Notes to Consolidated Financial Statements
(dollars in thousands, except share and
per share data)
1.
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Organization and Business
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RBC Bearings Incorporated,
together with its subsidiaries, is an international manufacturer and marketer of highly engineered precision bearings and products,
which are integral to the manufacture and operation of most machines, aircraft and mechanical systems, to reduce wear to moving
parts, facilitate proper power transmission, reduce damage and energy loss caused by friction and control pressure and flow. The
terms “we”, “us”, “our”, “RBC” and the “Company” mean RBC Bearings
Incorporated and its subsidiaries, unless the context indicates another meaning. While we manufacture products in all major categories,
we focus primarily on highly technical or regulated bearing products and engineered products for specialized markets that require
sophisticated design, testing and manufacturing capabilities. We believe our unique expertise has enabled us to garner leading
positions in many of the product markets in which we primarily compete. Over the past fifteen years, we have broadened our end
markets, products, customer base and geographic reach. We currently have 42 facilities of which 33 are manufacturing facilities
in 5 countries.
The Company operates
in four reportable business segments—roller bearings, plain bearings, ball bearings and engineered products—in which
it manufactures roller bearing components and assembled parts and designs and manufactures high-precision roller and ball bearings.
The Company sells to a wide variety of original equipment manufacturers (“OEMs”) and distributors who are widely dispersed
geographically. No one customer accounted for more than 9% of the Company’s net sales in fiscal 2019, 2018 or 2017. The Company’s
segments are further discussed in Part II, Item 8. “Financial Statements and Supplemental Data,” Note 18 “Reportable
Segments.”
2.
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Summary of Significant Accounting Policies
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General
The
consolidated financial statements include the accounts of RBC Bearings Incorporated, Roller Bearing Company of
America, Inc. (“RBCA”) and its wholly-owned subsidiaries, Industrial Tectonics Bearings Corporation
(“ITB”), RBC Nice Bearings, Inc. (“Nice”), RBC Precision Products - Bremen, Inc.
(“Bremen (MBC)”), RBC Precision Products - Plymouth, Inc. (“Plymouth”), RBC Lubron Bearing
Systems, Inc. (“Lubron”), RBC Oklahoma, Inc. (“RBC Oklahoma”), RBC Aircraft Products, Inc.
(“API”), RBC Southwest Products, Inc. (“SWP”), All Power Manufacturing Co. (“All Power”),
RBC Aerostructures LLC (“AeroS”), Western Precision Aero LLC (“WPA”), Climax Metal Products Company
(“CMP”), RBC Turbine Components LLC (“TCI”), Sonic Industries, Inc. (“Sonic”), Sargent
Aerospace and Defense LLC (“Sargent”), Airtomic LLC. (“Airtomic”), Schaublin Holding S.A. and its
wholly-owned subsidiaries Schaublin SA, RBC Bearings Polska sp. Z.o.o., RBC France SAS and Schaublin GmbH
(“Schaublin”), RBC de Mexico S DE RL DE CV (“Mexico”), RBC Bearings U.K. Limited and its wholly-owned
subsidiary Phoenix Bearings Limited (“Phoenix”), Allpower de Mexico S DE RL DE CV (“Tecate”) and RBC
Bearings Canada, Inc. Divisions of RBCA include: RBC Corporate, RBC E-Shop, RBC Aerospace sales office and warehouse, Transport
Dynamics (“TDC”), Heim (“Heim Bearings Company”), Engineered Components (“ECD”), RBC
Aerocomponents (“AeroC”), PIC Design (“PIC Design”), RBC Hartsville, RBC West Trenton, RBC
Bishopsville, RBC Eastern Distribution Center, Shanghai Representative office of Roller Bearing Company of America, Inc.
(“RBC Shanghai”) and RBC Grand Prarie TX location. U.S. Bearings (“USB”) is a division of SWP and
Schaublin USA is a division of Nice. All intercompany balances and transactions have been eliminated in consolidation.
