	%

Net income available to common stockholders	$	31.7	$	24.0	$	7.7		31.8	%
Net income/(loss) available to common stockholders										$	38.1	$	(1.9	)	$	40.0		2,143.6	%

Net income per share available to common stockholders: diluted	$	1.09	$	0.95
Net income/(loss) per share available to common stockholders: diluted										$	1.31	$	(0.07	)
Weighted average common shares: diluted		28,944,955		25,392,047							29,093,791		25,500,393

Our net sales for the three-month period ended ~~July 2,~~October 1, 2022 increased ~~126.7%~~129.4% compared to the same period last fiscal year; excluding Dodge sales in the second quarter of fiscal 2023, net sales were up 9.9% year over year. Net sales in our Industrial segment increased 290.7% year over year; excluding Dodge, Industrial segment sales increased 7.9% year over year. This reflects a pattern of sustained growth, with strong results in areas including the semiconductor, mining, energy, and general industrial markets. Net sales in our Aerospace/Defense segment increased 11.4% year over year, led by commercial OEM, which was up 32.4% compared to the same period in the prior year while sales to the defense sector were down 15.3%. The increase in commercial aerospace reflects continued recovery in orders from large OEMs as build rates escalate and stability in the aftermarket. Defense sales were negatively impacted by the timing of delivery on parts that require government approval and/or completion of certain milestone achievements prior to invoicing.

Net income available to common stockholders for the second quarter of fiscal 2023 was $38.1 million compared to $1.9 million net loss for the same period last year. Net income for the second quarter of fiscal 2023 was affected by approximately $4.0 million of pre-tax transition services costs associated with the Dodge acquisition. Net loss for the second quarter of fiscal 2022 was affected by approximately $16.9 million of pre-tax costs associated with the acquisition of Dodge and $2.0 million of pre-tax restructuring costs primarily associated with consolidation efforts at one of our domestic manufacturing facilities.

	Six Months Ended
	October 1, 2022		October 2, 2021		$ Change		% Change
Total net sales	$	723.2	$	317.1	$	406.1		128.1	%

Net income available to common stockholders	$	69.7	$	22.2	$	47.5		214.5	%

Net income per share available to common stockholders: diluted	$	2.40	$	0.87
Weighted average common shares: diluted		29,020,403		25,632,845

Our net sales for the six-month period ended October 1, 2022 increased 128.1% compared to the same period last fiscal year; excluding Dodge sales in the first ~~quarter~~six months of fiscal 2023, net sales were up ~~13.1% period~~11.5% year over ~~period. The increase in net~~year. Net sales ~~was a result of a 286.8% increase~~ in our Industrial segment. Sales to our Aerospace/Defense segment were led by aircraft OEM, which was up 23.2% compared to the same period in the prior year. Sales to the defense sector were down 3.4%. Excluding Dodge sales, sales to our industrial segment increased ~~17.3%~~288.8% year over year; excluding Dodge, Industrial segment sales increased 12.5% year over year. This reflects a pattern of sustained growth, ~~in our industrial sales,~~ with strong results in areas including the semiconductor, mining, energy, and general industrial markets. ~~Within aerospace, we experienced an increase~~Net sales in our Aerospace/Defense segment increased 10.7% year over year, led by commercial ~~aerospace business while the defense end markets were down as~~OEM, which was up 27.8% compared to the same period ~~last year.~~in the prior year while sales to the defense sector were down 9.6%. The increase in commercial aerospace reflects the recovery in build rates from large OEMs and stability in the aftermarket. Defense sales were negatively impacted by the timing of shipments associated with our marine business.

Net income available to common stockholders for the ~~first quarter of fiscal 2023~~six months ended October 1, 2022 was ~~$31.7~~$69.7 million compared to ~~$24.0~~$22.2 million⁽¹⁾ for the same period last year. Net income for the ~~first quarter of~~six-month period in fiscal 2023 was affected by approximately ~~$3.7~~$7.7 million of pre-tax transition services costs associated with the Dodge acquisition. Net income for the ~~first quarter of~~six-month period in fiscal 2022 was affected by ~~$0.2~~approximately $16.9 million of ~~discrete tax benefit.~~pre-tax costs associated with the acquisition of Dodge and $2.5 million of pre-tax restructuring costs primarily associated with consolidation efforts at one of our domestic manufacturing facilities.

Gross Margin

⁽¹⁾	~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

	Three Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

Gross Margin	$	151.1		$	62.5		$	88.6		142.0	%
% of net sales		40.9	%		38.8	%

~~Gross Margin~~

Three Months Ended
July 2,
2022 July 3,
2021 $
Change %
Change

Gross Margin $ 141.2 $ 63.8 $ 77.4 121.3 %
% of net sales 39.9 % 40.8 %

Gross margin was ~~39.9%~~40.9% of net sales for the ~~first~~second quarter of fiscal 2023 compared to ~~40.8%~~38.8% for the ~~first~~second quarter of fiscal 2022. The ~~decrease~~increase in gross margin as a percentage of net sales was driven by ~~product mix.~~increased volumes and efficiencies achieved and approximately $0.9 million of restructuring costs associated with consolidation efforts at one of our domestic facilities during the second quarter of fiscal 2022.

	Six Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

Gross Margin	$	292.3		$	126.2		$	166.1		131.5	%
% of net sales		40.4	%		39.8	%

Gross margin was 40.4% of net sales for the first six months of fiscal 2023 compared to 39.8% for the same period last year. Gross margin for the six-month period of fiscal 2022 was impacted by approximately $0.9 million of restructuring costs associated with consolidation efforts at one of our domestic facilities.

Selling, General and Administrative

	Three Months Ended											Three Months Ended
	July 2, 2022			July 3, 2021 (As Restated) ⁽¹⁾			$ Change		% Change			October 1, 2022			October 2, 2021			$ Change		% Change

SG&A	$	55.8		$	31.2		$	24.6		78.9	%	$	57.5		$	40.2		$	17.3		43.0	%
% of net sales		15.8	%		20.0	%							15.6	%		25.0	%

SG&A for the ~~first~~second quarter of fiscal 2023 was ~~$55.8~~$57.5 million, or ~~15.8%~~15.6% of net sales, as compared to ~~$31.2~~$40.2 million,⁽¹⁾, or ~~20.0%~~⁽¹⁾25.0% of net sales, for the same period of fiscal 2022. The improvement in SG&A as a % of net sales is primarily due to $12.4 million less stock-based compensation expense recognized in the second quarter of fiscal 2023 compared to the prior year.

