RBC Rbc Bearings Inc - 10-K

ITEM 1A. RISK FACTORS

Cautionary Statement as to Forward-Looking Information

This report includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: projections of earnings, cash flows, revenue or other financial items; statements of the plans, strategies and objectives of management for future operations; statements concerning proposed new services or developments; statements regarding future economic conditions or performance or future growth rates in the markets we serve; statements regarding future raw material costs or supply; statements of belief; and statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect,” “anticipate” or other comparable terminology, or the negative of such terms.

Although we believe that the expectations and assumptions reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition, results of operations, and cash flows, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed in this Annual Report on Form 10-K. Factors that could cause our actual results, performance and achievements or industry results to differ from estimates or projections contained in our forward-looking statements include, among others, the following:

The Company’s failure to maintain effective disclosure controls and procedures and internal control over financial reporting;

Competition in the bearings, engineered components and essential systems industries;

The loss of one or more of our significant customers or conditions that adversely affect the business of any of our significant customers;

Weaknesses or cyclicality in any of the industries in which our customers operate;

Future reductions in U.S. governmental spending or changes in governmental programs, particularly military equipment procurement programs;

Supply and costs of raw materials (particularly steel) and energy resources, the imposition or increase of import tariffs, and our ability to pass through these costs on a timely basis;

Changes in trade agreements or treaties and the imposition or increase of tariffs on our goods exported to other countries;

Our ability to obtai n and retain product approvals;

Risks associated with utilizing information technology systems, including cyber events;

Work stoppages and other labor problems affecting us or our customers or suppliers;

Unexpected equipment failures or catastrophic events;

Our ability to acquire and integrate complementary businesses;

Unanticipated liabilities of acquired businesses;

Risks associated with the substantial amount of goodwill that we have;

Our ability to attract and retain our management team and other highly skilled personnel;

Risks associated with operating internationally, including currency translation risks;

Possible liability and recalls with respect to our products;

Developments or disputes concerning patents or other proprietary rights;

The cancellation of orders in our backlog;

Risks associated with the substantial amount of debt we incurred to finance the Dodge acquisition; and

Other risks and un certainties including but not limited to those described from time to time in our current and quarterly reports filed with the SEC.

These and additional factors that could cause actual results to differ from our forward-looking statements are set forth in this Annual Report on Form 10-K under Part I, Item 1. “Business,” Part I, Item 1A. “Risk Factors,” Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Part II, Item 8. “Financial Statements and Supplementary Data.” All forward-looking statements contained in this report and any subsequently filed reports are expressly qualified in their entirety by these cautionary statements.

We have no duty to update any forward-looking statements after the date of this report to conform such statements to actual results or to changes in our expectations. You are advised, however, to review any disclosures we make on related subjects in our future periodic filings with the SEC.

Risk Factors Relating to Our Company

Our business, operating results, cash flows or financial condition could be materially adversely affected by any of the following risks. The trading price of our common stock could decline due to any of these risks, and you could lose all or part of your investment. You should carefully consider these risks before investing in shares of our common stock.

The Company’s failure to maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on the Company’s financial condition and the trading price of our common stock.

A material weakness in a company’s internal control over financial reporting 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 that company’s annual or interim financial statements will not be prevented or detected on a timely basis.

If the Company is unable to maintain effective internal control over financial reporting in the future, our 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 our stock price.

The bearings, engineered components and essential systems industries are highly competitive, and competition could reduce our profitability or limit our ability to grow.

The global bearings, engineered components and essential systems industries are highly competitive, and we compete with many U.S. and non-U.S. companies, some of which benefit from lower labor costs and fewer regulatory burdens than us. We compete primarily based on product qualifications, product line breadth, service and price. Certain competitors may be better able to manage costs than us or may have greater financial resources than we have. Due to the competitiveness in the bearings, engineered components and essential systems industries we may not be able to increase prices for our products to cover increases in our costs, and we may face pressure to reduce prices, which could materially reduce our revenues, cash flows and profitability. Competitive factors, including changes in market penetration, increased price competition and the introduction of new products and technology by existing and new competitors, could result in a material reduction in our revenues, cash flows and profitability.

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.

Our top ten customers collectively accounted for approximately 35%, 44% and 44% of our net sales during fiscal 2026, 2025 and 2024, respectively. Accordingly, the loss of one or more of those customers or a substantial decrease in those customers’ purchases from us could result in a material reduction in our revenues, cash flows and profitability. If one of our major customers were to experience an adverse change in its business, that customer could reduce its purchases from us.

The consolidation and combination of manufacturers could eliminate customers and/or put downward pricing pressures on sales of component parts. In addition, if one of our customers is acquired or merged with another entity, the new entity may discontinue using us as a supplier because of an existing business relationship between one of our competitors and the acquiring company, or because it may be more efficient to consolidate certain suppliers within the newly formed enterprise. The significance of the impact that such consolidations could have on our business is difficult to predict because we do not know when or if one or more of our customers will engage in merger or acquisition activity. However, if such activity involved our material customers it could materially impact our revenues, cash flows and profitability.

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.

The mining and construction equipment and other diversified industrial markets to which we sell products are, to varying degrees, cyclical and tend to decline in response to overall declines in industrial production. Margins in those industries are highly sensitive to demand cycles, and our customers (or our customers’ customers) in those industries historically have tended to delay large capital purchases and projects, including expensive maintenance and upgrades, during economic downturns. As a result, our business is also cyclical, and the demand for our products by these customers depends, in part, on overall levels of industrial production, general economic conditions, and business confidence levels. Many of our customers have historically experienced periodic downturns, which often have had a negative effect on demand for our products. Future downward economic cycles or customer downturns could reduce sales of our products resulting in reductions in our revenues, cash flows and profitability.

Future reductions or changes in U.S. government spending could negatively affect our business.

In fiscal 2026, approximately 1% of our net sales were made directly, and we estimate that approximately an additional 7% of our net sales were made indirectly, to the U.S. government to support military or other government projects. Our failure (or the failure of our customers that are prime contractors to the government) to obtain new government contracts, the cancellation of government contracts relating to our products, or reductions in federal budget appropriations for programs in which our products are used could materially reduce our revenues, cash flows and profitability. A reduction in federal budget appropriations relating to our products could result from a shift in government defense spending to other programs in which we are not involved or a reduction in U.S. government defense spending generally (due to budget reduction initiatives or a shift in government spending priorities).

Fluctuating supply and costs of subcomponents, raw materials and energy resources could materially reduce our revenues, cash flows and profitability.

Our business is dependent on the availability and costs of subcomponents, raw materials, particularly steel (generally in the form of stainless and chrome steel, which are commodity steel products), and energy resources. The availability and prices of subcomponents, raw materials and energy resources may be subject to change due to, among other things, new laws or regulations, economic inflation, suppliers’ allocations to other purchasers, interruptions in production or deliveries by suppliers and changes in exchange rates and supplier costs and profit expectations. Although we currently maintain alternative supply sources, our business is subject to the risk of price fluctuations and periodic delays in the delivery of certain subcomponents or raw materials. Disruptions in the supply of subcomponents, raw materials or energy resources could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices in order to obtain these items from other sources, which could thereby affect our net sales and profitability.

