Notes
to Unaudited Interim Consolidated Financial Statements
(dollars
in thousands, except share and per share data)
The
consolidated financial statements included herein have been prepared by RBC Bearings Incorporated, a Delaware corporation (collectively
with its subsidiaries, the “Company”), pursuant to the rules and regulations of the Securities and Exchange Commission.
The April 1, 2017 fiscal year end balance sheet data have been derived from the Company’s audited financial statements,
but do not include all disclosures required by generally accepted accounting principles in the United States. The interim financial
statements included with this report have been prepared on a consistent basis with the Company’s audited financial statements
and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 1, 2017.
These
statements reflect all adjustments, accruals and estimates consisting only of items of a normal recurring nature, which are, in
the opinion of management, necessary for the fair presentation of the consolidated financial condition and consolidated results
of operations for the interim periods presented. These financial statements should be read in conjunction with the Company’s
audited financial statements and notes thereto included in the Annual Report on Form 10-K.
The
results of operations for the three month period ended July 1, 2017 are not necessarily indicative of the operating results for
the entire fiscal year ending March 31, 2018. The three month periods ended July 1, 2017 and July 2, 2016 each include 13 weeks.
The amounts shown are in thousands, unless otherwise indicated.
Critical
Accounting Policies
Revenue
Recognition.
In accordance with SEC Staff Accounting Bulletin 101 “Revenue Recognition in Financial Statements
as amended by Staff Accounting Bulletin 104,” we recognize revenues principally from the sale of products at the point
of passage of title, which is at the time of shipment, except for certain customers for which it occurs when the products reach
their destination.
We
also recognize revenue on a Ship-In-Place basis for three customers who have required that we hold the product after final production
is complete. In this case, a written agreement has been executed (at the customer’s request) whereby the customer
accepts the risk of loss for product that is invoiced under the Ship-In-Place arrangement. For each transaction for
which revenue is recognized under a Ship-In-Place arrangement, all final manufacturing inspections have been completed and customer
acceptance has been obtained. In the three months ended July 1, 2017, 2.0% of the Company’s total net sales were recognized
under Ship-In-Place transactions.
Adoption
of Recent Accounting Pronouncements
In
May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting”, in an effort to
reduce diversity in practice as it relates to applying modification accounting for changes to the terms and conditions of share-based
payment awards. This ASU is effective for public companies for the financial statements issued for annual periods beginning after
December 15, 2017, including interim periods within those annual periods. Early adoption is permitted. The Company has not determined
the effect that the adoption of the pronouncement may have on its financial position and/or results of operations.
In
March 2017, the FASB issued ASU No. 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation
of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, in an effort to improve the presentation of
these costs within the income statement. Under current GAAP, all components of both net periodic pension cost and net periodic
postretirement cost are included within selling, general and administrative costs on the income statement. This ASU would require
entities to include only the service cost component within selling, general and administrative costs whereas all other components
would be included within other non-operating expense. In addition, only the service cost component would be eligible for capitalization
when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset). The amendments in this
Update should be applied retrospectively for the presentation of the service cost component and the other components of net periodic
pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective
date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit
in assets. This ASU is effective for public companies for the financial statements issued for annual periods beginning after December
15, 2017, including interim periods within those annual periods. The Company has not determined the effect that the adoption of
the pronouncement may have on its financial position and/or results of operations.
In
January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment”. The objective of this standard update is to simplify the subsequent measurement of goodwill, eliminating
Step 2 from the goodwill impairment test. Under this ASU, an entity should perform its annual goodwill impairment test by comparing
the fair value of a reporting unit with its carrying amount. An entity would recognize an impairment charge for the amount by
which the carrying amount exceeds the reporting unit’s fair value, assuming the loss recognized does not exceed the total amount
of goodwill for the reporting unit. The standard update is effective for fiscal years beginning after December 15, 2019. Early
adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated
financial statements.
In
October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740)”, in an effort to improve the accounting
for the income tax consequences of intra-equity transfers of assets other than inventory. Current GAAP prohibits the recognition
of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This
ASU establishes the requirement that an entity recognize the income tax consequences of an intra-entity transfer of an asset other
than inventory when the transfer occurs. This ASU is effective for public companies for the financial statements issued for annual
periods beginning after December 15, 2017 and interim periods within those annual periods. Earlier application is permitted as
of the beginning of an interim or annual reporting period, with any adjustments reflected as of the beginning of the fiscal year
of adoption. The Company has not determined the effect that the adoption of the pronouncement may have on its financial position
and/or results of operations.