	Six Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

SG&A	$	113.3		$	71.4		$	41.9		58.7	%
% of net sales		15.7	%		22.5	%

SG&A expenses increased by $41.9 million to $113.3 million for the first six months of fiscal 2023 compared to $71.4 million for the same period last year. SG&A for the first ~~quarter~~six months of fiscal 2023 ~~includes~~included approximately ~~$23.9~~$48.0 million of costs from the Dodge ~~business. The remainder of the increase is primarily associated with an increase~~business and increases in professional fees and personnel costs, ~~year over year.~~partially offset by a decrease in stock compensation expense.

⁽¹⁾	~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

Other, Net

Three Months Ended
July 2,
2022 July 3,
2021 $
Change %
Change

Other, net $ 20.9 $ 3.2 $ 17.7 542.1 %
% of net sales 5.9 % 2.1 %

	Three Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

Other, net	$	21.6		$	5.7		$	15.9		281.3	%
% of net sales		5.9	%		3.5	%

Other operating expenses for the ~~first~~second quarter of fiscal 2023 totaled ~~$20.9~~$21.6 million compared to ~~$3.2~~$5.7 million for the same period last year. For the ~~first~~second quarter of fiscal 2023, other operating expenses included ~~$3.8~~$4.0 million of TSA costs and other costs associated with the Dodge acquisition, ~~and $17.3~~$16.8 million of amortization of intangible assets, ~~partially offset by $0.2~~and $0.8 million of other ~~income.~~items. For the second quarter of fiscal 2022, other operating expenses included $1.1 million of restructuring costs and related items, $2.8 million of amortization of intangible assets, $1.4 million of costs associated with the acquisition of Dodge and $0.4 million of other costs.

	Six Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

Other, net	$	42.5		$	8.9		$	33.6		376.3	%
% of net sales		5.9	%		2.8	%

Other operating expenses for the first six months of fiscal 2023 totaled $42.5 million compared to $8.9 million for the same period last year. For the first ~~quarter~~six months of fiscal 2023, other operating expenses were comprised mainly of $7.8 million of TSA costs and other costs associated with the Dodge acquisition, $34.1 million of amortization of intangible assets, and $0.6 million of other items. For the first six months of fiscal 2022, other operating expenses were comprised mainly of ~~$2.6~~$5.4 million ofin amortization of ~~intangible assets and $0.6~~intangibles, $1.6 million of restructuring and related items, $1.4 million of costs associated with the acquisition of Dodge, and $0.5 million of other items.

Interest Expense, Net

Three Months Ended
July 2,
2022 July 3,
2021 $
Change %
Change

Interest expense, net $ 15.8 $ 0.3 $ 15.5 4,852.7 %
% of net sales 4.5 % 0.2 %

	Three Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

Interest expense, net	$	18.3		$	15.8		$	2.5		16.2	%
% of net sales		5.0	%		9.8	%

Interest expense, net, generally 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 ~~$15.8~~$18.3 million for the ~~first~~second quarter of fiscal 2023 compared to ~~$0.3~~$15.8 million for the same period last year. The ~~increase~~Company incurred approximately $15.5 million in ~~interest cost~~costs associated with the amortization of fees for a bridge financing commitment established in connection with the Dodge acquisition during the ~~period is a result~~second quarter of ~~the addition of~~fiscal 2022, which was replaced with the Term Loan Facility and Senior Notes in the third quarter of fiscal 2022. The increase in interest expense was primarily due to the increase in LIBOR during the second quarter of fiscal 2023.

	Six Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

Interest expense, net	$	34.1		$	16.1		$	18.0		112.1	%
% of net sales		4.7	%		5.1	%

Interest expense, net was $34.1 million for the first six months of fiscal 2023 compared to $16.1 million for the first six months of fiscal 2022. The Company incurred approximately $15.5 million in costs associated with the amortization of fees for a bridge financing commitment established in association with the Dodge acquisition during the second quarter of fiscal 2022, which was replaced with the Term Loan Facility and Senior Notes in the third quarter of fiscal 2022. The increase in interest expense was primarily due interest we are now incurring related to the debt disclosed within Item 1, Part I, Note 10 of this report.

Other Non-Operating Expense/(Income)

	Three Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

Other non-operating expense /(income)	$	0.2		$	(0.3	)	$	0.5		(163.2	)%
% of net sales		0.0	%		(0.2	)%

Other non-operating expenses were $0.2 million for the second quarter of fiscal 2023 compared to $0.3 million of income for the same period in the prior year. For the second quarter of fiscal 2023, other non-operating expenses were primarily comprised of $0.4 million of post-retirement benefit costs, partially offset by $0.2 million of foreign exchange gain. For the second quarter of fiscal 2022, other non-operating income was comprised of $0.5 million of income associated with short-term marketable securities partially offset by $0.1 million of foreign exchange loss and $0.1 million of other items.

~~Other Non-Operating Expense~~

	Six Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

Other non-operating expense /(income)	$	1.0		$	(0.8	)	$	1.8		(225.8	)%
% of net sales		0.1	%		(0.2	)%

Three Months Ended
July 2,
2022 July 3,
2021 $
Change %
Change

Other non-operating expense $ 0.8 $ (0.5 ) $ 1.3 (264.9 )%
% of net sales 0.2 % (0.3 )%

Other non-operating expenses were ~~$0.8~~$1.0 million for the first ~~quarter~~six months of fiscal 2023 compared to ~~$0.5~~$0.8 million of income for the same period in the prior year. For the first ~~quarter~~six months of fiscal 2023, other non-operating expenses were comprised of ~~$0.6~~$1.4 million of post-retirement benefit costs, ~~and $0.2~~partially offset by $0.4 million of ~~other items.~~foreign exchange gain. For the first ~~quarter~~six months of fiscal 2022, other non-operating income ~~of $0.5 million~~ was ~~primarily~~ comprised of ~~dividend~~$1.2 million of income ~~received from~~associated with short-term marketable ~~securities.~~securities partially offset by $0.1 million of foreign exchange loss and $0.3 million of other items.

