<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended JULY 1, 2000
( ) 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 Indentification Number)
incorporation)
60 ROUND HILL ROAD, FAIRFIELD, CT 06430
----------------------------------------------
(Address of principal executive offices) (Zip code)
203-255-1511
------------
Registrant's Telephone Number:
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
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 August 6, 2000
---------------------------- -----------------------------
Common stock, $.01 par value 100
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC.
INDEX
PAGE
Part I Financial Information
Item 1. Consolidated Balance Sheets -
At July 1, 2000 (unaudited) and April 1, 2000 3
Consolidated Statements of
Operations - Three months ended
July 1, 2000 (unaudited) and June 26, 1999 (unaudited) 4
Consolidated Statements of Cash
Flows - Three months ended July 1, 2000
(unaudited) and June 26, 1999 (unaudited) 5
Notes to Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-12
Part II Other Information 13
Signatures 14
Exhibit Index 15
Exhibit 27 16
2
<PAGE>
Part I
Item 1. Financial Information
Roller Bearing Company of America, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
July 1, April 1,
2000 2000
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,826 $ 1,051
Accounts receivable, net 29,229 31,775
Inventories 61,133 58,166
Prepaid expenses and other current assets 2,200 1,778
--------- ---------
Total current assets 94,388 92,770
--------- ---------
Property, plant and equipment, net of accumulated depreciation of
$42,522 at July 1, 2000 and $40,431 at April 1, 2000 60,614 60,987
Restricted marketable securities 4,501 4,501
Excess of costs over net assets acquired, net of accumulated amortization
of $5,222 at July 1, 2000 and $5,022 at April 1, 2000 26,552 26,752
Deferred financing costs, net of accumulated amortization of $2,909 at
July 1, 2000 and $2,720 at April 1, 2000 5,371 5,561
Other assets 1,544 1,522
--------- ---------
Total assets $ 192,970 $ 192,093
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 10,155 $ 10,413
Accrued expenses and other current liabilities 11,672 13,485
Current portion of long-term debt 17,085 15,331
Obligations under capital leases, current portion 849 808
--------- ---------
Total current liabilities 39,761 40,037
--------- ---------
Long-term debt 141,087 142,251
Capital lease obligations, less current portion 1,278 1,316
Other non-current liabilities 9,648 9,648
--------- ---------
Total liabilities 191,774 193,252
--------- ---------
Stockholder's equity:
Common stock - $.01 par value; 1,000 shares
authorized; issued and outstanding shares:
100 shares at July 1, 2000, and at April 1, 2000 -- --
Additional paid-in capital (759) (759)
Stock warrants 6,600 6,600
Currency traslation adjustment (150) (150)
Retained earnings (deficit) (4,495) (6,850)
--------- ---------
Total stockholder's equity (deficit) 1,196 (1,159)
Total liabilities and stockholder's equity $ 192,970 $ 192,093
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
------------------
July 1, June 26,
2000 1999
---- ----
<S> <C> <C>
Net sales $43,861 $42,971
Cost of sales 29,473 31,226
-------------------
Gross Margin 14,388 11,745
Operating expenses:
Selling, general and administrative 6,540 5,830
Other expense, net of other income 195 168
-------------------
6,735 5,998
Operating income 7,653 5,747
Interest expense, net 3,662 3,388
-------------------
Income before taxes and extraordinary charge 3,991 2,359
Income tax expense 1,636 900
-------------------
Net income $ 2,355 $ 1,459
===================
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
July 1, June 26,
2000 1999
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,355 $ 1,459
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 2,152 2,254
Deferred income taxes --
Amortization of goodwill 200 200
Amortization of deferred financing costs 190 225
Changes in working capital, net of acquisition:
(Increase) decrease in accounts receivable 2,546 4,612
(Increase) decrease in inventories (2,967) (2,361)
(Increase) decrease in prepaid expenses & other current assets (422) (49)
(Increase) decrease in other non-current assets (22) (167)
Increase (decrease) in accounts payable & accrued expenses (2,071) (870)
Increase (decrease) in other non-current liabilities -- 159
------- --------
Net cash provided by operating activities 1,961 5,462
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries -- (10,200)
Purchase of property, plant & equipment, net (1,455) (1,233)
Sale of restricted marketable securities -- 4,800
Purchase of restricted marketable securities -- (4,800)
------- --------
Net cash used in investing activities (1,455) (11,433)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in revolving credit facility 1,500 3,500
Issuance of Industrial Revenue Bond -- 4,800
Payments of bank term loan (910)
Principal payments on capital lease obligations (321) (248)
------- --------
Net cash provided by financing activities 269 8,052
Net increase in cash 775 2,081
Cash, at beginning of year 1,051 291
------- --------
Cash, at end of period $ 1,826 $ 2,372
======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 6,342 $ 6,122
======= ========
Income taxes $ 438 $ --
======= ========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
The 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
fiscal year end 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 and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended April 1, 2000 (the "Form 10-K"). 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. These financial statements
should be read in conjunction with the Company's audited financial statements
and notes thereto included in the Form 10-K.
