<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 27, 1997
-----------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 333-33085
ROLLER BEARING COMPANY OF AMERICA , INC. .
------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3426227
--------- ----------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
60 ROUND HILL ROAD, FAIRFIELD , CT
----------------------------------
(Address of principal executive offices)
203-255-1511
------------
(Registrant's telephone number, including area code)
Indicate by check mark 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 twelve (12) months (or for shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 6, 1998
- ------------------------------- -------------------------------
Common stock, $.01 par value 100
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC.
INDEX
PAGE
----
Part I Financial Information
Item 1. Condensed Consolidated Balance Sheets -
at December 27, 1997 (unaudited) and March 29, 1997 3
Condensed Consolidated Statements of
Operations - Three Months and Nine Months ended
December 27, 1997 (unaudited) and December 28, 1996
(unaudited) 4
Condensed Consolidated Statements of Cash
Flows - Nine Months ended December 27, 1997
(unaudited) and December 28,1996 (unaudited) 5
Notes to Condensed Consolidated Financial
Statements 6 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 12
Part II Other Information 13
Signatures 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM. 1 FINANCIAL STATEMENTS
ROLLER BEARING COMPANY OF AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 27, March 29,
1997 1997
---------------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 5,646 $ 859
Accounts receivable, net 20,881 19,766
Inventories 42,067 36,852
Prepaid expenses and other current assets 1,351 764
--------- ----------
Total current assets 69,945 58,241
Property, plant and equipment, net 45,012 40,098
Restricted marketable securities 3,993 3,901
Goodwill, net of accumulated amortization of $3,276
at December 1997, and $2,843 at March 1997 19,478 19,911
Deferred financing costs, net of accumulated amortization
of $532 at December 1997, and $337 at March 1997 7,947 1,383
Other assets 1,078 979
--------- ----------
Total assets $ 147,453 $ 124,513
--------- ----------
--------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 11,563 $ 9,644
Accrued expenses and other current liabilities 9,675 7,136
Current portion of long-term debt 1,125 2,500
Obligations under capital leases, current portion 1,152 1,325
--------- ----------
Total current liabilities 23,515 20,605
--------- ----------
Long term debt:
Senior subordinated note
payable 110,000 -
Bank term loan payable 14,625 -
Revolving credit agreement - 24,627
Term notes payable - 24,988
Industrial development revenue bonds 10,700 10,700
--------- ----------
135,325 60,315
Capital lease obligations, less current portion 2,327 3,141
Other noncurrent liabilities 3,255 3,080
--------- ----------
Total liabilities 164,422 87,141
--------- ----------
Stockholder's equity:
Common stock - $.01 par
value; 1,000 shares authorized; issued and
outstanding shares:
100 shares at December 1997, and at March 1997 - -
Additional paid-in capital - 35,831
Retained earnings (deficit) (16,969) 1,541
--------- ----------
Total stockholder's equity (16,969) 37,372
--------- ----------
Total liabilities and stockholder's equity $ 147,453 $ 124,513
--------- ----------
--------- ----------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 27, DECEMBER 28,
1997 1996 1997 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 34,282 $ 21,960 $ 95,253 $ 63,927
Cost of sales 24,698 15,415 67,839 44,862
------------ ------------ ------------ ------------
Gross margin 9,584 6,545 27,414 19,065
Operating expenses:
Selling, general and administrative expenses 4,821 3,572 13,482 10,022
Other expenses, net of other income 326 264 1,348 674
------------ ------------ ------------ ------------
5,147 3,836 14,830 10,696
------------ ------------ ------------ ------------
Operating income 4,437 2,709 12,584 8,369
Interest expense, net 3,448 1,418 8,342 4,166
------------ ------------ ------------ ------------
Income before taxes and extraordinary charge 989 1,291 4,242 4,203
Provision for income taxes 405 529 1,739 1,723
------------ ------------ ------------ ------------
Income before extraordinary charge 584 762 2,503 2,480
Extraordinary charge, net 0 0 625 0
------------ ------------ ------------ ------------
Net income $ 584 $ 762 $ 1,878 $ 2,480
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
<TABLE>
<CAPTION>
ROLLER BEARING COMPANY OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,877 $ 2,480
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Deferred income taxes 329 -
Depreciation 5,277 4,718
Amortization of goodwill 433 433
Amortization of deferred financing costs 548 161
Extraordinary charge 625 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (644) 512
(Increase) decrease in inventories (3,550) (3,026)
(Increase) decrease in prepaid expenses
& other current assets (604) 260