Income Taxes

Three Months Ended
July 2,
2022 July 3, 2021
(As Restated) ⁽¹⁾

Income tax expense $ 10.5 $ 5.4
Effective tax rate 21.8 % 18.4 %

	Three Months Ended
	October 1, 2022			October 2, 2021

Income tax expense	$	9.7		$	2.4
Effective tax rate		18.1	%		223.5	%

Income tax expense for the three-month period ended ~~July 2,~~October 1, 2022 was ~~$10.5~~$9.7 million compared to ~~$5.4~~$2.4 million⁽¹⁾for the three-month period ended ~~July 3,~~October 2, 2021. Our effective income tax rate for the three-month period ended ~~July 2,~~October 1, 2022 was ~~21.8%~~18.1% compared to ~~18.4%~~⁽¹⁾223.5% for the three-month period ended ~~July 3,~~October 2, 2021. The effective income tax rate for the three-month period ended ~~July 2,~~October 1, 2022 of ~~21.8% included $0.6~~18.1% includes $2.4 million of tax benefits associated with share-based ~~compensation; the~~compensation and $0.2 million of other items. The effective income tax rate without ~~these~~discrete items would have been ~~23.1%~~22.9%. The effective income tax rate for the three-month period ended ~~July 3,~~October 2, 2021 of ~~18.4%~~⁽¹⁾223.5% included ~~$2.1~~$0.1 million of tax ~~benefit~~benefits associated with share-based compensation ~~along~~offset by the establishment of a $1.9 million valuation allowance for capital loss carryforwards we do not expect to recognize and $0.1 million of other items. The effective income tax rate without discrete items for the three-month period ended October 2, 2021 would have been 53.5%. The effective income tax rate without discrete items differed from the statutory rate primarily due to nondeductible share-based compensation expense recognized in the period and R&D credits.

	Six Months Ended
	October 1, 2022			October 2, 2021

Income tax expense	$	20.2		$	7.9
Effective tax rate		19.9	%		25.8	%

Income tax expense for the six-month period ended October 1, 2022 was $20.2 million compared to $7.9 million for the six-month period ended October 2, 2021. Our effective income tax rate for the six-month period ended October 1, 2022 was 19.9% compared to 25.8% for the six-month period ended October 2, 2021. The effective income tax rate for the six-month period ended October 1, 2022 of 19.9% includes $3.0 million of tax benefits associated with share-based compensation partially offset by $0.2 million of discrete tax ~~benefit~~expense primarily associated with establishing a valuation allowance on a loss carryforward; the ~~release~~effective income tax rate without these benefits and other items would have been 23.0%. The effective income tax rate for the six-month period ended October 2, 2021 of ~~unrecognized~~25.8% includes $2.2 million of tax ~~positions~~benefits associated with share-based compensation offset by the ~~statute~~establishment of ~~limitations expiration.~~a $1.9 million valuation allowance for capital loss carryforwards we don’t expect to recognize and $0.1 million of other items. The effective income tax rate without these benefits and other items for the ~~three-month~~six-month period ended ~~July 3,~~October 2, 2021 would have been ~~26.2%~~⁽¹⁾27.2%.

~~(1)~~

~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

~~Segment Information~~

Segment Information

We previously reported our financial results under four operating segments (Plain Bearings; Roller Bearings; Ball Bearings; and Engineered Products), but the Dodge acquisition has resulted in a change in the internal organization of the Company and how our chief operating decision maker makes operating decisions, assesses the performance of the business, and allocates resources. Accordingly, we will now report our financial results under two operating segments: Aerospace/Defense; and Industrial. Financial information for fiscal 2022 has been recast to conform to the new segment presentation. We use gross margin as the primary measurement to assess the financial performance of each reportable segment.

Aerospace/Defense Segment

	Three Months Ended												Three Months Ended
	July 2, 2022			July 3, 2021			$ Change			% Change			October 1, 2022			October 2, 2021			$ Change		% Change

Total net sales	$	99.4		$	90.4		$	9.0			10.0	%	$	103.5		$	92.9		$	10.6		11.4	%

Gross margin	$	38.6		$	38.6		$	(0.0	)		(0.1	)%	$	41.0		$	36.6		$	4.4		12.2	%
% of segment net sales		38.8	%		42.8	%								39.6	%		39.4	%

SG&A	$	7.5		$	7.3		$	0.2			3.0	%	$	7.4		$	7.2		$	0.2		2.5	%
% of segment net sales		7.5	%		8.0	%								7.2	%		7.8	%

Net sales increased ~~$9.0~~$10.6 million, or ~~10.0%~~11.4%, for the three months ended ~~July 2,~~October 1, 2022 compared to the same period last year. Commercial aerospace increased during the period ~~18.9%~~31.3% year over year. The ~~aerospace~~commercial OEM ~~component~~business was up ~~23.2%~~32.4%, demonstrating ~~early signs of a~~continued recovery as build rates and orders escalate in the OEM markets. ~~This was further evidenced by continuing expansion of our backlog during the period.~~ Our defense markets, which ~~represent about 35.0%~~represented approximately 32.3% of segment sales, decreased by approximately ~~3.4%~~15.3% during the period. These markets were impacted by the timing of deliveries to certain government customers which require sign off or achievement of certain milestones prior to shipment. Overall distribution and aftermarket sales, which represent ~~18.3%~~18.4% of segment sales, increased ~~2.7%~~14.9% year over year.

Gross margin as a percentage of segment net sales was ~~38.8%~~39.6% for the ~~first~~second quarter of fiscal 2023 compared to ~~42.8%~~39.4% for the same period last year. The ~~decrease~~increase in gross margin as a percentage of net sales was driven by ~~product mix~~increased volumes and greater cost efficiencies achieved in our plants during the period.

	Six Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

Total net sales	$	202.9		$	183.3		$	19.6		10.7	%

Gross margin	$	79.6		$	75.2		$	4.4		5.9	%
% of segment net sales		39.2	%		41.0	%

SG&A	$	14.9		$	14.5		$	0.4		2.8	%
% of segment net sales		7.4	%		7.9	%

Net sales increased $19.6 million, or 10.7%, for the six months ended October 1, 2022 compared to the same period last year. The 10.7% increase was primarily driven by a 25.0% increase in our commercial aerospace market, both OEM and aftermarket, while our defense market was down 9.6% year over year due to the timing of shipments related to our marine business. During the year, we have noted improvement in the sales and orders to our commercial aerospace customers as build rates continue to grow. Our backlog and recent results reflect the early stages of this process which we expect to continue to see in upcoming quarters. Overall distribution and aftermarket sales were up 8.6% year over year.

Gross margin as a percentage of net sales decreased to 39.2% for the first six months of fiscal 2023 compared to 41.0% for the same period last year. The decrease in gross margin percentage is due to product mix.