The Company has a fiscal
year consisting of 52 or 53 weeks, ending on the Saturday closest to March 31. Based on this policy, fiscal years 2019, 2018
and 2017 each contained 52 weeks. The amounts are shown in thousands, unless otherwise indicated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent
assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Estimates are used for, but not limited to, the accounting for the allowance
for doubtful accounts, valuation of inventories, accrued expenses, goodwill and intangible assets, depreciation and amortization,
income taxes and tax reserves, pension and postretirement obligations and the valuation of options.
Revenue Recognition
On April 1, 2018, the
Company adopted Accounting Standards Update (ASU) No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
. This new
guidance provides a five-step model to determine when and how revenue is recognized, and requires an entity to recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
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.
When the Company accepts
or acknowledges the customer purchase order, the type of good or service is defined on a line-by-line basis. Individual performance
obligations are established by virtue of the individual line items identified on the sales order acknowledgment at the time of
issuance. The majority of the Company’s revenue relates to the sale of goods and contains a single performance obligation
for each distinct good. The remainder of the Company’s revenue from customers is generated from services performed. These
services include repair and refurbishment work performed on customer-controlled assets as well as design and test work. The performance
obligations for these services are also identified on the sales order acknowledgement at the time of issuance on a line-by-line
basis.
Transaction price reflects
the amount of consideration that the Company expects to be entitled to in exchange for transferred goods or services. A contract’s
transaction price is allocated to each distinct performance obligation and revenue is recognized as the performance obligation
is satisfied. For the majority of our contracts, the Company may provide distinct goods or services, in which case we separate
the contract into more than one performance obligation (i.e., a good or service is individually listed in a contract or sold individually
to a customer). The Company generally sells products and services with observable standalone selling prices.
The performance obligations
for the majority of RBC’s product sales are satisfied at the point in time in which the products are shipped, consistent
with the pattern of revenue recognition under the previous accounting standard. The Company has determined that the customer obtains
control upon shipment of the product based on the shipping terms (either when it ships from RBC’s dock or when the product
arrives at the customer’s dock) and recognizes revenue accordingly. Once a product has shipped, the customer is able to direct
the use of, and obtain substantially all of the remaining benefits from, the asset. Approximately 94% of the Company’s revenue
was recognized in this manner based on sales for the year ended March 30, 2019.
The Company has determined
performance obligations are satisfied over time for customer contracts where RBC provides services to customers and also for a
limited number of product sales. RBC has determined revenue recognition over time is appropriate for our service revenue contracts
as they create or enhance an asset that the customer controls throughout the duration of the contract. Approximately 6% of the
Company’s revenue was recognized in this manner based on sales for the year ended March 30, 2019. Revenue recognition over
time is appropriate for customer contracts with product sales in which the product sold has no alternative use to RBC without significant
economic loss and an enforceable right to payment exists, including a normal profit margin from the customer, in the event of contract
termination. These types of contracts comprised less than 1% of total sales for the year ended March 30, 2019. For both of these
types of contracts, revenue is recognized over time based on the extent of progress towards completion of the performance obligation.
The Company utilizes the cost-to-cost measure of progress for over-time revenue recognition contracts as we believe this measure
best depicts the transfer of control to the customer, which occurs as we incur costs on contracts. Revenues, including profits,
are recorded proportionally as costs are incurred. Costs to fulfill include labor, materials, subcontractors’ costs, and
other direct and indirect costs.
Contract costs are
the incremental costs of obtaining and fulfilling a contract (i.e., costs that would not have been incurred if the contract had
not been obtained) to provide goods and services to customers. Contract costs largely consist of design and development costs for
molds, dies and other tools that RBC will own and that will be used in producing the products under the supply arrangements. These
contract costs are amortized to expense on a systematic and rational basis over a period consistent with the transfer to the customer
of the goods or services to which the asset relates. Costs incurred to obtain a contract are primarily related to sales commissions
and are expensed as incurred as they are generally not tied to specific customer contracts. These costs are included within selling,
general and administrative costs on the consolidated statements of operations.