In
August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts
and Cash Payments”, which addresses eight specific cash flow issues with the objective of reducing the existing diversity
in practice. This ASU is effective for public companies for the financial statements issued for annual periods beginning after
December 15, 2017 and interim periods within those annual periods. Earlier application is permitted as of the beginning of an
interim or annual reporting period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company
has not determined the effect that the adoption of the pronouncement may have on its statements of cash flows.
In
March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” which amends
ASC Topic 718, Compensation - Stock Compensation. This ASU includes provisions intended to simplify various aspects related to
how share-based payments are accounted for and presented in the financial statements. The Company adopted this standard on April
2, 2017. As a result of the adoption, the Company began recording the tax effects associated with stock-based compensation through
the income statement on a prospective basis which resulted in a tax benefit of $2.3 million for the first three months of fiscal
2018. Prior to adoption, these amounts would have been recorded as an increase to additional paid-in capital. This change may
create volatility in the Company’s effective tax rate. The adoption of this standard also resulted in a cumulative effect change
to opening retained earnings of $1.1 million for previously unrecognized excess tax benefits.
In
addition, the Company will prospectively classify all tax-related cash flows resulting from share-based payments, including the
excess tax benefits related to the settlement of stock-based awards, as cash flows from operating activities in the statement
of cash flows. Prior to the adoption of this standard, these were shown as cash inflows from financing activities and cash outflows
from operating activities.
The
adoption of the ASU also resulted in the Company removing the excess tax benefits from the assumed proceeds available to repurchase
shares when calculating diluted earnings per share on a prospective basis. The revised calculation increased the diluted weighted
average common shares outstanding by approximately 0.1 million shares in the period of adoption. The Company also made an accounting
policy election to continue to estimate forfeitures as it did prior to adoption.
In
February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The core principal of ASU 2016-02 is that an
entity should recognize on its balance sheet assets and liabilities arising from a lease. In accordance with that principle, ASU
2016-02 requires that a lessee recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing
its right to use the underlying leased asset for the lease term. The recognition, measurement, and presentation of expenses and
cash flows arising from a lease by a lessee will depend on the lease classification as a finance or operating lease. This new
accounting guidance is effective for public companies for fiscal years beginning after December 15, 2018 under a modified retrospective
approach and early adoption is permitted. The Company is currently evaluating the impact this adoption will have on its consolidated
financial statements.
In
July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” This
update requires the company to measure inventory using the lower of cost and net realizable value. Net realizable value is defined
as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and
transportation. This ASU applies to companies measuring inventory using methods other than the last-in, first-out (LIFO) and retail
inventory methods, including but not limited to the first-in, first-out (FIFO) or average costing methods. The Company adopted
this ASU on a prospective basis on April 2, 2017 and it did not have a material impact on the Company’s consolidated financial
statements.
In
May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The objective of this
standard update is to remove inconsistent practices with regards to revenue recognition between U.S. GAAP and IFRS. The standard
intends to improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets.
The provisions of ASU No. 2014-09 will be effective for interim and annual periods beginning after December 15, 2017, with early
adoption permitted for annual periods beginning after December 15, 2016.
The
guidance permits use of either a retrospective or cumulative effect transition method. Based upon the FASB’s decision to approve
a one-year delay in implementation, the new standard is now effective for the Company in fiscal 2019, with early adoption permitted,
but not earlier than fiscal 2018. The Company has not yet determined which adoption method it will use but is currently anticipating
using the modified retrospective method with a final decision to be determined based on the results of its assessment, once completed.
The
Company is currently assessing the impact of the new standard on its business by reviewing its current accounting policies and
practices to identify potential differences that would result from applying the requirements of the new standard to its revenue
contracts. The assessment phase of the project has identified potential accounting and disclosure differences that may arise from
the application of the new standard. The Company is in the process of reviewing individual contracts and performing a deeper analysis
of the impacts of the new standard. The Company has made significant progress on its contract reviews during the fourth quarter
of fiscal 2017 and expects to finalize its evaluation of these and other potential differences that may result from applying the
new standard to its contracts with customers in fiscal 2018. The Company will provide updates on its progress in future filings.