Where our customer contracts permit us to do so, we seek to pass through a significant portion of our additional costs to our customers through steel surcharges or price increases. However, many of our contracts are fixed-price contracts under which we are not able to pass these additional costs on to our customers. Even where we are able to pass these steel surcharges or price increases to our customers, there may be a lag of several months between the time we experience a cost increase and the time we are able to implement surcharges or price increases, particularly for orders already in our backlog. Competitive pressures and the terms of certain of our long-term contracts may require us to absorb at least part of these cost increases. As a result, our gross margin percentage could decline. We cannot provide assurances that we will be able to continue to pass these additional costs on to our customers at all or on a timely basis or that our customers will not seek alternative sources of supply if there are significant or prolonged increases in the price of subcomponents or other raw materials or energy resources.

U.S. and international import tariffs and other trade policies could adversely affect our revenue and profit margin.

The United States imposes tariffs on many of the raw materials and component parts we import from foreign sources (including our foreign operations) to support our U.S. manufacturing operations. Most notably, steel, which is our largest raw material import, is subject to what is known as a “Section 232 tariff.” These tariffs increase our cost for imported raw materials and component parts, which decreases our profitability to the extent that we are unable to pass the increased cost on to our customers.

In addition to driving up our operating costs, these tariffs and other changes in U.S. trade policy have caused foreign countries to implement retaliatory tariffs and other responsive trade policies that apply to our U.S.-manufactured products sold in those countries, thereby causing those products to be more expensive, which may reduce our sales in those countries, thereby adversely affecting our revenue, cash flow and profitability. In addition, any foreign tariff-driven reduction in sales of our customers’ products into which our products are integrated will correspondingly reduce the demand for our products, thereby adversely affecting our revenue, profitability and cash flow.

The international trade situation is very fluid and subject to rapid change, including litigation, as the U.S. increases, decreases, suspends or reinstates tariffs against various countries and products and those countries respond. The tariffs and retaliatory tariffs are driving escalating global trade conflicts which have led to, and may continue to lead to, inflationary pressures and uncertainty, which could impact our operations.

While we have not experienced a material impact on our business to date, no assurance can be given that will continue to be the case. We are continuing to evaluate the trade situation as it evolves and we are assessing mitigation strategies, including supply chain adjustments and pricing actions. The ultimate impact of tariffs on our operations and financial results is currently uncertain and will depend on the scope, duration, and potential expansion of the measures implemented.

Some of our products and operations 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.

Essential to servicing the Aerospace & Defense market is the ability to obtain product approvals. We have a substantial number of product approvals, which enable us to provide products used in virtually all domestic aircraft platforms presently in production or operation. Product approvals are typically issued by the FAA to designated OEMs who are Production Approval Holders of FAA-approved aircraft. These Production Approval Holders provide quality control oversight and generally limit the number of suppliers directly servicing the commercial Aerospace market. Regulations enacted by the FAA provide for an independent process (the PMA process) that enables suppliers who currently sell their products to the Production Approval Holders to also sell products to the aftermarket. Our foreign sales may be subject to similar approvals or U.S. export control restrictions. We cannot assure you that we will not lose approvals for our Aerospace products in the future. The loss or suspension of product approvals could result in lost sales and materially reduce our revenues, cash flows and profitability.

The repair and overhaul of aircraft parts and accessories throughout the world is highly regulated by government agencies, including the FAA. Our repair and overhaul operations are subject to certification pursuant to regulations established by the FAA and foreign government agencies, with regulations varying from country to country, although compliance with FAA requirements generally satisfies regulatory requirements in other countries. Our failure to comply with these regulations, or our compliance with new and more stringent government regulations, if enacted, could have an adverse effect on our business, financial condition and results of operations.

As a U.S. government contractor, we are subject to various procurement and other laws, regulations and contract terms applicable to our industry, including the FAR, the DFARS, the Truth in Negotiations Act, the False Claims Act, the Procurement Integrity Act, the International Traffic in Arms Regulations promulgated under the Arms Export Control Act, the Close the Contractor Fraud Loophole Act, the Foreign Corrupt Practices Act, and Cost Accounting Standards (CAS), and we could be adversely affected by any negative finding by the U.S. government as to our compliance with them, including suspension or debarment from future government contracting.

The retirement of commercial aircraft could reduce our revenues, cash flows and profitability.

We sell replacement parts used in the repair and overhaul of jet engine and aircraft components, as well as provide such repair and overhaul services ourselves. As aircraft or engines for which we offer replacement parts or repair and overhaul services are retired, demand for these parts and services could decline and could reduce our revenue, cash flows and profitability.

Risks associated with utilizing information technology systems could adversely affect our operations.

We rely upon our information technology (“IT”) systems to process, transmit and store electronic information to manage and operate our business. Further, in the ordinary course of business we store sensitive data, including intellectual property, on our networks. The secure maintenance and transmission of this information is critical to our business operations.

We may face cyber events and other IT security threats, including malware, ransomware, phishing and other intrusions, to our IT infrastructure, attempts to gain unauthorized access to proprietary, classified or confidential information, and threats to the physical security of our IT systems. As a U.S. government contractor, our risk of cyber events may be greater than the risk faced by other companies that are not government contractors. In addition to security threats, our IT systems may also be subject to network, software or hardware failures. The unavailability of our IT systems, the failure of these systems to perform as anticipated, or any significant breach of data security could cause loss of data, disrupt our operations, require significant management attention and resources, subject us to liability to third parties or regulatory actions or contract termination, and negatively impact our reputation among our customers and the public, which could have a negative impact on our financial and competitive position, results of operations and liquidity. In addition, our business with our customers and vendors could be impacted by cyber events on their IT systems.

To address the risk to our IT systems and data, we maintain an IT security program designed to resist cyber events and to mitigate the damage from successful events. Refer to Part I, Item 1C of this Annual Report for details regarding our data protection and cybersecurity risk management program.

Work stoppages and other labor problems could materially reduce our ability to operate our business.

We currently have three collective bargaining agreements covering employees at our Plymouth, Indiana, Fairfield, Connecticut and West Trenton, New Jersey facilities, representing approximately 4% of our U.S.-based hourly employees as of March 28, 2026. While we believe our relations with our employees are satisfactory, the inability to satisfactorily negotiate and enter into new collective bargaining agreements upon expiration, or a lengthy strike or other work stoppage at any of our facilities, particularly at some of our larger facilities, could materially reduce our ability to operate our business. In addition, any attempt by our employees not currently represented by a union to join a union could result in additional expenses, including with respect to wages, benefits and pension obligations.

In addition, work stoppages at one or more of our customers or suppliers (including suppliers of transportation services), many of which have large unionized workforces, could also cause disruptions to our business that we cannot control, and these disruptions could materially reduce our revenues, cash flows and profitability.

Unexpected equipment failures or catastrophic events could increase our costs and reduce our sales due to production curtailments or shutdowns.

Our manufacturing processes are dependent upon critical pieces of turning, milling, grinding, and electrical equipment, and this equipment could, on occasion, be out of service as a result of unanticipated failures. In addition to equipment failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions, earthquakes or violent weather conditions. In the future, we could experience material plant shutdowns or periods of reduced production as a result of these types of equipment failures or catastrophes. Interruptions in production capabilities would inevitably increase our production costs and reduce revenues, cash flows and profitability for the affected period.