The results of operations for the three month period ended July 1, 2000 are not
necessarily indicative of the operating results for the full year.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, Industrial Tectonics Bearings Corporation
("ITB"), RBC Linear Precision Products ("LPP"), RBC Nice Bearings, Inc.
("Nice"), Bremen Bearings, Inc. ("Bremen"), Miller Bearings, Inc. ("Miller"),
Tyson Bearings, Inc. ("Tyson"), ") RBC Schaublin S.A. ("Schaublin") and Roller
Bearing Company FSC, Inc. ("FSC"). All material intercompany balances and
transactions have been eliminated.
All references to "Holdings" refer to Roller Bearing Holding Company, Inc., a
Delaware corporation, and the parent and sole stockholder of the Company.
1. ACQUISITION OF WHOLLY OWNED SUBSIDIARIES
On December 17, 1999, Schaublin, a wholly owned subsidiary of the Company,
completed an asset purchase of Schaublin SA, a manufacturer of collets and
bearings whose principal operations are located in Delemont, Switzerland, and a
related stock purchase of Schaublin France SA, a manufacturer of bearings
located in Bovagnet, France. The acquisition was economically effective as of
January 1, 1999. The earnings of Schaublin for the period from January 1, 1999
through September 30, 1999 effectively reduced the aggregate purchase price for
the acquisition to 14.0 million Swiss Francs, or approximately $8.8 million. The
results of operations of Schaublin for the period commencing October 1, 1999 are
included in the results of operations of the Company.
On June 11, 1999, Tyson, a wholly owned subsidiary of the Company, completed the
acquisition of certain selected assets of SKF USA, Inc.'s taper roller bearing
operations whose principal operations are located in Glasgow, Kentucky. The
aggregate purchase price for the acquisition, which was effective as of April 1,
1999, was $10.2 million plus the assumption of certain selected liabilities. The
acquisition was accounted for under the purchase method of accounting.
The results of operations of Tyson and Schaublin subsequent to the respective
effective dates 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 former owners
of Schaublin for the quarter ended June 26, 1999 as if the acquisitions took
place on April 4, 1999 are as follows (unaudited):
6
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS ENDED
JUNE 26, 1999
------------------
<S> <C>
Net Sales $ 47,315
Operating Income $ 6,606
Income before Extraordinary Items $ 2,237
Net Income $ 2,237
</TABLE>
2. DEBT
On June 23, 1997, pursuant to a Redemption and Warrant Purchase Agreement 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 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 semiannually
and mature on June 15, 2007, but may be redeemed at the Company's option
beginning on June 15, 2002, or earlier under certain conditions specified in the
indenture pursuant to which the Notes were issued (the "Indenture"). The Notes
are unsecured and subordinated to all existing and future Senior Indebtedness
(as defined in the Indenture) 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:
<TABLE>
<CAPTION>
AS OF
-------------------------------
Balance Sheet Data: JULY 1, 2000 APRIL 1, 2000
------------ -------------
<S> <C> <C>
Current assets $35,967 $35,156
Noncurrent assets 42,418 42,740
------- -------
Total assets $78,385 $77,896
======= =======
Current liabilities $46,738 $48,280
Noncurrent liabilities 4,899 4,974
------- -------
Total liabilities $51,637 $53,254
------- -------
Stockholder's equity $26,748 $24,642
======= =======
<CAPTION>
THREE MONTHS ENDED
-------------------------------
Operating Results JULY 1, 2000 JUNE 26, 1999
------------ -------------
<S> <C> <C>
Net sales $18,921 $23,171
Gross margin $ 4,490 $ 4,091
Net income $ 1,755 $ 1,553
</TABLE>
7
<PAGE>
Total current liabilities include intercompany liabilities of $19,421 and
$22,266 as of July 1, 2000 and April 1, 2000, respectively. Net income includes
a provision for income taxes of $1,220 and $1,080 in fiscal years 2001 and 2000,
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 $18,600 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 July 1, 2000 the Company had
the ability to borrow up to an additional $23,400 under the Revolving Credit
Facility.