1.
Accumulated Other Comprehensive Income (Loss)
The
components of comprehensive income (loss) that relate to the Company are net income, foreign currency translation adjustments
and pension plan and postretirement benefits.
The
following summarizes the activity within each component of accumulated other comprehensive income (loss):
|
|
Currency
Translation
|
|
|
Pension
and Postretirement Liability
|
|
|
Total
|
|
Balance at April 1, 2017
|
|
$
|
(3,942
|
)
|
|
$
|
(5,881
|
)
|
|
$
|
(9,823
|
)
|
Other comprehensive income before reclassifications
|
|
|
4,445
|
|
|
|
—
|
|
|
|
4,445
|
|
Amounts reclassified from accumulated other comprehensive income
|
|
|
—
|
|
|
|
196
|
|
|
|
196
|
|
Net current period other comprehensive income
|
|
|
4,445
|
|
|
|
196
|
|
|
|
4,641
|
|
Balance at July 1, 2017
|
|
$
|
503
|
|
|
$
|
(5,685
|
)
|
|
$
|
(5,182
|
)
|
2.
Net Income Per Common Share
Basic
net income per common share is computed by dividing net income available to common stockholders by the weighted-average number
of common shares outstanding.
Diluted
net income per common share is computed by dividing net income by the sum of the weighted-average number of common shares 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.
The
table below reflects the calculation of weighted-average shares outstanding for each period presented as well as the computation
of basic and diluted net income per common share:
|
|
Three
Months Ended
|
|
|
|
July
1,
2017
|
|
|
July
2,
2016
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
21,809
|
|
|
$
|
18,040
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net income per common share—weighted-average shares outstanding
|
|
|
23,805,138
|
|
|
|
23,320,579
|
|
Effect of dilution due to employee stock awards
|
|
|
384,237
|
|
|
|
306,172
|
|
Denominator for diluted net income per common share — weighted-average shares outstanding
|
|
|
24,189,375
|
|
|
|
23,626,751
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common share
|
|
$
|
0.92
|
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share
|
|
$
|
0.90
|
|
|
$
|
0.76
|
|
At
July 1, 2017, 221,500 employee stock options have been excluded from the calculation of diluted earnings per share. At July 2,
2016, 217,250 employee stock options have been excluded from the calculation of diluted earnings per share. The inclusion of these
employee stock options would be anti-dilutive.
The
adoption of ASU 2016-09 on April 2, 2017 resulted in the Company removing the excess tax benefits from the assumed proceeds available
to repurchase shares when calculating diluted earnings per share on a prospective basis. The revised calculation increased the
diluted weighted average common shares outstanding by 87,089 shares in the period of adoption.
3.
Cash and Cash Equivalents
The
Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Short-term
investments, if any, are comprised of equity securities and are measured at fair value by using quoted prices in active markets
and are classified as Level 1 of the valuation hierarchy.
4.
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 1, 2017
|
|
|
April 1, 2017
|
|
Raw materials
|
|
$
|
34,576
|
|
|
$
|
35,364
|
|
Work in process
|
|
|
81,128
|
|
|
|
79,048
|
|
Finished goods
|
|
|
176,731
|
|
|
|
175,182
|
|
|
|
$
|
292,435
|
|
|
$
|
289,594
|
|
5.