(Increase) decrease in other non current assets - 488
Increase (decrease) in accounts payable (199) (217)
Increase (decrease) in accrued expenses &
other current liabilities 1,377 943
------------ ------------
Net cash provided by operating activities 5,469 6,752
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment, net (5,009) (4,613)
(Purchase) use of restricted marketable securities (93) 518
Acquisition of subsidiaries (3,846) (5,553)
------------ ------------
Net cash used in investing activities (8,948) (9,648)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in revolving credit facility (24,627) 3,924
Proceeds from long-term debt 126,000 -
Payments of long-term debt (27,488) (938)
Payments of bank term loan (250) -
Proceeds from capital lease obligations - 804
Principal payments on capital lease obligations (986) (926)
Dividends paid to parent company (56,219) -
Financing fees paid in
connection with the Recapitalization (8,164) -
------------ ------------
Net cash provided by financing activities 8,266 2,864
------------ ------------
Net increase (decrease) in cash 4,787 (32)
Cash, at beginning of period 859 366
------------ ------------
Cash, at end of period $ 5,646 $ 334
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 7,445 $ 4,004
Income taxes $ 1,011 $ 310
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
The condensed consolidated financial statements included herein have been
prepared by Roller Bearing Company of America, Inc., (the "Company"), without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). The fiscal year end condensed balance sheet data
was derived from the Company's audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
The interim financial statements furnished with this report have been prepared
on a consistent basis with the Company's audited financial statements for the
fiscal year ended March 29, 1997. These statements reflect all adjustments,
consisting only of items of a normal recurring nature, which are, in the opinion
of management, necessary for the fair statement of the consolidated financial
condition and consolidated results of operations for the interim periods
presented. It is suggested that these financial statements be read in
conjunction with the audited financial statements and notes thereto included in
the Company's registration statement on Form S-4, filed with the Commission and
declared effective December 22, 1997.
The results of operations for the three and nine month periods ended December
27, 1997 are not necessarily indicative of the operating results for the full
year.
All references to "Holdings" refer to Roller Bearing Holding Company, Inc., a
Delaware corporation and the corporate parent and sole stockholder of the
Company.
1. ACQUISITION OF WHOLLY OWNED SUBSIDIARY
On August 8, 1997, Bremen Bearings, Inc. ("Bremen"), a wholly-owned subsidiary
of the Company, completed the acquisition of the Bremen Bearings Division of SKF
USA, Inc., a manufacturer of needle bearings with facilities in Bremen, Indiana.
The purchase was effective as of July 1, 1997. The acquisition was accounted
for under the purchase method of accounting. The aggregate purchase price of
$5,313 was subject to certain adjustments and subsequent conditions. Thus,
$3,640 was paid at closing and the payments deferred include $473, which was
paid in December, 1997 for the installation of certain equipment, and $1,200,
which is due on August 8, 1998.
The results of operations of Bremen subsequent to the effective date of
acquisition are included in the results of operations of the Company. Pro forma
consolidated results of operations of the Company, based upon pre-acquisition
unaudited historical information provided by the seller of Bremen, for the nine
months ended December 27, 1997 and December 28, 1996, as if the acquisition took
place at the beginning of each fiscal year, are as follows:
NINE MONTHS ENDED
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
Net sales $ 99,125 $ 74,133
Income before extraordinary charge $ 2,758 $ 2,637
Net income $ 2,133 $ 2,637
6
<PAGE>
2. INVENTORIES
Inventories are summarized as follows:
DECEMBER 27, 1997 MARCH 29, 1997
----------------- --------------
Raw material $ 2,613 $ 1,711
Work in process 18,620 17,170
Finished goods 20,834 17,971
-------- --------
Total inventories $ 42,067 $ 36,852
-------- --------
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized as follows:
DECEMBER 27, 1997 MARCH 29, 1997
----------------- ---------------
Land $7,537 $7,536
Building 8,777 7,287
Machinery & equipment 52,480 43,886
------ ------
Total property, plant &
equipment, at cost 68,794 58,709
Less, accumulated depreciation
and amortization 23,782 18,611
------ ------
Property, plant and equipment, net $45,012 $40,098
------ ------
4. RECAPITALIZATION
On June 23, 1997, pursuant to a Redemption and Warrant Purchase dated May 20,
1997, Holdings effected a recapitalization of its outstanding capital stock
(including the financing and other transactions consummated by Holdings, the
Company and its subsidiaries in connection therewith, the "Recapitalization").