Industrial Segment

Three Months Ended
July 2,
2022 July 3,
2021 $
Change %
Change

Total net sales $ 254.7 $ 65.8 $ 188.9 286.8 %

Gross margin $ 102.6 $ 25.2 $ 77.4 307.9 %
% of segment net sales 40.3 % 38.2 %

SG&A $ 30.0 $ 5.7 $ 24.3 421.5 %
% of segment net sales 11.8 % 8.7 %

	Three Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

Total net sales	$	265.6		$	68.0		$	197.6		290.7	%

Gross margin	$	110.1		$	25.8		$	84.3		325.4	%
% of segment net sales		41.5	%		38.1	%

SG&A	$	30.1		$	6.0		$	24.1		408.6	%
% of segment net sales		11.3	%		8.7	%

Net sales increased ~~$188.9~~$197.6 million, or ~~286.8%~~290.7%, for the three months ended ~~July 2,~~October 1, 2022 compared to the same period last year. The increase was primarily due to three months of Dodge sales in fiscal 2023 and continued strong performance across the majority of our industrial markets. Excluding Dodge sales of ~~$177.5~~$192.3 million, net sales increased ~~$11.4~~$5.3 million, or ~~17.3%~~7.9%, period over period. This increase was driven by performance in semiconductor, energy, mining, and the general industrial markets. Sales to distribution and the aftermarket reflected ~~63.4%~~67.0% of our quarterly industrial sales. These distribution and aftermarket sales increased ~~565.0%~~637.2% compared to the same quarter in the prior year and ~~11.6% excluding associated sales from Dodge.~~0.6% organically.

Gross margin for the three months ended ~~July 2,~~October 1, 2022 was ~~40.3%~~41.5% of net sales, compared to ~~38.2%~~38.1% in the comparable period in fiscal 2022. The improved gross margin is ~~primarily~~ due to price increases ~~put into place~~ and ~~product mix.~~also the unfavorable impact of $0.9 million of restructuring costs associated with consolidation efforts at one of our domestic facilities in the second quarter of fiscal 2022.

	Six Months Ended
	October 1, 2022			October 2, 2021			$ Change		% Change

Total net sales	$	520.3		$	133.8		$	386.5		288.8	%

Gross margin	$	212.7		$	51.0		$	161.7		316.8	%
% of segment net sales		40.9	%		38.1	%

SG&A	$	60.1		$	11.7		$	48.4		415.0	%
% of segment net sales		11.5	%		8.7	%

Net sales increased $386.5 million, or 288.8%, for the six months ended October 1, 2022 compared to the same period last year. The increase was primarily due to six months of Dodge sales in fiscal 2023 and strong performance across our industrial markets. Excluding Dodge sales, net sales increased $16.8 million, or 12.5%, period over period. Sales to distribution and the aftermarket increased 601.0% over last year, and 6.1% on an organic basis. The overall segment increase, excluding the addition of Dodge, was driven by performance in semiconductor, energy, mining, and the general industrial markets.

Gross margin for the six months ended October 1, 2022 was 40.9% of net sales, compared to 38.1% in the same period in fiscal 2022. The increase in gross margin is driven by price increases and the fact that gross margin for the first six months of fiscal 2022 included the unfavorable impact of $0.9 million of restructuring costs associated with consolidation efforts at one of our domestic facilities.

Corporate

Three Months Ended
July 2,
2022 July 3, 2021
(As Restated) ⁽¹⁾ $
Change %
Change

SG&A $ 18.3 $ 18.2 $ 0.1 0.9 %
% of total net sales 5.2 % 11.7 %

	Three Months Ended
	October 1, 2022			October 2, 2021			$ Change			% Change

SG&A	$	20.0		$	27.0		$	(7.0	)		(26.2	)%
% of total net sales		5.4	%		16.8	%

Corporate SG&A was ~~$18.3~~$20.0 million, or ~~5.2%~~5.4% of sales for the ~~first~~second quarter of fiscal 2023 compared to ~~$18.2~~⁽¹⁾$27.0 million, or ~~11.7%~~⁽¹⁾16.8% of sales for the same period last year. The year over year ~~increase~~decrease was primarily due to ~~an increase~~a decrease in stock compensation expense, partially offset by increases in other personnel costs and professional ~~fees during the period.~~fees.

~~(1)~~

~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

	Six Months Ended
	October 1, 2022			October 2, 2021			$ Change			% Change

SG&A	$	38.3		$	45.2		$	(6.9	)		(15.3	)%
% of total net sales		5.3	%		14.3	%

Corporate SG&A decreased $6.9 million for the six months ended October 1, 2022 compared to the same period last year due to a decrease in stock compensation expense, partially offset by increases in other personnel costs and professional fees.

Liquidity and Capital Resources

(dollars in millions in tables)

Our business is capital-intensive. Our capital requirements include manufacturing equipment and materials. In addition, we have historically fueled our growth, in part, through acquisitions, including the Dodge acquisition completed on November 1, 2021. We have historically met our working capital, capital expenditure ~~requirements~~ and acquisition funding needs through our net cash flows provided by operations, various debt arrangements and sale of equity to investors. We believe that operating cash flows and available credit under the Revolving Credit Facility ~~and Foreign Revolver~~ will provide adequate resources to fund internal growth initiatives for the foreseeable future. For further discussion regarding the funding of the Dodge acquisition, refer to Part I, Item 1 – Note 13.

Our ability to meet future working capital, capital ~~expenditures~~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.

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 those operations. Although we believe our operations would not be materially impaired by such dispositions, relocations or consolidations, we could incur significant cash or non-cash charges in connection with them.

Liquidity

As of ~~July 2,~~October 1, 2022, we had cash and cash equivalents of ~~$119.6~~$88.5 million of which approximately ~~$24.8~~$25.2 million was cash held by our foreign operations. We expect that our undistributed foreign earnings will be re-invested indefinitely for working capital, internal growth and acquisitions for and by our foreign subsidiaries.

Domestic Credit Facility

~~The~~

On November 1, 2021 RBC Bearings Incorporated, our top holding company, and our Roller Bearing Company of America, Inc. subsidiary (“RBCA”) entered into ~~the New~~a Credit Agreement (the “New Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer and the other lenders party thereto, ~~on November 1, 2021~~ and terminated the Company’s prior Credit Agreement, which was entered into with Wells Fargo in 2015 (the “2015 Credit ~~Agreement.~~Agreement”). The New Credit Agreement provides the Company with (a) ~~the~~a $1,300.0 million ~~Term~~term loan facility (the “Term Loan ~~Facility,~~Facility”), which was used to fund a portion of the cash purchase price for the acquisition of Dodge and to pay related fees and expenses, and (b) ~~the~~a $500.0 million ~~Revolving~~revolving credit facility (the “Revolving Credit ~~Facility.~~Facility” and together with the Term Loan Facility, the “Facilities”). Debt issuance costs associated with the New Credit Agreement totaled $14.9 million and will be amortized over the life of the New Credit Agreement.