We may not be able to continue to make the acquisitions necessary for us to realize our growth strategy.

The acquisition of businesses that complement or expand our operations is an important element of our business strategy. We frequently engage in evaluations of potential acquisitions and negotiations for possible acquisitions, some of which, if consummated, could be significant to us. We cannot assure you that we will be successful in identifying attractive acquisition candidates or completing acquisitions on favorable terms in the future. Our inability to acquire businesses, or to operate them profitably once acquired, could have a material adverse effect on our business, financial position, cash flow and growth.

Our ability to realize anticipated benefits and synergies from our acquisitions could be affected by a number of factors, including: the need for greater than expected cash or other financial resources or management time in order to implement or integrate acquisitions; increases in other expenses related to an acquisition, including restructuring and other exit costs; the timing and impact of purchase accounting adjustments; difficulties in employee or management integration, including labor disruptions or disputes; and unanticipated liabilities associated with acquired businesses.

Any potential cost-saving opportunities may take several quarters or years following an acquisition to implement, and any results of these actions may not be realized for several quarters thereafter, if at all.

Businesses that we acquire may have liabilities for which we are liable.

In order to complete an acquisition, it may be necessary for us to assume the liabilities of the acquired business. These liabilities may be known at the time of the acquisition, but could be underestimated by us, or they may not be known to us until after the acquisition. In the case of an acquisition in which we do not assume all the liabilities of the acquired business, we typically obtain indemnification from the seller against the unassumed liabilities, although no assurance can be given that such indemnification will be sufficient in amount, scope or duration to fully offset the risk of the unassumed liabilities. Liabilities of acquired businesses that ultimately are borne by us (either because we assume them or our indemnification right proves to be insufficient or unenforceable) could have a material adverse effect on our business, financial condition or results of operations. In addition, after we complete an acquisition we may learn of other matters that adversely affect us, such as issues relating to the acquired business’s compliance with applicable laws, or issues relating to its supply chain, customer relationships or order demand.

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.

Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. Indefinite-lived intangibles represent repair station certifications obtained in business combinations and assumed to have indefinite lives. As of March 28, 2026, we had $2,003.4 of goodwill and $24.3 of indefinite-lived intangibles, representing approximately 40% of our total assets. We review goodwill and indefinite-lived intangibles at least annually for impairment and any excess in carrying value over the estimated fair value is charged to the results of operations. Our estimates of fair value are based on assumptions about the future operating cash flows, growth rates, discount rates applied to these cash flows, and current market estimates of value. If we are required to record a charge to earnings because of an impairment of goodwill or indefinite-lived intangibles, our results of operations and financial condition could be materially and adversely affected.

We depend heavily on our senior management and other key personnel, the loss of whom could materially affect our financial performance and prospects.

Our business is managed by a number of key personnel, including our CEO Dr. Michael J. Hartnett. Our future success will depend on, among other things, our ability to retain the services of these personnel and to hire their successors and other highly qualified employees at all levels.

Our international operations are subject to risks inherent in such activities.

We have operations in Australia, England, Canada, France, Germany, India, Mexico, the Peoples Republic of China, Poland and Switzerland. Of our 65 facilities in 11 countries, 21 are located outside the U.S., including 12 manufacturing facilities in four countries .

In fiscal 2026, approximately 11% of our net sales were generated by our international operations. Our foreign operations are subject to the risks inherent in such activities such as: currency devaluations, logistical and communication challenges, costs of complying with a variety of foreign laws and regulations, greater difficulties in protecting and maintaining our rights to intellectual property, difficulty in staffing and managing geographically diverse operations, acts of terrorism or war or other acts that may cause social disruption which are difficult to quantify or predict, and general economic conditions in these foreign markets. Our international operations may be negatively impacted by changes in government policies, such as changes in laws and regulations, restrictions on imports and exports, sources of supply, duties or tariffs, the introduction of measures to control inflation, and changes in the rate or method of taxation. To date we have not experienced significant difficulties with the foregoing risks associated with our international operations.

Currency translation risks may have a material impact on our results of operations.

The majority of our foreign operations utilize the local currency as their functional currency. Foreign currency transaction gains and losses are included in earnings. 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 and payables. Unrealized currency translation gains and losses are recorded on the balance sheet upon translation of the foreign operations’ functional currency to the reporting currency. Because our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and the currencies used by our international operations have had, and will continue to have, an impact on our earnings. We periodically enter into derivative financial instruments such as cross currency swaps to reduce the effect of fluctuations in exchange rates on transactions and account balances denominated in non-functional currencies. Currency fluctuations may affect our financial performance in the future and we cannot predict the impact of future exchange rate fluctuations on our results of operations. See Part II, Item 7A. “Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Exchange Rates” of this Annual Report on Form 10-K.

We may incur material losses for product liability and recall-related claims.

We are subject to a risk of product and recall-related liability in the event that the failure, use or misuse of any of our products results in personal injury, death or property damage or our products do not conform to our customers’ specifications. In particular, our products are installed in a number of types of vehicle fleets, including airplanes, helicopters, trains, automobiles, heavy trucks and farm equipment, many of which may be subject to government-ordered recalls as well as voluntary recalls by the manufacturer. If one of our products is found to be defective, causes a fleet to be disabled or otherwise results in a product recall, significant claims may be brought against us. We currently maintain insurance coverage for product liability claims but not for recall-related claims. We cannot assure you that product liability claims, if made, would not exceed our insurance coverage limits. Claims that are not covered by insurance, or that exceed insurance coverage limits, could result in material losses. Claims that are covered by insurance could result in increased future insurance costs.

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.

Our ability to compete effectively is dependent upon our ability to protect and preserve the intellectual property and proprietary information owned, licensed or otherwise used by us. We have numerous U.S. and foreign trademark registrations and patents. We also have U.S. and foreign trademark and patent applications pending. We cannot assure you that our pending trademark and patent applications will result in trademark registrations and issued patents, and our failure to secure rights under these applications may limit our ability to protect the intellectual property rights that these applications were intended to cover. Although we have attempted to protect our intellectual property and proprietary information both in the United States and in foreign countries through a combination of patent, trademark, copyright and trade secret protection, and non-disclosure agreements, these steps may be insufficient to prevent unauthorized use of our intellectual property and proprietary information, particularly in foreign countries where the protection available for such intellectual property and proprietary information may be limited. We cannot assure you that any of our intellectual property rights will not be infringed upon or that our trade secrets will not be misappropriated or otherwise become known to or independently developed by competitors. We may not have adequate remedies available for any such infringement or other unauthorized use. We cannot assure you that any infringement claims asserted by us will not result in our intellectual property being challenged or invalidated, that our intellectual property will be held to be of adequate scope to protect our business, or that we will be able to deter current and former employees, contractors or other parties from breaching confidentiality obligations and misappropriating trade secrets.