In connection with the Recapitalization, the Company issued the Senior
Subordinated Notes and incurred the Term Loans described below. The proceeds
therefrom were utilized to pay a dividend to Holdings to finance the redemption
of a substantial portion of its common stock, all of its preferred stock and
certain warrants to purchase common stock, and to pay certain Recapitalization
fees and expenses. This transaction was further financed from the proceeds of
certain debt issued directly by Holdings. In addition, a new group of investors
(who were not previously stockholders of Holdings) purchased shares of common
stock and warrants to purchase common stock of Holdings, directly from certain
stockholders of Holdings. The redemption of shares and warrants were treated by
Holdings as a recapitalization transaction.
Stockholders of Holdings owning approximately 7% of the outstanding voting
shares prior to the effective date of the Recapitalization, owned approximately
71% of the outstanding voting shares immediately following the Recapitalization.
The new group of investors referred to above owned the remaining 29% of the
voting shares at such time and thus are not controlling stockholders of either
Holdings or the Company. As a result, the transaction did not result in the
establishment of new bases in Holdings' or the Company's assets and liabilities.
Funds disbursed by Holdings and the Company were charged against their capital
accounts to the extent permitted by law.
7
<PAGE>
5. DEBT
In connection with the financing of the Recapitalization, the Company issued
$110,000 aggregate principal amount of 9 5/8% Senior Subordinated Notes Due 2007
(the "Notes"). The Notes pay interest semi-annually and mature on June 15, 2007,
but may be redeemed at the Company's option beginning on June 15, 2002, as well
as, earlier under certain conditions specified in the indenture (the
"Indenture") pursuant to which the Notes were issued. The Notes are unsecured
and subordinate to all existing and future Senior Indebtedness (as defined in
the Indenture pursuant to which the Notes were issued) of the Company. The
Notes are fully and unconditionally and irrevocably guaranteed jointly and
severally, on a senior subordinated basis by each of the wholly-owned
subsidiaries of the Company.
The separate financial statements of the subsidiary guarantors have not been
presented because management has determined that they would not be material to
investors. However, the summarized combined financial information of the
subsidiary guarantors are as follows:
DECEMBER 27, MARCH 29,
Balance Sheet Data 1997 1997
Total current assets $ 24,685 $ 17,730
Noncurrent assets 20,993 16,417
-------- ---------
Total assets $ 45,678 $ 34,147
-------- ---------
Total current liabilities $ 39,697 $ 31,716
Noncurrent liabilities 1,010 1,228
-------- ---------
Total liabilities $ 40,707 $ 32,944
-------- ---------
Stockholder's equity $ 4,971 $ 1,203
DECEMBER 27, DECEMBER 28,
Operating Results 1997 1997
------------ ------------
Net sales $ 38,242 $ 13,578
Gross margin 9,282 3,363
Income before extraordinary charge 3,404 951
Net income $ 3,404 $ 951
Total current liabilities includes intercompany liabilities of $33,719 and
$28,312 as of December 27, 1997 and March 29, 1997, respectively. Income before
extraordinary charge includes a charge for corporate overhead allocated from the
Company of $780 and $780 in fiscal years 1998 and 1997, respectively, and a
provision for income taxes of $ 2,366 and $661 in fiscal years 1998 and 1997,
respectively.
In addition, in connection with the Recapitalization, the Company entered into
bank credit facilities (the "Senior Credit Facilities") with a group of lenders
providing for $16,000 of term loans (the "Term Loans") and up to $54,000 of
revolving credit loans and letters of credit (the "Revolving Credit Facility").
Approximately $10,900 of the Revolving Credit Facility is being utilized to
provide letters of credit to secure the Company's obligations relating to
certain Industrial Development Revenue Bonds. As of December 27, 1997 the
Company had the ability to borrow up to an additional $43,100 under the
Revolving Credit Facility.
The Company incurred approximately $8,164 of fees primarily related to costs
associated with the issuance of the Notes as well as the Senior Credit
Facilities. Approximately $7,405 of these costs have been capitalized as
deferred financing costs and are being amortized over the terms of the Notes and
Term Loans.