Goodwill and Intangible Assets
Goodwill
|
|
Roller
|
|
|
Plain
|
|
|
Ball
|
|
|
Engineered Products
|
|
|
Total
|
|
April 1, 2017
|
|
$
|
16,007
|
|
|
$
|
79,597
|
|
|
$
|
5,623
|
|
|
$
|
166,815
|
|
|
$
|
268,042
|
|
Translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33
|
|
|
|
33
|
|
July 1, 2017
|
|
$
|
16,007
|
|
|
$
|
79,597
|
|
|
$
|
5,623
|
|
|
$
|
166,848
|
|
|
$
|
268,075
|
|
Intangible
Assets
|
|
|
|
|
July 1, 2017
|
|
|
April 1, 2017
|
|
|
|
Weighted Average Useful Lives
|
|
|
Gross Carrying Amount
|
|
|
Accumulated Amortization
|
|
|
Gross Carrying Amount
|
|
|
Accumulated Amortization
|
|
Product approvals
|
|
|
24
|
|
|
$
|
53,952
|
|
|
$
|
7,031
|
|
|
$
|
53,869
|
|
|
$
|
6,465
|
|
Customer relationships and lists
|
|
|
24
|
|
|
|
107,899
|
|
|
|
13,397
|
|
|
|
107,864
|
|
|
|
12,308
|
|
Trade names
|
|
|
10
|
|
|
|
19,956
|
|
|
|
5,639
|
|
|
|
19,923
|
|
|
|
5,137
|
|
Distributor agreements
|
|
|
5
|
|
|
|
722
|
|
|
|
722
|
|
|
|
722
|
|
|
|
722
|
|
Patents and trademarks
|
|
|
15
|
|
|
|
9,191
|
|
|
|
4,296
|
|
|
|
8,803
|
|
|
|
4,130
|
|
Domain names
|
|
|
10
|
|
|
|
437
|
|
|
|
397
|
|
|
|
437
|
|
|
|
386
|
|
Other
|
|
|
5
|
|
|
|
1,189
|
|
|
|
1,080
|
|
|
|
1,174
|
|
|
|
1,043
|
|
|
|
|
|
|
|
|
193,346
|
|
|
|
32,562
|
|
|
|
192,792
|
|
|
|
30,191
|
|
Non-amortizable repair station certifications
|
|
|
n/a
|
|
|
|
34,200
|
|
|
|
—
|
|
|
|
34,200
|
|
|
|
—
|
|
Total
|
|
|
|
|
|
$
|
227,546
|
|
|
$
|
32,562
|
|
|
$
|
226,992
|
|
|
$
|
30,191
|
|
Amortization
expense for definite-lived intangible assets for the three months ended July 1, 2017 and July 2, 2016 was $2,353 and $2,213, respectively.
Estimated amortization expense for the remaining nine months of fiscal 2018, the five succeeding fiscal years and thereafter is
as follows:
2018
|
|
$
|
6,982
|
|
2019
|
|
|
9,153
|
|
2020
|
|
|
9,046
|
|
2021
|
|
|
8,994
|
|
2022
|
|
|
8,878
|
|
2023
|
|
|
8,791
|
|
2024 and thereafter
|
|
|
108,940
|
|
6.
Debt
The
balances payable under all borrowing facilities are as follows:
|
|
July 1, 2017
|
|
|
April 1, 2017
|
|
Revolver and term loan facilities
|
|
$
|
234,500
|
|
|
$
|
267,000
|
|
Debt issuance costs
|
|
|
(4,036
|
)
|
|
|
(4,392
|
)
|
Other
|
|
|
7,401
|
|
|
|
7,192
|
|
Total debt
|
|
|
237,865
|
|
|
|
269,800
|
|
Less: current portion
|
|
|
15,485
|
|
|
|
14,214
|
|
Long-term debt
|
|
$
|
222,380
|
|
|
$
|
255,586
|
|
The
current portion of long-term debt as of both July 1, 2017 and April 1, 2017 includes the current portion of the Schaublin mortgage
and the current portion of the Revolver and Term Loan Facilities.
Credit
Facility
In
connection with the Sargent Aerospace & Defense (“Sargent”) acquisition on April 24, 2015, the Company entered
into a new credit agreement (the “Credit Agreement”) and related Guarantee, Pledge Agreement and Security Agreement
with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit
Issuer and the other lenders party thereto and terminated the JP Morgan Credit Agreement. The Credit Agreement provides RBCA,
as Borrower, with (a) a $200,000 Term Loan and (b) a $350,000 Revolver and together with the Term Loan (the “Facilities”).
The Facilities expire on April 24, 2020.
Amounts
outstanding under the Facilities generally bear interest at (a) a base rate determined by reference to the higher of (1) Wells
Fargo’s prime lending rate, (2) the federal funds effective rate plus 1/2 of 1% and (3) the one-month LIBOR rate plus 1%
or (b) 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 0.25%
for base rate loans and 1.25% for LIBOR rate loans. As of July 1, 2017, there was $54,500 outstanding under the Revolver and $180,000
outstanding under the Term Loan, offset by $4,036 in debt issuance costs (original amount was $7,122).