We could become subject to litigation claiming that our intellectual property or proprietary information infringes the rights of a third party. In that event, we could incur substantial defense costs and, if such litigation is successful, we could be required to pay the claimant damages for our past use of such intellectual property or proprietary information, and we could either be required to pay royalties for our use of it in the future or be prohibited from using it in the future. Our inability to use our intellectual property and proprietary information on a cost-effective basis in the future could have a material adverse effect on our revenue, cash flow and profitability. See Part I, Item 1. “Business—Intellectual Property” of this Annual Report on Form 10-K.

Cancellation of orders in our backlog could negatively impact our revenues, cash flows and profitability.

As of March 28, 2026, we had an order backlog of $2.3 billion. However, orders included in our backlog may be subject to cancellation, delay or other modifications by our customers and we cannot assure you that these orders will ultimately be fulfilled.

Quarterly performance can be affected by the timing of government product inspections and approvals.

A portion of our revenue is associated with contracts with the U.S. government that require onsite inspection and approval of the products by government personnel before we may ship the products, and we have no control over the timing of those inspections and approvals. If products scheduled for delivery in one quarter are not inspected or approved until the following quarter, the delay would adversely affect our sales and profitability for the quarter in which the shipments were scheduled.

We incurred substantial debt in order to complete the Dodge and VACCO acquisitions, which could constrain our business and exposes us to the risk of defaults under our debt instruments.

In fiscal 2022, we incurred $1,800.0 of total debt to finance the acquisition of Dodge Industrial and in July 2025 we incurred $200.0 of debt to finance the acquisition of VACCO Industries. As of March 28, 2026, our total debt was $875.5. This debt could or will have important consequences, including, but not limited to:

this debt requires us to make significant interest and principal payments in the future;

a substantial portion of our cash flow from operations will be used to repay the principal and interest on our debt, thereby reducing the funds available to us for other purposes including for strategic acquisitions, working capital, capital expenditures, and general corporate purposes;

our flexibility in planning for and reacting to changes in our business, the competitive landscape and the markets in which we operate may be limited; and

we may be placed at a competitive disadvantage relative to other companies in our industry with less debt or comparable debt on more favorable terms.

Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our financial and operating performance and no assurance can be given that our business will generate sufficient cash flow to service our debt.

Additionally, our ability to comply with the financial and other covenants contained in our debt instruments could be affected by, among other things, changes in our results of operations, the incurrence of additional indebtedness, the pricing of our products, our success at implementing cost reduction initiatives, our ability to successfully implement our overall business strategy, or changes in industry-specific or general economic conditions which are beyond our control. The breach of any of these covenants could result in a default or event of default under our debt instruments, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our prospects, business, financial condition, results of operations and cash flows could be materially and adversely affected and could cause us to become bankrupt or otherwise insolvent. In addition, these covenants may restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our business and stockholders.

Increases in interest rates would increase the cost of servicing our bank debt and could reduce our profitability.

Future increases in interest rates would increase the cost of servicing our bank debt ( i.e. , term loan and revolving credit facility), which could materially reduce our profitability and cash flows.

Use of artificial intelligence could expose us to operational, compliance, and data-related risk.

We currently utilize artificial intelligence -enabled tools primarily to support administrative and efficiency-focused functions. While these tools are not used to make operational, financial reporting, or customer-related decisions, we are still exposed to certain risks including potential data and security or privacy breaches, reliance on third-party AI service providers, inaccurate or incomplete outputs, and evolving regulatory and legal requirements. These risks could result in negative consequences for the Company such as, but not limited to, increased inefficiencies, increased training and legal costs, and contractual or legal claims.

Risk Factors Related to our Capital Stock

Provisions in our charter documents may prevent or hinder efforts to acquire a controlling interest in us.

Provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions that might benefit our stockholders or in which our stockholders might otherwise receive a premium for their shares. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.

Pursuant to our charter documents, our Board of Directors (the “Board”) consists of nine members serving staggered three-year terms and divided into three classes. As a result, two annual meetings are required to change a majority of the Board members.

Our certificate of incorporation authorizes the issuance of 10,000,000 shares of preferred stock, with such designations, rights and preferences as may be determined from time to time by the Board, without stockholder approval. We utilized this authorization to issue 4,600,000 shares of 5.00% Series A Mandatory Convertible Preferred Stock in fiscal 2022, which converted into shares of our common stock in October 2024. In the future the Board could authorize the issuance of some or all of the authorized shares of preferred stock with rights, preferences and privileges that could have the effect of discouraging, delaying or preventing a change in control of us, or that could impede our stockholders’ ability to approve a transaction they consider in their best interests. Although we have no present intention to issue any additional preferred stock, no assurance can be given that we will not do so in the future. Holders of our common stock do not have preemptive rights to subscribe for a pro rata portion of preferred stock or any other capital stock that we may issue in the future.

We do not expect to pay cash dividends on our common stock in the foreseeable future.

Except for a $2.00 per common share special dividend paid in 2014, we have never paid any cash dividends on our common stock and we do not expect to pay cash dividends on the common stock in the foreseeable future. Instead, we plan to apply earnings and excess cash, if any, to the service of our debt, and the expansion and development of our business (although the Company does have a $100.0 common stock repurchase plan that we have never executed under). Thus, any return on an investment in our common stock would depend solely on an increase, if any, in the market value of the common stock.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The financial and business analysis below provides information that we believe is relevant to an assessment and understanding of our consolidated financial position, results of operations and cash flows. This financial and business analysis should be read in conjunction with the consolidated financial statements and related notes. All references to “Notes” in this Item 7 refer to the “Notes to Consolidated Financial Statements” included in Item 8 of this Annual Report on Form 10-K.

The following discussion contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. See the information provided in Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K under the heading “Cautionary Statement as to Forward-Looking Information.”

General

We are a well-known international manufacturer of highly engineered precision bearings, components and essential systems for the Aerospace & Defense and Industrial markets. 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 bearing categories, we focus primarily on the higher end of the bearing market where we believe our value-added manufacturing and engineering capabilities enable us to differentiate ourselves from our competitors and enhance profitability. We believe our unique expertise has enabled us to garner leading positions in many of the product markets in which we primarily compete. With 65 facilities in 11 countries, of which 44 are manufacturing facilities, we have been able to significantly broaden our end markets, products, customer base and geographic reach. We have a fiscal year consisting of 52 or 53 weeks, ending on the Saturday closest to March 31. Based on this policy, fiscal 2026 had 52 weeks and fiscal 2025 had 52 weeks.

We currently operate under two reportable business segments – Aerospace & Defense and Industrial:

Aerospace & Defense. This segment represents the end markets for the Company’s highly engineered bearings and precision components used in commercial aerospace, defense aerospace, defense marine, defense ground vehicles, missiles and guided munitions, and space and satellite applications.

Industrial. This segment represents the end markets for the Company’s highly engineered bearings, gearing and precision components used in various industrial applications including: construction, mining, forestry, energy, agricultural and other machinery; aggregate and cement handling; food and beverage manufacturing; grain, and agricultural product handling; metals and mining material handling; chemicals, oil and gas production; warehousing and logistics; manufacturing automation and semiconductor equipment; power generation; waste and water management; rail and transportation.

We use gross margin as the primary measurement to assess the financial performance of each reportable segment. End market and channel sales within our segments are based on internal definitions and metrics considered by management and are periodically reviewed and updated prospectively.