8
<PAGE>
Proceeds from these borrowings were used to repay certain existing indebtedness
as well as to pay a dividend to Holdings in order to consummate the
Recapitalization described above.
The debt agreements require that the Company meet certain financial covenants,
principally limiting the incurrence of additional indebtedness, the payment of
dividends, and certain other transactions.
6. EXTRAORDINARY CHARGE
The extraordinary charge for the nine months ended December 27, 1997 resulted
from the write off of unamortized deferred financing costs due to the Company's
early extinguishment of debt in connection with the Recapitalization described
above. The extraordinary charge was $1,059 and is reflected net of the related
tax benefit of $434.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying condensed consolidated
financial statements.
THREE MONTHS ENDED DECEMBER 27, 1997 COMPARED TO THREE MONTHS ENDED DECEMBER
28,1996
Net sales for the three months ended December 27, 1997 were $34,282, an increase
of $12,322 or 56.1% over the three months ended December 28, 1996. The increase
included net sales totaling $8,816 from RBC Nice Bearings, Inc. ("Nice") and
Bremen, acquired effective February 1997, and July 1997, respectively. Net
sales increased $3,506 or 16.0% without the Nice and Bremen sales. The reason
for this increase was primarily due to increased sales to the aerospace and
airframe industries.
Gross margin increased by $3,039 or 46.4% for the three months ended December
27, 1997, as compared to the same period last year, as a result of higher sales
volume. Gross margin as a percentage of net sales decreased by 1.8% from 29.8%
for the third quarter of fiscal 1997, to 28.0% in the third quarter of fiscal
1998 primarily due to the impact of the acquired companies Nice and Bremen.
Gross margin as a percentage of net sales without Nice and Bremen was 30.2% for
the three months ended December 27, 1997.
Selling, general and administrative (SG&A) expenses increased by $1,249 or 35.0%
for the three month period ended December 27, 1997 compared to the same period
last year. The increase was primarily due to infrastructure costs necessary to
support the expanded business as well as the additional expenses related to the
acquired companies. SG&A as a percentage of net sales decreased from 16.3% for
the third quarter of fiscal 1997, to 14.1% for the third quarter of fiscal 1998.
The improvement of 2.2% is primarily due to the fixed nature of certain SG&A
costs compared to the higher revenue level. Other operating expenses increased
primarily due to legal fees and the settlements of certain litigation.
Operating income increased by $1,728 or 63.8% to $4,437 for the three months
ended December 27, 1997, as compared to $2,709 for the corresponding period in
the prior year. The increase primarily resulted from higher gross margin from
higher sales volume, partially offset by higher SG&A and other operating
expenses.
Interest expense for the three months ended December 27, 1997 was $3,448, as
compared to $1,418 for the corresponding period in the prior year. The increase
of $2,030 may be attributed to the debt incurred in connection with the
Recapitalization - see notes 4 and 5 to the condensed consolidated financial
statements.
Income before taxes and extraordinary charges decreased for the three month
period ended December 27, 1997 to $989 from $1,292 for the same period last
year, as a result of higher operating income less higher interest expense
resulting from the debt incurred in connection with acquisition financing and
the Recapitalization.
Net income for the current quarter reflects a tax provision of $406 compared to
$530 for the third quarter of fiscal 1997, an effective tax rate of 41% in both
periods. Net Income decreased by $178 to $582 from $762 for the corresponding
period last year.
10
<PAGE>
NINE MONTHS ENDED DECEMBER 27, 1997 COMPARED TO NINE MONTHS ENDED DECEMBER 28,
1996
Net sales for the nine months ended December 27, 1997 were $95,253, an increase
of $31,326 or 49.0% over the nine months ended December 28, 1996. The increase
includes net sales totaling $23,668 from RBC Linear Precision Products, Inc.
("LPP"), Nice, and Bremen, acquired effective October 1996, February 1997, and
July 1997, respectively. Net sales increased $7,658 or 12.3% without the LPP,
Nice and Bremen sales. This includes an adjustment of $1,477 for LPP third
quarter sales in 1996 in order to make percentage changes between 1997 and 1996
comparable. The primary reason for this increase was due to continued strong
performance particularly in the aerospace, airframe and construction & mining
segments of the Company's business.