In certain contracts,
the Company facilitates shipping and handling activities after control has transferred to the customer. The Company has elected
to record all shipping and handling activities as costs to fulfill a contract. In situations where the shipping and handling costs
have not been incurred at the time revenue is recognized, the estimated shipping and handling costs are accrued.
Prior to the adoption
of ASC Topic 606, the Company recognized revenue in accordance with ASC Topic 605. Our accounting policy was as follows:
The Company recognizes revenue only after
the following four basic criteria are met:
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●
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Persuasive evidence of an arrangement exists;
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●
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Delivery has occurred or services have been rendered;
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●
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The seller’s price to the buyer is fixed or determinable; and
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|
●
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Collectability is reasonably assured.
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Revenue is recognized
upon the passage of title, which generally is at the time of shipment, except for certain customers for which it occurs when the
products reach their destination. Accounts receivable, net of applicable allowances, is recorded when revenue is recorded.
We also on occasion
record deferred revenue on our balance sheet as a liability. Deferred revenue represents progress payments received, primarily
from one customer, to cover purchases of raw materials per the terms of multi-year long-term contracts. Revenue associated with
these agreements is recognized in accordance with the criteria discussed above.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents. The Company maintains its cash accounts primarily with Bank of America, N.A., Credit Suisse Group
AG and Wells Fargo & Company. The domestic balances are insured by the Federal Deposit Insurance Company up to $250. The Company
has not experienced any losses in such accounts.
Accounts Receivable, Net and Concentration
of Credit Risk
Accounts receivable
include amounts billed and currently due from customers. The amounts due are stated at their estimated net realizable value. The
Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make
required payments. The Company reviews the collectability of its receivables on an ongoing basis taking into account a combination
of factors. The Company reviews potential problems, such as past due accounts, a bankruptcy filing or deterioration in the customer’s
financial condition, to ensure the Company is adequately accrued for potential loss. Accounts are considered past due based on
when payment was originally due. If a customer’s situation changes, such as a bankruptcy or creditworthiness, or there is a change
in the current economic climate, the Company may modify its estimate of the allowance for doubtful accounts. The Company will write-off
accounts receivable after reasonable collection efforts have been made and the accounts are deemed uncollectible.
The Company sells to
a large number of OEMs and distributors who service the aftermarket. The Company’s credit risk associated with accounts receivable
is minimized due to its customer base and wide geographic dispersion. The Company performs ongoing credit evaluations of its customers’
financial condition and generally does not require collateral or charge interest on outstanding amounts. The Company had no concentrations
of credit risk with any one customer greater than approximately 7% of accounts receivables at March 30, 2019 and 6% at March 31,
2018.
Inventory
Inventories are stated
at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. The Company accounts for inventory
under a full absorption method, and records 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.
Contract Assets (Unbilled Receivables)
Pursuant to the over-time
revenue recognition model, revenue may be recognized prior to the customer being invoiced. An unbilled receivable is recorded to
reflect revenue that is recognized when (1) the cost-to-cost method is applied and (2) such revenue exceeds the amount invoiced
to the customer. Contract assets are included within prepaid expenses and other current assets or other assets on the consolidated
balance sheet.
Property, Plant and Equipment
Property, plant and
equipment are recorded at cost. Depreciation and amortization of property, plant and equipment, including equipment under capital
leases, is provided for by the straight-line method over the estimated useful lives of the respective assets or the lease term,
if shorter. Depreciation of assets under capital leases is reported within depreciation and amortization. The cost of equipment
under capital leases is equal to the lower of the net present value of the minimum lease payments or the fair market value of the
leased equipment at the inception of the lease. Expenditures for normal maintenance and repairs are charged to expense as incurred.
The estimated useful
lives of the Company’s property, plant and equipment follows:
Buildings and improvements
|
20-30 years
|
Machinery and equipment
|
3-15 years
|
Leasehold improvements
|
Shorter of the term of lease or estimated useful life
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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 value may have declined. Separate tests are performed for goodwill and indefinite lived intangible assets. We apply a qualitative
test of impairment on the indefinite lived intangible assets. This is done by assessing the existence of events or circumstances
which would make it more likely than not that impairment is present. No such factors were identified during our current year analysis.