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 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. We can 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.

We have demonstrated expertise in acquiring and integrating bearing and precision engineered component manufacturers that have complementary products or distribution channels and have provided significant margin enhancement. We have consistently increased the profitability of acquired businesses through a process of methods and systems improvement coupled with the introduction of complementary and proprietary new products. Since 1992 we have completed 30 acquisitions, including VACCO, which we acquired on July 18, 2025. These acquisitions have broadened our end markets, products, customer base and geographic reach.

Outlook

For the fiscal year ended March 28, 2026, 57.9% of our net sales were attributable to the Industrial segment while the Aerospace & Defense segment contributed 42.1% of our net sales. Our net sales increased 14.3% year over year due to sales increases in both the Aerospace & Defense and Industrial segments. VACCO, which was acquired on July 18, 2025, accounted for $83.9 of net sales in fiscal 2026. VACCO is part of our Aerospace & Defense segment.

Aerospace & Defense segment sales increased 32.9% year over year. Commercial aerospace increased 17.8%, due to the increased build rates from large OEMs. defense sales, which represented approximately 40.0% of segment sales during the year, were up 64.5% for the year. Excluding net sales from VACCO, defense sales were up 22.9% year over year. Our backlog in this segment is significant and deliveries are expected to continue to grow in the coming years.

Industrial segment sales increased 3.8% year over year, led by a 4.8% increase in distribution and aftermarket sales. Sales to OEMs were up 1.5% year over year, primarily driven by aggregate & cement, warehousing, grain and food & beverage.

Of our net sales for the fourth quarter of fiscal 2026, 57.1% was attributable to the Industrial segment compared to 42.9% for the Aerospace & Defense segment. Approximately $200.0 of Industrial segment sales in the fourth quarter of fiscal 2026 were to distribution and aftermarket compared to approximately $191.5 in the prior year while approximately $95.9 were made directly to OEMs in the fourth quarter of fiscal 2026 compared to approximately $88.9 in the prior year. Net sales in the Aerospace & Defense segment increased $64.8, or 41.2%, for the fourth quarter of fiscal 2026 compared to the same period last fiscal year. Excluding net sales from VACCO, net sales increased in this segment by 22.8%. Commercial aerospace net sales, which consisted of $106.6 of OEM and $22.9 of distribution and aftermarket, increased by 18.5% compared to the fourth quarter of fiscal 2025 when OEM net sales were $85.9 and distribution and aftermarket net sales were $23.3. This was driven by increased build rates in the OEM market and aftermarket demand remained strong. Our fiscal 2026 fourth quarter defense markets’ net sales, which consisted of $74.0 of OEM and $18.6 of distribution and aftermarket, increased 92.5% compared to the fourth quarter of fiscal 2025 when OEM net sales were $38.1 and distribution and aftermarket net sales were $10.0. Excluding net sales from VACCO, defense net sales were up 35.0% compared to the same period in the prior year.

The Company forecasts net sales to be approximately $500.0 to $510.0 in the first quarter of fiscal 2027, compared to $436.0 in the first quarter of fiscal 2026, which represents a growth rate of 14.7% to 17.0%. Excluding $28.0 of expected net sales from VACCO, net sales are expected to grow 8.3% to 10.6%. Adjusted gross margin is expected to be in the range of 45.25% to 45.5% and SG&A as a percentage of net sales is expected to be in the range of 16.50% to 16.75%.

Our backlog as of March 28, 2026 was $2.3 billion, which included $0.6 billion of VACCO backlog and $1.1 billion of marine related backlog, compared to a total of $0.9 billion as of March 29, 2025. This increase reflects continued growth, most notably in our commercial aerospace and marine defense end markets.

We experienced solid operating cash flow generation during fiscal 2026 (as discussed in the “Liquidity and Capital Resources” section below). We believe that operating cash flows and available credit under our revolving bank credit facilities will provide adequate resources to fund internal growth initiatives for the foreseeable future, including at least the next 12 months. As of March 28, 2026, we had cash of $57.3, of which, $33.1 was cash held by our foreign operations.

Sources of Revenue

A contract with a customer exists when there is commitment and approval from both parties involved, the rights of the parties are identified, payment terms are defined, the contract has commercial substance and collectability of consideration is probable. The Company has determined that the contract with the customer is established when the customer purchase order is accepted or acknowledged. Long-term agreements (“LTAs”) are used by the Company and certain of its customers to reduce their supply uncertainty for a period of time, typically multiple years. While these LTAs define commercial terms including pricing, termination rights and other contractual requirements, they do not represent the contract with the customer for revenue recognition purposes.

Approximately 95% of the Company’s revenue was generated from the sale of products to customers in the Aerospace & Defense and Industrial markets for each of the years ended March 28, 2026 and March 29, 2025. The remaining 5% of the Company’s revenue for each of the last two fiscal years was derived from services performed for customers, which included repair and refurbishment work performed on customer-controlled assets as well as design and test work.

Refer to Note 2 for further discussion regarding the Company’s revenue policy.

Cost of Sales

Cost of sales includes employee compensation and benefits, raw materials, outside processing, depreciation of manufacturing machinery and equipment, supplies and manufacturing overhead.

Less than half of our factory costs, depending on product mix, are attributable to raw materials, purchased components and outside processing. When we experience raw material inflation, we attempt to offset these cost increases by changing our buying patterns, expanding our vendor network and passing through price increases when possible. Although we experienced cost inflation on raw material, labor and overhead for this fiscal year, we were able to mitigate it through pricing, insourcing and strategic sourcing efforts.

We monitor gross margin performance through a process of monthly operation reviews with all our divisions. We develop new products to target certain markets allied to our strategies by first understanding volume levels and product pricing and then constructing manufacturing strategies to achieve defined margin objectives. We only pursue product lines where we believe that the developed manufacturing process will yield the targeted margins. Management monitors gross margins of all product lines on a monthly basis to determine which manufacturing processes or prices should be adjusted.

Fiscal 2026 Compared to Fiscal 2025

Results of Operations

(amounts in millions, except share and per share data)

$ Change

% Change

Net sales

Net income attributable to common stockholders

Net income per common share attributable to common stockholders: Diluted

Weighted average common shares attributable to common stockholders: Diluted

Net sales for the fiscal year ended March 28, 2026 increased $234.6, or 14.3%, compared to fiscal 2025. Excluding $83.9 of net sales from VACCO, net sales increased by 9.2% compared to the prior year. This increase was the result of a 3.8% increase in our Industrial segment, while net sales in our Aerospace & Defense segment increased 32.9% year over year. Industrial segment sales experienced the strongest contribution to growth in the aggregate & cement, warehousing and logistics, food & beverage and grain markets. Within Aerospace & Defense, total commercial aerospace net sales increased 17.8% and defense net sales increased 64.5% year over year. Commercial aerospace net sales, which consisted of $387.4 of OEM and $85.0 of distribution and aftermarket, increased by 17.8% compared to fiscal 2025 when OEM net sales were $317.8 and distribution and aftermarket net sales were $83.1. The OEM markets have continued to improve as build rates have steadily increased over the last several months. Our defense market net sales, which consisted of $237.1 of OEM and $78.5 of distribution and aftermarket, increased by 64.5% compared to fiscal 2025 when OEM net sales were $146.3 and distribution and aftermarket net sales were $45.6. The increase in defense sales was led by marine, missiles and guided munitions and reflects continued growth in demand which is evident by our growing backlog. The acquisition of VACCO also contributed to the sales growth. Excluding VACCO, net sales increased by 19.1% for the Aerospace & Defense segment.