The Term Loan ~~Facility and the Revolving Credit~~ Facility will mature on November 2, ~~2026.~~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. Commencing one full fiscal quarter after the execution of the New Credit Agreement,~~penalty, which will offset future quarterly amortization installments. The required future principal payments on the Term Loan Facility are $0 for the remainder of fiscal 2023, $0 for fiscal 2024, and $0 for fiscal 2025, due to prepayments previously made, and approximately $87.5 million for fiscal 2026, and $942.5 million for fiscal 2027. The Revolving Credit Facility will ~~amortize in quarterly installments as set forth in Part I, Item 1 – Note 10, with~~mature on November 2, 2026, at which time all amounts outstanding under the ~~balance payable on the Maturity Date unless otherwise extended in accordance with the terms of the Term Loan Facility.~~Revolving Credit Facility will be payable.

As of ~~July 2,~~October 1, 2022, ~~$1,075.0~~$1,030.0 million was outstanding under the Term Loan Facility and approximately $3.7 million 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 the Company had the ability to borrow up to an additional $496.3 million under the Revolving Credit Facility.

Senior Notes

On October 7, 2021, RBCA issued $500.0 million aggregate principal amount of ~~the~~4.375% Senior Notes ~~and used the approximately $492.0 million of~~due 2029 (the “Senior Notes”). The net proceeds from the issuance ~~(after~~of the Senior Notes were approximately $492.0 million after deducting initial purchasers’ discounts and commissions and offering ~~expenses)~~expenses. On November 1, 2021, the Company used the proceeds to fund a portion of the cash purchase price for the acquisition of Dodge.

The Senior Notes were issued pursuant to ~~the Indenture~~an indenture with Wilmington Trust, National Association, as ~~trustee.~~trustee (the “Indenture”). The Indenture contains covenants limiting the ability of the Company to (i) incur additional indebtedness or guarantee indebtedness, (ii) declare or pay dividends, redeem stock or make other distributions to stockholders, (iii) make investments, (iv) create liens or use assets as security in other transactions, (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of its assets, (vi) enter into transactions with affiliates, and (vii) sell or transfer certain assets. These covenants contain various exceptions, limitations and qualifications. At any time that the Senior Notes are rated investment grade, certain of these covenants will be suspended.

Interest on the Senior Notes accrues at a rate of 4.375% and is payable semi–annually in cash in arrears on April 15 and October 15 of each year ~~commencing April 15, 2022.~~

Foreign Term Loan and Revolving Credit Facility

~~Our Foreign~~

On August 15, 2019, one of our foreign subsidiaries, Schaublin SA (“Schaublin”), entered into two separate credit agreements (the “Foreign Credit ~~Agreements~~Agreements”) with Credit Suisse (Switzerland) Ltd. ~~provided us with financing~~ to ~~acquire~~(i) finance the acquisition of Swiss Tool, ~~in 2019~~ and (ii) provide future working ~~capital for Schaublin, our foreign subsidiary.~~capital. The Foreign Credit Agreements ~~provide (a) the Foreign Term Loan,~~provided Schaublin with a CHF 15.0 million (approximately $15.4 million) term loan (the “Foreign Term Loan”), which was extinguished in February 2022 and ~~(b) the Foreign Revolver,~~ a CHF 15.0 million (approximately $15.4 million) revolving credit facility (the “Foreign Revolver”), which ~~continues in effect until~~was terminated ~~by either Schaublin or Credit Suisse. Debt issuance costs associated with the Foreign Credit Agreements totaled CHF 0.3 million (approximately $0.3 million).~~

Amounts outstanding under the Foreign Term Loan and the Foreign Revolver generally bear interest at LIBOR plus a specified margin. The applicable margin is based on Schaublin’s ratio of total net debt to consolidated EBITDA at each measurement date. Currently, Schaublin’s margin is 1.00%.

The Foreign Credit Agreements require Schaublin to comply with various covenants, which are tested annually on March 31. These covenants include, among other things, a financial covenant to maintain a ratio of consolidated net debt to adjusted EBITDA not greater than 2.50 to 1 as of March 31, 2021 and thereafter. Schaublin is also required to maintain an economic equity of CHF 20.0 million at all times. The Foreign Credit Agreements allow Schaublin to, among other things, incur other debt or liens and acquire or dispose of assets provided that Schaublin complies with certain requirements and limitations of the Foreign Credit Agreements. As of July 2, 2022, Schaublin was in compliance with all such covenants.

As of July 2, 2022, the Foreign Term Loan has been paid, with no balance outstanding. There were no amounts outstanding under the Foreign Revolver. Schaublin has the ability to borrow up to an additional $15.6 million under the Foreign Revolver as of July 2,October 1, 2022.

Cash Flows

Six-month Period Ended October 1, 2022 Compared to the Six-month Period Ended October 2, 2021

The following table summarizes our cash flow activities:

	FY23			FY22		$ Change
Net cash provided by/(used in):
Operating activities ..	$	88.4		$	93.5	$	(5.1	)
Investing activities		0.4			83.6		(83.2	)
Financing activities		(179.9	)		1,020.3		(1,200.2	)
Effect of exchange rate changes on cash		(3.3	)		0.1		(3.4	)
Increase/(decrease) in cash and cash equivalents	$	(94.4	)	$	1,197.5	$	(1,291.9	)

~~Cash Flows~~

~~Three-month Period Ended July 2, 2022 Compared to the Three-month Period Ended July 3, 2021~~

~~The following table summarizes our cash flow activities:~~

FY23 FY22 $ Change
Net cash provided by (used in):
Operating activities $ 59.0 $ 53.3 $ 5.7
Investing activities 15.2 (33.3 ) 48.5
Financing activities (136.4 ) 4.5 (140.9 )
Effect of exchange rate changes on cash (1.1 ) 0.2 (1.3 )
Increase/(Decrease) in cash and cash equivalents $ (63.3 ) $ 24.7 $ (88.0 )