The determination of any goodwill impairment is made at the reporting unit level and consists of two steps. First, the Company
determines the fair value of a reporting unit and compares it to its carrying amount. Second, if the carrying amount of the reporting
unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill
over the goodwill’s implied 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 discount rates,
revenue growth rates, terminal growth rates and cash flow projections. Discount rates, growth rates and cash flow projections are
the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by
using a weighted average cost of capital (“WACC”). The WACC considers market and industry data as well as Company-specific
risk factors for each reporting unit in determining the appropriate discount rate to be used. The discount rate utilized for each
reporting unit for our fiscal 2019 test was 11.0% and is indicative of the return an investor would expect to receive for investing
in such a business. Terminal growth rate determination follows common methodology of capturing the present value of perpetual cash
flow estimates beyond the last projected period assuming a constant WACC and long-term growth rates. The terminal growth rate used
for our fiscal 2019 test was 2.5%. The Company has determined that, to date, no impairment of goodwill exists and fair value of
the reporting units exceeded the carrying value in total by approximately 102.7%. The fair value of the reporting units exceeds
the carrying value by a minimum of 27.2% at each of the four reporting units. A decrease of 1.0% in our terminal growth rate would
not result in impairment of goodwill for any of our reporting units. An increase of 1.0% in our discount rate would not result
in impairment of goodwill for any of our reporting units. The Company performs the annual impairment testing during the fourth
quarter of each fiscal year. 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.
Deferred Financing Costs
Deferred financing
costs are amortized on a straight-line basis over the lives of the related credit agreements.
Contract Liabilities (Deferred Revenue)
The Company may receive
a customer advance or deposit, or have an unconditional right to receive a customer advance, prior to revenue being recognized.
Since the performance obligations related to such advances may not have been satisfied, a contract liability is established. Contract
liabilities are included within accrued expenses and other current liabilities or other non-current liabilities on the consolidated
balance sheets until the respective revenue is recognized. Advance payments are not considered a significant financing component
as the timing of the transfer of the related goods or services is at the discretion of the customer.
Pension and Postretirement Health Care
and Life Insurance Benefits
The Company has one
consolidated noncontributory defined benefit pension plan covering union employees in its Heim division plant in Fairfield, Connecticut,
its Bremen subsidiary plant in Plymouth, Indiana and former union employees of the Tyson subsidiary in Glasgow, Kentucky and the
Nice subsidiary in Kulpsville, Pennsylvania.
The Company, for the
benefit of employees at its Heim, West Trenton, Bremen and PIC facilities and former union employees of its Tyson and Nice subsidiaries,
sponsors contributory defined benefit health care plans that provide postretirement medical and life insurance benefits to union
employees who have attained certain age and/or service requirements while employed by the Company. The plans are unfunded and costs
are paid as incurred. Postretirement benefit obligations are included in “Accrued expenses and other current liabilities”
and “Other non-current liabilities” in the consolidated balance sheet.
We calculate our pension
costs as required under U.S. GAAP, and the calculations and assumptions utilized require judgment. U.S. GAAP outlines the methodology
used to determine pension expense or income for financial reporting purposes. Pension expense is split between operating income
and non-operating income, where only the service cost component is included in operating income (within cost of sales and other,
net on the consolidated statement of operations) and the non-service components are included in retirement benefits non-service
expense (within other non-operating expense on the consolidated statement of operations). For purposes of determining retirement
benefits non-service expense under U.S. GAAP, a calculated “market-related value” of our plan assets is used to develop
the amount of deferred asset gains or losses to be amortized. The market-related value of assets is determined using actual asset
gains or losses over a three-year period. Under U.S. GAAP, a “corridor” approach may be elected and applied in the
recognition of asset and liability gains or losses which limits expense recognition to the net outstanding gains and losses in
excess of the greater of 10% of the projected benefit obligation (PBO) or the calculated “market-related value” of
assets. We do not use a “corridor” approach in the calculation of Financial Accounting Standards (FAS) pension expense.