Net income attributable to common stockholders increased by $53.8 to $287.6 for fiscal 2026 compared to fiscal 2025. The net income attributable to common stockholders of $287.6 in fiscal 2026 was impacted by $14.8 of acquisition and related costs, $6.2 of restructuring and consolidation charges, $49.8 of interest expense, and $81.7 of income tax expense. The net income attributable to common stockholders of $233.8 in fiscal 2025 was impacted by $1.5 of restructuring and consolidation charges, $59.8 of interest expense, $12.4 of preferred stock dividends, and $65.7 of income tax expense.

Gross Margin

$ Change

% Change

Gross Margin

Gross Margin %

Gross margin was 44.4% of sales for fiscal 2026 compared to 44.4% for the same period last year. The increase in gross margin was primarily driven by volume. Gross margin in fiscal 2026 was impacted by $2.1 in restructuring costs related to inventory rationalization efforts at one of our manufacturing plants and $13.2 of unfavorable purchase accounting adjustments associated with the VACCO acquisition.

Selling, General and Administrative

$ Change

% Change

% of net sales

SG&A as a % of net sales was 16.9% compared to 17.1% in the prior fiscal year. SG&A expenses increased by $36.8 to $316.1 for fiscal 2026 compared to fiscal 2025, primarily driven by increased personnel costs and $11.2 from the inclusion of VACCO.

Other, Net

$ Change

% Change

Other, net

% of net sales

Other operating expenses for fiscal 2026 totaled $93.1 compared to $76.9 for fiscal 2025. For fiscal 2026, other operating costs consisted of $81.0 of amortization expense, $1.6 of acquisition costs, $4.1 of restructuring costs, $1.1 of bad debt expense and $5.3 of other items. Of the amortization expense incurred during the period, $10.3 was related to acquired intangible assets from the VACCO acquisition. For fiscal 2025, other operating expenses consisted of $71.8 of amortization expense, $1.5 of restructuring costs, $1.2 of bad debt expense and $2.4 of other items.

Interest Expense, Net

$ Change

% Change

Interest expense, net

% of net sales

Interest expense, net, consists of interest charged on the Company’s debt agreements and amortization of deferred financing fees, offset by interest income. Interest expense, net was $49.8 for fiscal 2026 compared to $59.8 for fiscal 2025. The decrease in interest expense between the periods was due to the reduction of the principal balance on our Term Loan (as defined in “Liquidity and Capital Resources—Liquidity—Domestic Credit Facility”), partially offset by the impact of a $200.0 draw on the Revolving Credit Facility (as defined in “Liquidity and Capital Resources—Liquidity—Domestic Credit Facility”) during the second quarter of fiscal 2026 to fund part of the VACCO acquisition. In addition, the Cross Currency Swap has enabled us to better manage interest costs.

Other Non-Operating Expense/(Income)

$ Change

% Change

Other non-operating expense/(income)

% of net sales

Other non-operating expense for fiscal 2026 totaled $1.9, consisting primarily of post-retirement benefit costs and foreign exchange gains and losses. Non-operating income during fiscal 2025 was $1.8, consisting primarily of a $4.0 legal settlement partially offset by post-retirement benefit costs and foreign exchange gains and losses.

Income Taxes

Income tax expense

Effective tax rate with discrete items

Effective tax rate without discrete items

Income tax expense for fiscal 2026 was $81.7 compared to $65.7 for fiscal 2025. Our effective income tax rate for fiscal 2026 was 22.1% compared to 21.1% for fiscal 2025. The effective income tax rates are different from the U.S. statutory rate due to the U.S. credits for increasing research activities and foreign-derived intangible income provision, which decrease the rate, and differences in foreign and state income taxes, which increase the rate. The effective income tax rate for fiscal 2026 of 22.1% included discrete items totaling a benefit of $6.2 which is substantially related to a benefit associated with stock-based compensation, changes in valuation allowances, and one-time adjustments to record deferred tax liabilities for foreign subsidiaries. The effective income tax rate for fiscal 2026 without these discrete items would have been 23.8%. The effective income tax rate for fiscal 2025 of 21.1% included discrete items totaling a benefit of $7.6 which is substantially related to a benefit associated with stock-based compensation, a reduction in unrecognized tax benefits due to the expiration of the statute of limitations, and benefits related to the release of a valuation allowance and an adjustment related to state remeasurements. The effective income tax rate for fiscal 2025 without these discrete items would have been 23.5%.

Global Minimum Tax

In October 2021, the Organisation for Economic Co-operation and Development (“OECD”) announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 with the adoption of additional components in later years or announced their plans to enact legislation in future years. The Company has performed an assessment of the potential impact to its income taxes as a result of Pillar Two. Based on the results of the assessment, the Company believes that it can avail itself of the transitional safe harbor rules in all jurisdictions in which the Company operates. We will continue to monitor both the U.S. and international legislative developments related to Pillar Two to assess for any potential impacts. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions in which we operate.

One Big Beautiful Bill Act

On July 4, 2025, the U.S. enacted new legislation, Public Law No: 119-21, The One Big Beautiful Bill Act (“The Act”). The Act includes several U.S. corporate tax provisions, including restoring immediate deductibility of certain capital expenditures, restoring full expensing of domestic research and development costs, and changes in the computations of U.S. taxation on international earnings. As the Company continues to analyze the changes in tax law contained in the Act, we expect the Act to result in a favorable timing shift in our U.S. cash tax payments, with no material impact on our fiscal 2026 effective tax rate.

Segment Information

We report our financial results under two operating segments: Aerospace & Defense and Industrial. We use gross margin as the primary measurement to assess the financial performance of each reportable segment.

Aerospace & Defense Segment:

$ Change

% Change

Net sales

Gross margin

Gross margin %

% of segment net sales

Net sales increased $195.2, or 32.9%, for fiscal 2026 compared to fiscal 2025. Commercial aerospace net sales, which consisted of $387.4 of OEM and $85.0 of distribution and aftermarket, increased by 17.8% compared to fiscal 2025 when OEM net sales were $317.8 and distribution and aftermarket net sales were $83.1. The OEM markets have continued to improve in line with build rates. Our defense market net sales, which consisted of $237.1 of OEM and $78.5 of distribution and aftermarket, increased by 64.5% compared to fiscal 2025 when OEM net sales were $146.3 and distribution and aftermarket net sales were $45.6. The increase in defense sales was led by marine, missiles and guided munitions and reflects continued growth in demand which is evident by our growing backlog. The acquisition of VACCO also contributed to the sales growth. Excluding VACCO, net sales increased by 19.1% for the Aerospace & Defense segment. Excluding VACCO, commercial net sales increased 17.3% and defense market net sales increased 22.9% compared to the same period in the prior year.