8
<PAGE>
The balances payable under all borrowing facilities are as follows:
<TABLE>
<CAPTION>
JULY 1, 2000 APRIL 1, 2000
------------ -------------
<S> <C> <C>
SENIOR SUBORDINATED NOTES PAYABLE $110,000 $110,000
CREDIT FACILITY
Term Loan, payable in quarterly installments of $250, commencing September 30,
1997, increasing annually thereafter to $1,375 from September 30, 2001 with
final payment due June 30, 2002; bears interest at variable rates, payable
monthly and quarterly for prime and LIBOR-based elections, respectively
10,000 10,875
Revolving Credit Facility borrowings outstanding 12,000 10,500
SWISS CREDIT FACILITY
Term Loan, payable in quarterly installments of approximately
$301, commencing March 2001, increasing thereafter to
approximately $452 from March 2004; bears interest at variable
rates, payable quarterly 6,031 6,031
SCHAUBLIN NOTE
--------------
Term Loan, payable in two annual installments; approximately
$134 due December, 2000 and approximately $603 due December, 2001,
bears interest at 5% 737 737
OTHER LOANS 904 939
-----------
INDUSTRIAL DEVELOPMENT REVENUE BONDS
Series 1994 A due in annual installments of $180 beginning September 1, 2006,
graduating to $815 on September 1, 2014 with final payment due on
September 1, 2017; bears interest at a variable rate, payable monthly 7,700 7,700
through December 2017
Series 1994 B bears interest at a variable rate, payable monthly
through December 2017 3,000 3,000
Series 1998 tax-exempt industrial development bonds; bears interest at
variable rates, payable monthly through December 2021 3,000 3,000
Series 1999 tax-exempt industrial development bonds; bearing
interest at variable rates, payable monthly through April 2024 4,800 4,800
-------- --------
TOTAL DEBT 158,172 157,582
LESS: CURRENT PORTION 17,085 15,331
-------- --------
LONG-TERM DEBT $141,087 $142,251
======== ========
</TABLE>
The current portion of long-term debt as of July 1, 2000 and April 1, 2000
includes $12,000 and $10,500, respectively borrowing on the Revolving Credit
Facility, which is borrowed on and paid down periodically throughout the year.
9
<PAGE>
3. RECENTLY ISSUED PRONOUNCEMENTS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued. This Statement, which was amended by SFAS No. 137,
becomes effective for the Company for the fiscal year beginning April 1, 2001,
and establishes accounting and reporting standards for derivative instruments
and for hedging activities. It requires that an entity recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. The Company does not anticipate the
adoption of this standard will have a material effect on the financial
statements.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
Except for the historical information and current statements contained in this
Quarterly Report on Form 10-Q, certain matters discussed herein, including,
without limitation, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" are forward looking statements that involve risks and
uncertainties, including, without limitation, the effect of economic and market
conditions and competition, the cyclical nature of the Company's target markets,
particularly, the aerospace industry, the cost of raw materials and the
Company's ability to pass cost increases to its customers, the reliance of the
Company on certain customers, the ability of the Company to expand into new
markets, the ability of the Company to integrate acquisitions and other factors
discussed from time to time in the reports filed by the Company with the
Securities and Exchange Commission, which could cause actual results to differ
materially.
The following discussion addresses the financial condition of the Company as of
July 1, 2000 and the results of its operations for the three month period ended
July 1, 2000, compared to the comparable periods last year. The discussion
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations for the fiscal year ended April 1,
2000 included in the Form 10-K.