During the first ~~three~~six months of fiscal 2023, we generated cash of ~~$59.0~~$88.4 million from operating activities compared to ~~$53.3~~$93.5 million of cash generated during the same period of fiscal 2022. The ~~increase~~decrease of ~~$5.7~~$5.1 million for fiscal 2023 was mainly a result of ~~a favorable change in non-cash activity of $13.3 million and an increase in net income of $13.4 million, partially offset by~~ the unfavorable impact of a net change in operating assets and liabilities of ~~$21.0~~$66.9 million, partially offset by a favorable change in non-cash activity of $3.2 million and an increase in net income of $58.6 million. The unfavorable change in operating assets and liabilities is detailed in the table below, while the increase in non-cash charges resulted from ~~$20.4~~a $40.2 million ofincrease in depreciation and amortization, ~~and $2.2~~partially offset by unfavorable changes of $15.8 million of share-based compensation charges, $11.3 million of amortization of deferred financing costs, ~~partially offset by unfavorable changes of $5.4~~$7.8 million in deferred taxes, ~~$3.4~~and $2.1 million of ~~share-based compensation charges and $0.5 million of~~consolidation, restructuring, and ~~consolidation~~other noncash charges.

~~(1)~~

~~See Note 2, Summary of Significant Accounting Policies – Restatement, for discussion regarding the impacts of the Restatement.~~

The following chart summarizes the unfavorable change in operating assets and liabilities of ~~$21.0~~$66.9 million for fiscal 2023 versus fiscal 2022 and the favorable change of ~~$3.2~~$14.0 million for fiscal 2022 versus fiscal 2021.

	FY23			FY22			FY23			FY22
Cash provided by (used in):
Cash provided by/(used in):
Accounts receivable	$	6.5		$	(11.0	)	$	8.6		$	(20.6	)
Inventory		(23.3	)		(1.6	)		(38.0	)		(2.2	)
Prepaid expenses and other current assets		(0.6	)		(3.4	)		(0.9	)		(9.3	)
Other noncurrent assets		(0.6	)		2.7			6.5			5.6
Accounts payable		(2.6	)		5.5			(19.9	)		22.8
Accrued expenses and other current liabilities		10.4			7.1			(11.6	)		18.1
Other noncurrent liabilities		(10.8	)		3.9			(11.6	)		(0.4	)
Total change in operating assets and liabilities:	$	(21.0	)	$	3.2		$	(66.9	)	$	14.0

During the first ~~three~~six months of fiscal 2023, we generated ~~$15.2~~$0.4 million in investing activities as compared to ~~$33.3~~generating $83.6 million ~~used~~ during the first ~~three~~six months of fiscal 2022. This ~~increase from cash used to~~decrease in cash generated was attributable to $120.5 million less in proceeds from sale of marketable securities and an increase in capital expenditures of $16.2 million, partially offset by a $30.0 million decrease in purchases of marketable securities, $0.5 million increase in proceeds from the sale of assets and Dodge acquisition purchase price adjustments of $23.0 ~~million and $29.9 million less in purchase of marketable securities partially offset by an increase in capital expenditures of $4.4~~ million.

During the first ~~three~~six months of fiscal 2023, we used ~~$136.4~~$179.9 million in financing activities compared to ~~$4.5~~$1,020.3 million generated during the first ~~three~~six months of fiscal 2022. This decrease from cash generated to cash used was primarily attributable to ~~$119.2~~$605.7 million proceeds from the issuance of common stock during

the first six months of fiscal 2022, $445.5 million proceeds from the issuance of preferred stock during the first six months of fiscal 2022, $161.1 million more payments made on outstanding debt, ~~$15.2~~$11.5 million cash dividends paid on preferred stock, $6.8 million fewer exercises of share-based awards, ~~$5.8 million more cash dividends paid on preferred stock,~~ and ~~$1.0~~$2.2 million in principal payments made on finance lease obligations during the current fiscal year, partially offset by ~~$0.3~~$32.2 million less in ~~treasury stock purchases.~~finance fees paid in connection with credit facilities and term loans and $0.4 million fewer repurchases of common stock.

Capital Expenditures

Our capital expenditures were ~~$7.9~~$15.2 million and $23.1 million for the ~~three-month period~~three- and six-month periods ended ~~July 2, 2022.~~October 1, 2022, respectively. We expect to make additional capital expenditures of ~~$30.0~~$15.0 million to ~~$25.0~~$20.0 million during the remainder of fiscal 2023 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.

Obligations and Commitments

The Company’s fixed contractual obligations and commitments are primarily comprised of our debt obligations disclosed ~~within~~in Part I, Item 1- Note 10 of this report. We also have lease obligations which are materially consistent with what we ~~have~~ disclosed ~~within~~in our Form 10-K/A for the fiscal year ended April 2, 2022.

Other Matters

Critical Accounting Policies and Estimates

Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We believe the most complex and sensitive judgments, because of their significance to the ~~Consolidated Financial Statements,~~consolidated financial statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Notes to the Consolidated Financial Statements in our fiscal 2022 Annual Report on Form 10-K/A describe the significant accounting estimates and policies used in preparation of ~~the Consolidated Financial Statements.~~our consolidated financial statements. Actual results in these areas could differ from management’s estimates. There have been no significant changes in our critical accounting estimates during the first ~~three~~six months of fiscal 2023.

Off-Balance Sheet Arrangements

As of ~~July 2,~~October 1, 2022, we had no significant off-balance sheet arrangements other than $3.7 million of outstanding standby letters of credit, all of which were under the Revolving Credit Facility.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Interest Rates. We currently have variable rate debt outstanding under ~~our credit agreements.~~the Term Loan Facility. We regularly evaluate the impact of interest rate changes on our net income and cash flow and take action to limit our exposure when appropriate. As discussed in Note 14 in Part I, Item I of this report, we entered into an interest rate swap on October 28, 2022.