Gross margin was $320.7, or 40.7% of net sales, in fiscal 2026 compared to $243.1, or 41.0% of sales, for the same period in fiscal 2025. We anticipate additional margin expansion in the upcoming year as the growing orders for commercial products are expected to increase volumes flowing through our manufacturing facilities driving cost efficiencies. Expected synergies from the VACCO acquisition should also contribute to margin expansion. Gross margin in fiscal 2026 was affected by $13.2 of purchase accounting adjustments related to the VACCO acquisition.

Industrial Segment:

$ Change

% Change

Net sales

Gross margin

Gross margin %

% of segment net sales

Net sales increased $39.4, or 3.8%, during fiscal 2026 compared to the same period last year. The continued strong performance was driven by the aggregate and cement, warehousing, food & beverage and grain markets, partially offset by softness in the mining & metals, power generation and oil & gas end markets. Sales to distribution and the aftermarket were $751.9 in fiscal 2026 compared to $717.4 in the prior year, a 4.8% year-over-year increase. OEM sales increased 1.5% to $331.0 for fiscal 2026 compared to $326.1 in the prior year.

Gross margin was $509.5, or 47.0% of net sales, in fiscal 2026 compared to $483.0, or 46.3% of sales, for the same period in fiscal 2025. The expansion in margin year over year was attributable to manufacturing efficiencies and product mix.

Corporate:

$ Change

% Change

% of total net sales

Corporate SG&A for fiscal 2026 increased $16.3 or 16.3% compared to fiscal 2025 due to increased spending in IT and personnel-related costs. As a percentage of net sales, Corporate SG&A was relatively flat year over year.

Liquidity and Capital Resources

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. 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 our revolving bank credit facilities will provide adequate resources to fund internal growth initiatives for the foreseeable future.

Our ability to meet future working capital, capital expenditures 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 March 28, 2026, we had cash of $57.3, of which, approximately $33.1 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, with the exception of our Canadian operations as there are no current plans to expand on the sales operations within that jurisdiction. As discussed in further detail below, we also have the ability to borrow money from our existing credit facilities.

Domestic Credit Facility

In fiscal 2022, RBC Bearings Incorporated, our top holding company, and our Roller Bearing Company of America, Inc. subsidiary (“RBCA”) entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), and the other lenders party thereto. The Credit Agreement provides the Company with (a) a $1,300.0 term loan (the “Term Loan”), which was used to fund a portion of the cash purchase price for the acquisition of Dodge Industrial and to pay related fees and expenses, and (b) a $500.0 revolving credit facility (the “Revolving Credit Facility” and together with the Term Loan, the “Facilities”).

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 0.50% and (iii) Term SOFR (as defined in the Credit Agreement based on SOFR, the secured overnight financing rate administered by the Federal Reserve Bank of New York) plus 1.00% or (b) Term SOFR plus a credit spread adjustment of 0.10% plus a margin ranging from 0.75% to a cap of 1.75% in the case of loans under the Revolving Credit Facility and 2.00% in the case of the Term Loan depending on the Company’s consolidated ratio of total net debt to consolidated EBITDA (as defined in the Credit Agreement) from time to time. The Facilities are subject to a SOFR floor of 0.00%. As of March 28, 2026, the Company’s margin was 1.00% for SOFR loans, the commitment fee rate was 0.175%, and the letter of credit fee rate was 0.75%.

The Term Loan matures in November 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, which will offset future quarterly amortization installments. Due to prepayments previously made, the required future principal payments on the Term Loan are $173.0 for fiscal 2027.

Originally the Revolving Credit Facility was to expire in November 2026 but on October 28, 2025, the Credit Agreement was amended to, among other things, (i) extend the expiration date of the Revolving Credit Facility to October 2030, (ii) eliminate the minimum interest coverage ratio covenant from the Credit Agreement, and (iii) reduce the margin cap within the pricing grid on Term SOFR-based loans under the Revolving Credit Facility from 2.00% to 1.75%. All amounts outstanding under the Revolving Credit Facility will be payable on its expiration date.

In connection with the amendment, new debt issuance costs totaled $1.8. Additionally, $0.6 of previously unamortized debt issuance costs associated with the Revolving Credit Facility will now be associated with the new arrangement. The total of $2.4 debt issuance costs will be amortized through the new term of October 2030. The remaining portion of original debt issuance costs associated with the Term Loan of $1.6 will continue to be amortized through the end of the Term Loan in November 2026.

The Credit Agreement requires the Company to comply with various covenants, including a maximum Total Net Leverage Ratio (as defined within the Credit Agreement) of 4.50:1.00 (provided that such maximum ratio may be increased by the Company to 0.50:1.00 for a period of 12 months after the consummation of a material acquisition (provided that there may be only one such increase in effect at any one time)). As of March 28, 2026 the Company was in compliance with all debt covenants.

The Credit Agreement allows the Company to, among other things, make distributions to 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 Credit Agreement.

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

As of March 28, 2026, $173.0 was outstanding under the Term Loan, $200.0 was outstanding under the Revolving Credit Facility (used to fund a portion of the purchase price for VACCO), and $3.7 of the Revolving Credit Facility was being utilized to provide letters of credit to secure the Company’s obligations relating to certain insurance programs. The Company had the ability to borrow an additional $296.3 under the Revolving Credit Facility as of March 28, 2026.

Senior Notes

In fiscal 2022, RBCA issued $500.0 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 $492.0, after deducting initial purchasers’ discounts and commissions and offering expenses, and were used to fund a portion of the 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 domestic subsidiaries that also guarantee the 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.

The Senior Notes will mature on October 15, 2029. The Company may redeem some or all of the Senior Notes at any time at the redemption prices set forth in the Indenture, 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 Borrowing Arrangements

One of our foreign subsidiaries, Schaublin SA, has a CHF 5.0 (approximately $6.1 USD) credit line with Credit Suisse (Switzerland) Ltd. to provide future working capital, if necessary. As of March 28, 2026, $0.1 was being utilized to provide a bank guarantee. Fees associated with this credit line are nominal.

In July 2024, Swiss Tool Systems, one of our foreign subsidiaries, purchased the building where it operates for CHF 7.1 (approximately $8.4 USD) and took out a 10-year, 2.9% fixed-rate mortgage on the building for CHF 4.0 (approximately $4.5 USD).

Interest Rate Swap

Because the Company is exposed to market risks relating to fluctuations in interest rates, the Company maintained an interest rate swap prior to its expiration on December 30, 2025 (the “Interest Rate Swap”). At this time we have not yet determined if we will enter into a new interest rate swap arrangement.

Cross Currency Swap

The Company is exposed to foreign exchange rate fluctuations as some of our subsidiaries operate in various countries.

On August 12, 2024, the Company entered into the Cross Currency Swap with a third-party financial counterparty. The objective of the Cross Currency Swap is to economically hedge the Company’s net investment in its lower-tier European subsidiary, Schaublin, against adverse changes in the Swiss franc/U.S. dollar exchange rate. The Cross Currency Swap is based upon a net investment of CHF 69.4 ($80.0 USD) notional amount with a three-year maturity date. RBC receives a fixed U.S. dollar amount on a month-to-month basis based upon a fixed annual rate of 2.77% of the notional amount. At maturity, RBC will net-settle the principal of the Cross Currency Swap in cash with the counterparty. The Cross Currency Swap has been designated as a net investment hedge on an after-tax basis.