The
Credit Agreement requires the Company to comply with various covenants, including among other things, financial covenants to maintain
the following: (1) a ratio of consolidated net debt to adjusted EBITDA, not to exceed 3.50 to 1; and (2) a consolidated interest
coverage ratio not to be less than 2.75 to 1. The Credit Agreement allows the Company to, among other things, make distributions
to shareholders, 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 agreement. As of July 1, 2017, the Company was in compliance with all such covenants.
The
Company’s obligations under the Credit Agreement are secured as well as providing for a pledge of substantially all of the
Company’s and RBCA’s assets. The Company and certain of its subsidiaries have also entered into a Guarantee to guarantee
RBCA’s obligations under the Credit Agreement.
Approximately
$3,840 of the Revolver is being utilized to provide letters of credit to secure RBCA’s obligations relating to certain insurance
programs. As of July 1, 2017, RBCA has the ability to borrow up to an additional $291,660 under the Revolver.
Other
Notes Payable
On
October 1, 2012, Schaublin purchased the land and building, which it occupied and had been leasing, for 14,067 CHF (approximately
$14,910). Schaublin obtained a 20 year fixed rate mortgage of 9,300 CHF (approximately $9,857) at an interest rate of 2.9%. The
balance of the purchase price of 4,767 CHF (approximately $5,053) was paid from cash on hand. The balance on this mortgage as
of July 1, 2017 was 7,091 CHF, or $7,401.
7.
Income Taxes
The
Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions,
the Company is no longer subject to state or foreign income tax examinations by tax authorities for years ending before April
2, 2005. The Company is no longer subject to U.S. federal tax examination by the Internal Revenue Service for years ending before
March 29, 2014. A U.S. federal tax examination by the Internal Revenue Service for the year ended March 30, 2013 was effectively
settled in fiscal 2016.
The
effective income tax rates for the three month periods ended July 1, 2017 and July 2, 2016, were 25.8% and 32.7%. In addition
to discrete items, the effective income tax rates for these periods are different from the U.S. statutory rates due to a special
U.S. manufacturing deduction, the U.S. credit for increasing research activities, and foreign income taxed at lower rates which
decrease the rate, and state income taxes which increase the rate.
The
effective income tax rate for the three month period ended July 1, 2017 of 25.8% includes discrete items of $2,322 primarily comprised
of the adoption of ASU 2016-09
Compensation - Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting
and items associated with the release of unrecognized tax positions associated with statute of limitations expiration. The
effective income tax rate without discrete items for the three month period ended July 1, 2017 would have been 33.7%. The effective
income tax rate for the three month period ended July 2, 2016 of 32.7% includes discrete items of $215 primarily comprised of
items associated with the release of unrecognized tax positions associated with statute of limitations expiration. The effective
income tax rate without discrete items for the three month period ended July 2, 2016 would have been 33.5%. The Company believes
it is reasonably possible that some of its unrecognized tax positions may be effectively settled within the next twelve months
due to the closing of audits and the statute of limitations expiring in varying jurisdictions. The decrease, pertaining primarily
to credits and state tax, is estimated to be approximately $531.
8.
Reportable Segments
The
Company operates through operating segments for which separate financial information is available, and for which operating results
are evaluated regularly by the Company’s chief operating decision maker in determining resource allocation and assessing performance.
Those operating segments with similar economic characteristics and that meet all other required criteria, including nature of
the products and production processes, distribution patterns and classes of customers, are aggregated as reportable segments.
The
Company has four reportable business segments; Plain Bearings, Roller Bearings, Ball Bearings and Engineered Products, which are
described below.
Plain
Bearings.
Plain bearings are produced with either self-lubricating or metal-to-metal designs and consists of several sub-classes,
including rod end bearings, spherical plain bearings and journal bearings. Unlike ball bearings, which are used in high-speed
rotational applications, plain bearings are primarily used to rectify inevitable misalignments in various mechanical components.
The bearings and rings businesses of Sargent are included here.
Roller
Bearings.