Gross margin increased by $8,349 or 43.8% for the nine months ended December 27,
1997, as compared to the same period last year, as a result of higher sales
volume. Gross margin as a percentage of net sales decreased 1.0% from 29.8% for
the first nine months of fiscal 1997, to 28.8% for the first nine months of
fiscal 1998 primarily due to the lower gross profit margins realized on sales
from LPP, Nice, and Bremen. Gross margin as a percentage of net sales
excluding the sales by these acquired companies was 30.9% for the nine months
ended December 27, 1997.
Selling, general and administrative (SG&A) expenses increased by $3,460 or 34.5%
for the nine month period ended December 27, 1997 compared to the same period
last year. The increase is primarily due to infrastructure costs necessary to
support the expanded business as well as the additional expenses related to the
three acquired companies. SG&A as a percentage of net sales decreased from
15.7% for the first nine months of fiscal 1997, to 14.2% for the first nine
months of fiscal 1998. The improvement of 1.5% is primarily due to the fixed
nature of certain SG&A costs compared to the higher revenue level. Other
operating expenses increased by $674 primarily due to a charge relating to the
difference between redemption price and exercise price ($563) of certain options
repurchased by Holdings at the time of the Recapitalization and other charges
net of other income ($111).
Operating income increased by $4,215 or 50.4% to $12,584 for the nine months
ended December 27, 1997, as compared to $8,369 for the corresponding period in
the prior year. The increase primarily resulted from higher gross margin from
higher sales volume, partially offset by higher SG&A and other operating
expenses.
Interest expense for the nine months ended December 27, 1997 was $8,342, as
compared to $4,166 for the corresponding period in the prior year. The increase
of $4,176 may be attributed to the debt incurred in connection with the
Recapitalization - see notes 4 and 5 to the condensed consolidated financial
statements.
Income before taxes and extraordinary charges increased for the nine month
period ended December 27, 1997 to $4,242 from $4,203 for the same period last
year, as a result of higher operating income less higher interest expense
resulting from the debt incurred in connection with acquisition financing and
the Recapitalization.
Net income for the first nine months ended December 27, 1997 reflects a tax
provision of $1,740 compared to $1,724 for the first nine months of fiscal 1997,
an effective combined Federal and State effective tax rate of 41% in both
periods. Income before extraordinary charges increased by $23 to $2,503 from
$2,480 for the corresponding period last year. However, net income decreased to
$1,878 from $2,480 in fiscal 1997, due to an extraordinary charge relating to
the early extinguishment of debt of $1,059 less related tax benefit of $434
($625 net). The early extinguishment of debt related to the Recapitalization.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital at December 27, 1997 was $46,430 compared to $37,636 at March
29, 1997, an increase of $8,794. For the nine months ended December 28, 1997,
the Company provided $5,469 of cash from operating activities.
Cash used for capital expenditures for the nine months ended December 27, 1997
was $5,009 as compared to $4,613 for the same period last year. In addition,
for the nine months ended December 27, 1997, the Company used $93 for the
purchase of marketable securities, and $3,846 towards the purchase of Bremen -
see note 1 to the condensed consolidated financial statements.
The Company had net cash inflows from financing activities of $8,266, primarily
due to the Recapitalization - see notes 4 and 5 to the condensed consolidated
financial statements. In connection with the Recapitalization, the Company
received gross proceeds of $110,000 from the sale of the Notes and $16,000 under
the Term Loans. The Company utilized these funds to pay off the balance of the
Company's then existing revolving credit facility of $24,627, and its then
existing term debt of $27,488. In addition, the Company paid a dividend to
Holdings, aggregating approximately $56,219; used by Holdings for the redemption
of its common stock in the amount of $17,603, its preferred stock in the amount
of $37,013, and warrants to purchase its common stock in the amount of $823; and
approximately $780 for professional and other fees paid by Holdings. Finally,
the Company paid approximately $8,164 in fees related to the Recapitalization,
approximately $7,405 of which have been capitalized as deferred financing costs
and are being amortized over the term of the Notes and Term Loans. During the
nine month period ended December 27, 1997, the Company also used $250 for
principal payments on the Term Loans, and $986 of funds for capital lease
obligations.