Foreign Currency Exchange Rates. Our operations in the following countries utilize the following currencies as their functional currency:

●	● Australia – Australian dollar	●	India – rupee
●	● Canada – Canadian dollar	●	Mexico – peso
●	● China – Chinese yuan	●	Poland – zloty
●	● France – euro	●	Switzerland – Swiss franc
●	● Germany – euro

As a result, we are exposed to risk associated with fluctuating currency exchange rates between the U.S. dollar and these currencies. Foreign currency transaction gains and losses are included in earnings. Approximately 12% ~~and 11%~~ of our net sales were impacted by foreign currency fluctuations for both the three- ~~month~~and six-month periods ended ~~July~~October 1, 2022, compared to 9% for both the three- and six-month periods ended October 2, ~~2022 and July 3, 2021, respectively.~~2021. Foreign currency transaction exposure arises primarily from the transfer of foreign currency from one subsidiary to another within the group, and to foreign currency denominated trade receivables. Unrealized currency translation gains and losses are recognized upon translation of the foreign operations’ balance sheets to U.S. dollars. Because our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our earnings. We periodically enter into derivative financial instruments in the form of forward exchange contracts to reduce the effect of fluctuations in exchange rates on certain third-party sales transactions denominated in non-functional currencies. Based on the accounting guidance related to derivatives and hedging activities, we record derivative financial instruments at fair value. For derivative financial instruments designated and qualifying as cash flow hedges, the effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive income, and is reclassified into earnings when the hedged transaction affects earnings. As of ~~July 2,~~October 1, 2022, we had no derivatives. As discussed in Note 14 in Part I, Item I of this report, we entered into an interest rate swap on October 28, 2022.

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) as of ~~July 2,~~October 1, 2022. This evaluation excluded the Dodge business acquired on November 1, 2021 as we are currently in the process of integrating the internal controls and procedures of Dodge into our internal controls over financial reporting. As provided under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations of the SEC, we will include the internal controls and procedures of Dodge in our annual assessment of the effectiveness of internal control over financial reporting for our 2023 fiscal year.

~~Based on~~Remediation of Material Weakness

To address the evaluation performed to evaluate the effectiveness of our disclosure controls and procedures, excluding Dodge, the Company determined that errors were made in its original accounting conclusions related to the timing of when stock-based compensation was recognized for equity awards granted to its Chief Executive Officer and Chief Operating Officer based on the terms of their employment agreements. The Company determined the errors were the result of apreviously reported material weakness ~~related to deficiency~~ in internal control over financial reporting ~~regarding~~described in Part I, Item 4 of the Company’s Form 10-Q for the quarterly period ended July 2, 2022, the Company enhanced and revised the design of ~~its control~~existing controls and procedures to ~~consider all relevant terms within executive~~properly review employment agreements ~~and~~involving equity awards to ensure they are accounted for in accordance with the ~~related application~~latest accounting pronouncements. The Company’s internal audit department will test the operating effectiveness of relevant authoritative accounting guidance for stock-based compensation awards, a non-cash item. Company-wide, there are two employment agreements for executive officers; one for its Chief Executive Officer and one for its Chief Operating Officer.management’s controls during the fiscal year.

The Company acknowledges that its management is responsible for establishing and maintaining internal control over financial reporting and assessing the effectiveness of its internal controls. The Company is committed to maintaining a strong internal control environment and implementing measures to ensure that the control deficiencies identified above are remediated as soon as possible. Management is in the process of implementing its remediation plan, which includes steps to design and implement new controls regarding management’s review of new or modified employment agreements for key executives. The Company will consider the material weakness remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.

Changes in Internal Control over Financial Reporting

NoExcept for the changes related to the Company's remediation efforts described above, there has been no change in ~~our~~the Company’s internal control over financial reporting that occurred during the ~~three-month period ended July 2, 2022, other than the material weakness noted above,~~second quarter of fiscal 2023 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 Securities Exchange ~~Act)~~Act of 1934).

As discussed ~~within~~in Note 13 included ~~within~~in Part I, Item 1 of this report, we acquired Dodge on November 1, 2021. We are currently in the process of integrating the internal controls and procedures of Dodge into our internal controls over financial reporting. As provided under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations of the SEC, we will include the internal controls and procedures of Dodge in our annual assessment of the effectiveness of our internal control over financial reporting for our 2023 fiscal year.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes to our risk factors and uncertainties since the ~~most recent~~ filing of our Form 10-K/A ~~other than what has been described below, which is also disclosed within~~filed with the ~~most recent filing of our Form 10-K/A.~~SEC on August 5, 2022. For a discussion of the risk factors, refer to Part I, Item 2, “Cautionary Statement as to Forward-Looking Information” contained in this quarterly report and Part I, Item 1A, “Risk Factors,” contained in the Company’s Annual Report on Form 10-K/A for the fiscal year ended April 2, 2022.

~~New Risk Factor~~

The Company has identified a material weakness in its internal control over financial reporting. If not remediated, the Company’s failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in its financial statements and a failure to meet its reporting and financial obligations, each of which could have a material adverse effect on the Company’s financial condition and the trading price of its common stock.

Subsequent to the filing of the Original Form 10-K, management identified a material weakness in its internal control over financial reporting related to the design of its control to consider all relevant terms within executive employment agreements and the related application of relevant authoritative accounting guidance for stock-based compensation awards, a non-cash item. Company-wide, there are two employment agreements for executive officers; one for its Chief Executive Officer and one for its Chief Operating Officer . A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

As discussed in Item 9A. Controls and Procedures of this Annual Report on Form 10-K/A, the Company’s management has re-evaluated its assessment of the effectiveness of internal control over financial reporting and its disclosure controls and procedures and concluded that they were not effective as of April 2, 2022.

The Company is committed to remediating its material weakness as promptly as possible. Management is in the process of implementing its remediation plan. However, there can be no assurance as to when the material weakness will be remediated or that additional material weaknesses will not arise in the future. If the Company is unable to maintain effective internal control over financial reporting, its ability to record, process and report financial information timely and accurately could be adversely affected, which could subject the Company to litigation or investigations, require management resources, increase costs, negatively affect investor confidence and adversely impact its stock price.