Preferred Stock

Prior to October 15, 2024, the Company had outstanding 4,600,000 shares of 5.00% Series A Mandatory Convertible Preferred Stock (“MCPS”) to which we paid a quarterly dividend aggregating $5.75, but on that date each then-outstanding share of the MCPS converted into 0.4413 shares of common stock, resulting in the retirement of the MCPS and the issuance of 2,029,955 shares of common stock, and the cessation of the Company paying related dividends.

Cash Flows

Fiscal 2026 Compared to Fiscal 2025

The following table summarizes our cash flow activities:

$ Change

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Effect of exchange rate changes on cash

(Decrease)/increase in cash

During fiscal 2026, we generated cash of $415.7 from operating activities compared to $293.6 for fiscal 2025. The increase of $122.1 was the result of a $41.4 increase in net income, a $56.8 favorable change in non-cash activity and net favorable change in operating assets and liabilities of $23.9. The favorable change in operating assets and liabilities is detailed in the table below. The change in non-cash activity was driven by $8.8 more depreciation and amortization, $6.1 more stock-based compensation, $0.6 more amortization of deferred financing costs, $37.7 more deferred taxes, $0.9 more non-cash operating lease expense, $0.2 of additional losses on the disposition of assets and $2.5 more restructuring and other non-cash charges.

The following chart summarizes the impact on cash flow from operating assets and liabilities for fiscal 2026 versus fiscal 2025.

Cash provided by (used in):

Accounts receivable

Inventory

Prepaid expenses and other current assets

Other noncurrent assets

Accounts payable

Accrued expenses and other current liabilities

Other noncurrent liabilities

Total change in operating assets and liabilities

During fiscal 2026, we used $349.7 for investing activities as compared to $49.8 for fiscal 2025. The increase in cash used was attributable to $276.7 used for the VACCO acquisition and a $23.3 increase in capital expenditures.

During fiscal 2026, we used cash of $43.3 for financing activities compared to $270.4 in fiscal 2025. This change was primarily attributable to $133.0 of additional proceeds received from the Revolving Credit Facility. Additionally, we had $22.0 less of payments made on the Term Loan, $17.2 less of preferred stock dividends paid, and $77.4 less of revolving credit facilities payments, partially offset by $1.8 more of financing fees paid, $10.7 less of exercises of stock-based awards, $4.9 more of repurchases of common stock, $0.5 more payments of finance lease obligations, $0.1 more repayments of notes payable and $4.5 less of proceeds received from mortgage.

Capital Expenditures

Our capital expenditures in fiscal 2026 were $73.1 compared to $49.8 in fiscal 2025. We expect to make capital expenditures of approximately 3.5% to 4.0% of net sales during fiscal 2027 in connection with our existing business. We funded our fiscal 2026 capital expenditures, and expect to fund fiscal 2027 capital expenditures, principally through existing cash and internally generated funds. We may also make substantial additional capital expenditures in connection with acquisitions.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates on an on-going basis. Estimates are used for, but not limited to, the accounting for the allowance for credit losses, valuation of inventories, goodwill and intangible assets, depreciation and amortization, income taxes and tax reserves, the valuation of options and the valuation of business combinations. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We believe our judgments related to these accounting estimates are appropriate. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition. The performance obligations for the majority of RBC’s product sales are satisfied at the point in time in which the products are shipped. The Company has determined that the customer obtains control upon shipment of the product based on the shipping terms (i.e. when it ships from RBC’s dock or when the product arrives at the customer’s dock) and recognizes revenue when control has transferred to the customer. Once a customer has obtained control, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset. Approximately 95% and 98% of the Company’s revenue was recognized in this manner based on sales for the fiscal years ended March 28, 2026 and March 29, 2025, respectively.

Inventory. Inventory is stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. We account for inventory under a full absorption method. We record adjustments to the value of inventory based upon past sales history and forecasted plans to sell our inventories. The physical condition, including age and quality, of the inventories is also considered in establishing its valuation. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer inventory levels or competitive conditions differ from our expectations.

Goodwill and Indefinite-Lived Intangible Assets. Goodwill (representing the excess of the amount paid to acquire a company over the estimated fair value of the net assets acquired) and indefinite-lived intangible assets are not amortized but instead are tested for impairment annually, or when events or circumstances indicate that the carrying value of such asset may not be recoverable. Separate tests are performed for goodwill and indefinite lived intangible assets. The Company performs the annual impairment testing during the fourth quarter of each fiscal year. We completed a quantitative test of impairment on the indefinite lived intangible assets with no impairment noted in fiscal year 2026. The determination of any goodwill impairment is made at the reporting unit level. The Company determines the fair value of a reporting unit and compares it to its carrying amount. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company applies the income approach (discounted cash flow method) in testing goodwill for impairment. The key assumptions used in the discounted cash flow method used to estimate fair value include gross margin, discount rate, and long-term growth rate, which is affected by expectations about future market or economic conditions. The fair value of the reporting units exceeds the carrying value by a minimum of 38.8% at each of the two reporting units. Assuming no growth in gross margin within the model would not result in impairment of goodwill for any of our reporting units. Although no changes are expected, if the actual results of the Company are less favorable than the assumptions the Company makes regarding estimated cash flows, the Company may be required to record an impairment charge in the future.

Valuation of Business Combinations. We allocate the amounts we pay for each acquisition to the assets we acquire and liabilities we assume based on their estimated fair values at the date of acquisition, including identifiable intangible assets, which either arise from a contractual or legal right or are separable from goodwill. We base the fair value of identifiable intangible assets acquired in a business combination on detailed valuations which are prepared with the assistance of a specialist and consider our best estimates of inputs and assumptions that a market participant would use. We utilize a specialist for these valuations due to the complexity and estimation uncertainty involved in determining the fair value given the significant assumptions involved. Significant assumptions utilized in the valuation models include discount rates, revenue growth rates and EBITDA margins. We allocate to goodwill any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired. Transaction costs associated with these acquisitions are expensed as incurred through other, net on the consolidated statements of operations.

Income Taxes. As part of the process of preparing the consolidated financial statements, we are required to estimate the income taxes in each jurisdiction in which we operate. This process involves estimating the actual current tax liabilities together with assessing temporary differences resulting from the differing treatment of items for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities, which are included in the consolidated balance sheets. We must then assess the likelihood that the deferred tax assets will be recovered, and to the extent that we believe that recovery is not more than likely, we are required to establish a valuation allowance. If a valuation allowance is established or increased during any period, we are required to include this amount as an expense within the tax provision in the consolidated statements of operations. Significant judgment is required in determining our provision for income taxes, deferred tax assets and liabilities, accrual for uncertain tax positions and any valuation allowance recognized against net deferred tax assets.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, refer to Note 2.

Off-Balance Sheet Arrangements

The Company has $3.7 of outstanding standby letters of credit, all of which are under the Revolving Credit Facility. We had no significant off-balance sheet arrangements as of March 28, 2026.