Roller bearings are anti-friction bearings that use rollers instead of balls. The Company manufactures four
basic types of roller bearings: heavy duty needle roller bearings with inner rings, tapered roller bearings, track rollers and
aircraft roller bearings.
Ball
Bearings.
The Company manufactures four basic types of ball bearings: high precision aerospace, airframe control, thin
section and commercial ball bearings which are used in high-speed rotational applications.
Engineered
Products.
Engineered Products consists of highly engineered hydraulics, fasteners, collets and precision components used
in aerospace, marine and industrial applications. The hydraulics, fasteners and precision components businesses of Sargent are
included here.
Segment
performance is evaluated based on segment net sales and operating income. Items not allocated to segment operating income include
corporate administrative expenses and certain other amounts.
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
July
1,
2017
|
|
|
July
2,
2016
|
|
Net
External Sales
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
72,653
|
|
|
$
|
70,450
|
|
Roller
|
|
|
31,413
|
|
|
|
27,834
|
|
Ball
|
|
|
15,780
|
|
|
|
13,710
|
|
Engineered Products
|
|
|
44,051
|
|
|
|
42,585
|
|
|
|
$
|
163,897
|
|
|
$
|
154,579
|
|
Gross
Margin
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
28,376
|
|
|
$
|
26,554
|
|
Roller
|
|
|
12,755
|
|
|
|
12,289
|
|
Ball
|
|
|
6,175
|
|
|
|
5,304
|
|
Engineered Products
|
|
|
14,603
|
|
|
|
13,104
|
|
|
|
$
|
61,909
|
|
|
$
|
57,251
|
|
Selling,
General & Administrative Expenses
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
6,449
|
|
|
$
|
5,990
|
|
Roller
|
|
|
1,571
|
|
|
|
1,441
|
|
Ball
|
|
|
1,615
|
|
|
|
1,462
|
|
Engineered Products
|
|
|
5,277
|
|
|
|
4,893
|
|
Corporate
|
|
|
12,866
|
|
|
|
12,010
|
|
|
|
$
|
27,778
|
|
|
$
|
25,796
|
|
Operating
Income
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
21,161
|
|
|
$
|
19,763
|
|
Roller
|
|
|
11,183
|
|
|
|
10,788
|
|
Ball
|
|
|
4,495
|
|
|
|
3,714
|
|
Engineered Products
|
|
|
8,217
|
|
|
|
6,947
|
|
Corporate
|
|
|
(13,256
|
)
|
|
|
(11,991
|
)
|
|
|
$
|
31,800
|
|
|
$
|
29,221
|
|
Geographic
External Sales
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
143,026
|
|
|
$
|
135,177
|
|
Foreign
|
|
|
20,871
|
|
|
|
19,402
|
|
|
|
$
|
163,897
|
|
|
$
|
154,579
|
|
Intersegment
Sales
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
1,156
|
|
|
$
|
1,213
|
|
Roller
|
|
|
3,409
|
|
|
|
3,984
|
|
Ball
|
|
|
528
|
|
|
|
515
|
|
Engineered Products
|
|
|
8,173
|
|
|
|
7,517
|
|
|
|
$
|
13,266
|
|
|
$
|
13,229
|
|
All
intersegment sales are eliminated in consolidation.
9.
Integration and Restructuring of Industrial Operations
In
the third quarter of fiscal 2017, the Company reached a decision to integrate and restructure its industrial manufacturing operation
in South Carolina. The Company exited a few smaller product offerings and consolidated two manufacturing facilities into one.
These restructuring efforts will better align our manufacturing capacity and market focus. As a result, the Company recorded a
charge of $7,060 associated with the restructuring in the third quarter of fiscal 2017 attributable to the Roller Bearings segment.
The $7,060 charge includes $3,215 of inventory rationalization costs, $261 in impairment of intangibles, $2,402 loss on fixed
assets disposals, and $1,182 exit obligation associated with a building operating lease. The inventory rationalization costs were
recorded in Cost of Sales in the income statement. All other costs were recorded under operating expenses in the Other, Net category
of the income statement. The pre-tax charge of $7,060 was offset with a tax benefit of approximately $2,222. The Company determined
that the market approach was the most appropriate method to estimate the fair value for the inventory, intangible assets, equipment
and building operating lease using comparable sales data and actual quotes from potential buyers in the market place.