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

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

Total share repurchases under the 2019 plan for the three months ended ~~July 2,~~October 1, 2022 are as follows:

Period Total
number of
shares
purchased Average
price paid
per share Number of
shares
purchased
as part of the
publicly
announced
program Approximate
dollar value
of shares still
available to be
purchased
under the
program
(000’s)
04/03/2022 – 04/30/2022 54 $ 185.24 54 $ 79,043
05/01/2022 – 05/28/2022 38 178.23 38 79,036
05/29/2022 – 07/02/2022 30,377 196.42 30,377 $ 73,069
Total 30,469 $ 196.38 30,469

Period	Total number of shares purchased		Average price paid per share		Number of shares purchased as part of the publicly announced program		Approximate dollar value of shares still available to be purchased under the program (000’s)
07/03/2022 – 07/30/2022		—	$	—		—	$	73,069
07/31/2022 – 08/27/2022		63		236.00		63		73,054
08/28/2022 – 10/01/2022		—		—		—	$	73,054
Total		63	$	236.00		63

During the ~~first~~second quarter of fiscal 2023, we did not issue any common stock that was not registered under the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

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).*
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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,~~November 10, 2022

By:	/s/ Robert M. Sullivan
	Name:	Robert M. Sullivan
	Title:	Chief Financial Officer
	Date:	~~August 5,~~November 10, 2022

EXHIBIT INDEX

Exhibit Number		Exhibit Description
31.01		Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a).
31.02		Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a).
32.01		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*
32.02		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

3537

iso4217:USD xbrli:shares

	July 2, 2022			April 2, 2022 (As Restated) ⁽¹⁾
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	119,587		$	182,862
Accounts receivable, net of allowance for doubtful accounts of $2,860 as of July 2, 2022 and $2,737 as of April 2, 2022		234,987			247,487
Inventory		542,050			516,140
Prepaid expenses and other current assets		19,456			15,748
Total current assets		916,080			962,237
Property, plant and equipment, net		384,497			386,732
Operating lease assets, net		44,104			44,535
Goodwill		1,876,642			1,902,104
Intangible assets, net		1,500,714			1,511,515
Other noncurrent assets		35,980			38,294
Total assets	$	4,758,017		$	4,845,417


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	161,834		$	158,606
Accrued expenses and other current liabilities		158,713			145,252
Current operating lease liabilities		8,333			8,059
Current portion of long-term debt		1,525			1,543
Total current liabilities		330,405			313,460
Long-term debt, less current portion		1,563,805			1,686,798
Long-term operating lease liabilities		35,928			36,680
Deferred income taxes		311,599			315,463
Other noncurrent liabilities		118,639			120,408
Total liabilities		2,360,376			2,472,809

Stockholders’ equity:
Preferred stock, $.01 par value; authorized shares: 10,000,000 as of July 2, 2022 and April 2, 2022, respectively; issued shares: 4,600,000 as of July 2, 2022 and April 2, 2022, respectively		46			46
Common stock, $.01 par value; authorized shares: 60,000,000 as of July 2, 2022 and April 2, 2022, respectively; issued shares: 29,877,876 and 29,807,208 as of July 2, 2022 and April 2, 2022, respectively		299			298
Additional paid-in capital		1,569,539			1,564,261
Accumulated other comprehensive loss		(11,750	)		(5,800	)
Retained earnings		917,843			886,155
Treasury stock, at cost, 958,791 shares and 928,322 shares as of July 2, 2022 and April 2, 2022, respectively		(78,336	)		(72,352	)

Total stockholders’ equity		2,397,641			2,372,608
Total liabilities and stockholders’ equity	$	4,758,017		$	4,845,417

	Common Stock				Preferred Stock				Additional Paid-in Capital		Accumulated Other Comprehensive			Retained Earnings			Treasury Stock						Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		(As Restated) ⁽¹⁾		Income/(Loss)			(As Restated) ⁽¹⁾			Shares			Amount			(As Restated) ⁽¹⁾
Balance at April 2, 2022		29,807,208	$	298		4,600,000	$	46	$	1,564,261	$	(5,800	)	$	886,155			(928,322	)	$	(72,352	)	$	2,372,608
Net income		—		—		—		—		—		—			37,438			—			—			37,438
Share-based compensation		—		—		—		—		3,819		—			—			—			—			3,819
Preferred stock dividends		—		—		—		—		—		—			(5,750	)		—			—			(5,750	)
Repurchase of common stock		—		—		—		—		—		—			—			(30,469	)		(5,984	)		(5,984	)
Exercise of equity awards		13,713		1		—		—		1,459		—			—			—			—			1,460
Change in net prior service cost and actuarial losses, net of tax expense of $148		—		—		—		—		—		535			—			—			—			535
Issuance of restricted stock, net of forfeitures		56,955		—		—		—		—		—			—			—			—			—
Currency translation adjustments		—		—		—		—		—		(6,485	)		—			—			—			(6,485	)
Balance at July 2, 2022		29,877,876	$	299		4,600,000	$	46	$	1,569,539	$	(11,750	)	$	917,843			(958,791	)	$	(78,336	)	$	2,397,641

	Three Months Ended July 3, 2021
	As Previously Reported		Restatement Impacts			As Restated
Selling, general and administrative	$	29,802	$	1,410		$	31,212
Total operating expenses	$	33,050	$	1,410		$	34,460
Operating income	$	30,723	$	(1,410	)	$	29,313
Income before income taxes	$	30,869	$	(1,410	)	$	29,459
Provision for income taxes	$	4,870	$	551		$	5,421
Net income	$	25,999	$	(1,961	)	$	24,038
Preferred stock dividends		—		—			—
Net income available to common stockholders	$	25,999	$	(1,961	)	$	24,038

Net income per common share available to common stockholders:
Basic	$	1.04	$	(0.08	)	$	0.96
Diluted	$	1.03	$	(0.08	)	$	0.95
Weighted average common shares:
Basic		25,021,063		—			25,021,063
Diluted		25,308,723		83,324			25,392,047

	As of July 3, 2021
	As Previously Reported		Restatement Impacts			As Restated
Deferred income taxes	$	17,956	$	(1,596	)	$	16,360
Total liabilities	$	216,223	$	(1,596	)	$	214,627
Additional paid-in capital	$	467,524	$	18,953		$	486,477
Retained earnings	$	884,851	$	(17,357	)	$	867,494
Total stockholders’ equity	$	1,274,376	$	1,596		$	1,275,972

	As of April 2, 2022
	As Previously Reported		Restatement Impacts			As Restated
Deferred income taxes	$	316,224	$	(761	)	$	315,463
Total liabilities	$	2,473,570	$	(761	)	$	2,472,809
Additional paid-in capital	$	1,537,749	$	26,512		$	1,564,261
Retained earnings	$	911,906	$	(25,751	)	$	886,155
Total stockholders’ equity	$	2,371,847	$	761		$	2,372,608

Period	Total number of shares purchased		Average price paid per share		Number of shares purchased as part of the publicly announced program		Approximate dollar value of shares still available to be purchased under the program (000’s)
04/03/2022 – 04/30/2022		54	$	185.24		54	$	79,043
05/01/2022 – 05/28/2022		38		178.23		38		79,036
05/29/2022 – 07/02/2022		30,377		196.42		30,377	$	73,069
Total		30,469	$	196.38		30,469