Principal and interest payments under the Senior Credit Facilities, interest
payments on the Notes, and the funding of acquisitions, represent significant
liquidity requirements for the Company. With respect to the Term Loans, the
Company has begun to make its required quarterly scheduled principal payments
commencing in September 1997. The Term Loans bear interest at a floating rate
based upon the interest rate option elected by the Company. As a result of the
indebtedness incurred in connection with the Recapitalization, the Company's
post-Recapitalization interest expense will be higher and will have a greater
proportionate impact on net income in comparison to pre-Recapitalization
periods.
The Company believes that cash flows from operations and amounts available under
the Revolving Credit Facility will provide adequate funds for ongoing
operations, planned capital expenditures (including acquisitions) and debt
service payments for at least the next twelve months. The Company's ability to
borrow is limited by the terms of the Senior Credit Facilities and the Indenture
under which the Notes were issued.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company was involved in three actions with the Emerson Power Transmission
Corporation ("Emerson") all arising out of the purchase of assets and a
requirements contracts between the Company and Emerson pursuant to which the
Company supplied its Spherco line of bearings to Emerson.
In September 1995, Emerson commenced an action in the Porter Superior Court,
located in Valparaiso, Indiana, alleging breach of contract by the Company for
failure to timely delivery certain bearings ordered by Emerson under a
requirements contract. An injunction was issued compelling the Company to
comply with the terms of the requirement contract, which injunction expired by
its terms in February 1996. In the same action, Emerson also sued for damages,
resulting from the Company's failure to timely delivery the bearings. The
Company commenced an action against Emerson in the federal district court
sitting in Connecticut in December 1995, claiming ownership rights in the part
numbers relating to Spherco line of bearings that were the subject of the
requirements contract. The court denied the Company's motion of preliminary
injunction in February 1996. The Company also filed an action against Emerson
in Connecticut state court in November 1995 alleging bad faith on the part of
Emerson in inflating its demand under the requirements contract and seeking to
recover sums due under the contract arising from a price increase for the
bearings which was not honored by Emerson. In addition, in the Connecticut
state court suit, Emerson counter sued the Company, claiming damages on the same
theory as in the Indiana suit.
On September 26, 1997, the Company and Emerson entered into a Settlement
Agreement and Mutual Release (the "Settlement Agreement") settling all these
actions. The Settlement Agreement, the terms of which are confidential,
provides for the dismissal of all of the above claims and the execution of
releases of the Company and Emerson. The Company does not expect the terms of
the Settlement Agreement to have a material effect on its financial condition or
results of operations.
Additionally, there are various claims and legal proceedings against the Company
relating to its operations in the normal course of business, none of which the
Company believes is material. The Company currently maintains insurance
coverage for product liability claims. There can be no assurance that
indemnification from its customers and coverage under insurance policies will be
adequate to cover any future product liability claims against the Company.
ITEMS 2, 3, 4, AND 5 ARE NOT APPLICABLE, AND HAVE BEEN OMITTED.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
13
<PAGE>
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.
Date: 6 Feb 98
-------------------
ROLLER BEARING COMPANY OF AMERICA, INC.
/s/ Michael J. Hartnett
--------------------------
by Michael J. Hartnett
President & Chief Executive Officer
/s/ Anthony S. Cavalieri
--------------------------
by Anthony S. Cavalieri
Vice President & Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the unaudited financial statements for the nine months ended December 27, 1997.
</LEGEND>
<CIK> 0001042465
<NAME> ROLLER BEARING COMPANY OF AMERICA, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-28-1998
<PERIOD-START> MAR-30-1997
<PERIOD-END> DEC-27-1997
<CASH> 5,646
<SECURITIES> 0
<RECEIVABLES> 21,065
<ALLOWANCES> 184
<INVENTORY> 42,067
<CURRENT-ASSETS> 69,945
<PP&E> 68,794
<DEPRECIATION> 23,782
<TOTAL-ASSETS> 147,453
<CURRENT-LIABILITIES> 23,515
<BONDS> 135,325
0
0
<COMMON> 0
<OTHER-SE> (16,969)
<TOTAL-LIABILITY-AND-EQUITY> 147,453
<SALES> 95,253
<TOTAL-REVENUES> 95,253
<CGS> 67,839
<TOTAL-COSTS> 13,482
<OTHER-EXPENSES> 1,348
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,342
<INCOME-PRETAX> 4,242
<INCOME-TAX> 1,739
<INCOME-CONTINUING> 2,503
<DISCONTINUED> 0
<EXTRAORDINARY> 625
<CHANGES> 0
<NET-INCOME> 1,878
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