THREE MONTHS ENDED JULY 1, 2000 COMPARED TO THREE MONTHS ENDED JUNE 26, 1999
Net sales for the three months ended July 1, 2000 were $43.9 million, an
increase of $0.9 million or 2.1% over the three months ended June 26, 1999. Net
sales included sales totaling $4.2 million from Schaublin, acquired effective
October, 1999. Net sales decreased $3.3 million or 7.7% without Schaublin's
sales. The decrease in net sales is primarily attributed to run-off sales at one
of the newly acquired companies which were included in the first quarter of last
year.
Gross margin increased by $2.6 million or 22.5% to $14.4 million for the three
months ended July 1, 2000, as compared to the comparable period last year. Gross
margin as a percentage of net sales increased 5.5%, from 27.3% for the first
quarter of fiscal 2000, to 32.8% in the first quarter of fiscal 2001. The
increase is primarily the result of strategic pricing increases, better
operational performance, the elimination of certain unprofitable lines and
machine tool capital enhancements.
Selling, general and administrative ("SG&A") expenses increased by $0.7 million
or 12.2% to $6.5 million for the three month period ended July 1, 2000 as
compared to the comparable period last year. The increase was primarily the
additional expenses related to Schaublin. SG&A as a percentage of net sales
increased from 13.6% for the first quarter of fiscal 2000 to 14.9% for the first
quarter of fiscal 2001.
Operating income increased by $1.9 million or 33.2% to $7.7 million for the
three months ended July 1, 2000 as compared to $5.8 million for the
corresponding period in the prior year. The increase primarily resulted from
higher gross margin partially offset by higher operating expenses.
Income before taxes increased for the three month period ended July 1, 2000 to
$4.0 million from $2.4 million for the same period last year, as a result of
higher operating income.
Net income for the current quarter reflects a tax provision of $1.6 million
compared to $0.9 million for the first quarter of fiscal 2000. Net income
increased by $0.9 million to $2.4 million from $1.5 million for the
corresponding period last year.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended July 1, 2000, the Company provided cash of $2.0
million from operating activities compared to $5.5 million for the comparable
period last year. The increase of $3.5 million is primarily the result of an
increase in non-cash working capital of $4.2 million, partially offset by an
increase in net income of $0.8 million, and all other of $0.1 million.
Cash used for investing activities for the three months ended July 1, 2000
consisted on $1.5 million relating to capital expenditures. Cash used for
investing activities for the three months ended June 26, 1999 was $11.4 million
which included $10.2 million for the acquisition of Tyson, with the remainder
relating to capital expenditures of $1.2 million. Proceeds of $4.8 million from
the issuance of industrial revenue bonds was placed in a trust account, and $4.8
million from such trust account was remitted to the Company in connection with
qualifying equipment purchases.
For the three months ended July 1, 2000, the Company had net cash inflows from
financing activities of $0.3 million partially resulting from a draw down on its
revolving credit facility of $1.5 million. These proceeds were partially used to
pay debt service and capital lease principal amounts of $0.9 million and $0.3
million, respectively. In the first quarter of fiscal 2000, the Company had net
cash inflows from financing activities of $8.1 million, partially resulting from
a draw down on its revolving credit facility of $3.5 million. Additionally, in
April 1999, the Company issued $4.8 million in secured industrial revenue bonds
which are due in 2024, and which were used for construction and purchase of
building improvements, fixtures, machinery and equipment in connection with a
manufacturing facility of the Company. During the three month period ended June
26, 1999, the Company used $0.2 million 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 is required to make scheduled principal payments which commenced in
December 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
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
(a) Exhibits
27 Financial Data Schedule.
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 behalf by the undersigned
thereunto duly authorized.
ROLLER BEARING COMPANY OF AMERICA, INC.
August 4, 2000 /s/ Michael J. Hartnett
------------------------------------------
By: Michael J. Hartnett
President & Chief Executive Officer
Principal Executive Officer
August 4, 2000 /s/ Anthony S. Cavalieri
------------------------------------------
By: Anthony S. Cavalieri
Vice President & Chief Financial Officer
Principal Financial and Accounting Officer
14
<PAGE>
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------------------------------------------------------------------------------
*27 Financial Data Schedule.
----------
* Filed herewith
15