We recognize the funded
status of a postretirement benefit plan (defined benefit pension and other benefits) as an asset or liability in our consolidated
balance sheets. Funded status represents the difference between the PBO of the plan and the market value of the plan’s assets.
Previously unrecognized deferred amounts such as demographic or asset gains or losses and the impact of historical plan changes
are included in accumulated other comprehensive income/loss. Changes in these amounts in future years will be reflected through
accumulated other comprehensive income/loss and amortized in future pension expense generally over the estimated average remaining
employee service period.
Income Taxes
The Company accounts for income taxes using the liability method, which requires it to recognize a current
tax liability or asset for current taxes payable or refundable and a deferred tax liability or asset for the estimated future tax
effects of temporary differences between the financial statement and tax reporting bases of assets and liabilities to the extent
that they are realizable. Deferred tax expense (benefit) results from the net change in deferred tax assets and liabilities during
the year. A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized.
The Company is exposed to certain tax contingencies in the ordinary course of business and records those tax liabilities in accordance
with the guidance for accounting for uncertain tax positions.
Temporary differences
relate primarily to the timing of deductions for depreciation, stock-based compensation, goodwill amortization relating to the
acquisition of operating divisions, basis differences arising from acquisition accounting, pension and retirement benefits, and
various accrued and prepaid expenses. Deferred tax assets and liabilities are recorded at the rates expected to be in effect when
the temporary differences are expected to reverse.
Net Income Per Common Share
Basic net income per
common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares
outstanding.
Diluted net income
per common share is computed by dividing net income by the sum of the weighted-average number of common shares and dilutive common
share equivalents then outstanding using the treasury stock method. Common share equivalents consist of the incremental common
shares issuable upon the exercise of stock options.
The table below reflects
the calculation of weighted-average shares outstanding for each year presented as well as the computation of basic and diluted
net income per common share:
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Fiscal
Year Ended
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|
|
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March
30,
2019
|
|
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March
31,
2018
|
|
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April
1,
2017
|
|
Net income
|
|
$
|
105,193
|
|
|
$
|
87,141
|
|
|
$
|
70,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
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Denominator for basic net income per common share—weighted-average shares
|
|
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24,357,684
|
|
|
|
23,948,565
|
|
|
|
23,521,615
|
|
Effect of dilution due to employee stock options
|
|
|
358,529
|
|
|
|
415,224
|
|
|
|
263,021
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|
Denominator for diluted net income per common share—adjusted weighted-average shares
|
|
|
24,716,213
|
|
|
|
24,363,789
|
|
|
|
23,784,636
|
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Basic net income per common share
|
|
$
|
4.32
|
|
|
$
|
3.64
|
|
|
$
|
3.00
|
|
Diluted net income per common share
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$
|
4.26
|
|
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$
|
3.58
|
|
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$
|
2.97
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|
At March 30, 2019,
256,990 employee stock options and 1,500 restricted shares have been excluded from the calculation of diluted earnings per share.
At March 31, 2018, 217,280 employee stock options and 53,073 restricted shares have been excluded from the calculation of diluted
earnings per share. At April 1, 2017, 459,500 employee stock options and 3,000 restricted shares have been excluded from the calculation
of diluted earnings per share. The inclusion of these employee stock options and restricted shares would be anti-dilutive.
Impairment of Long-Lived Assets
The Company assesses
the net realizable value of its long-lived assets and evaluates such assets for impairment whenever indicators of impairment are
present. For amortizable long-lived assets to be held and used, if indicators of impairment are present, management determines
whether the sum of the estimated undiscounted future cash flows is less than the carrying amount. The amount of asset impairment,
if any, is based on the excess of the carrying amount over its fair value, which is estimated based on projected discounted future
operating cash flows using a discount rate reflecting the Company’s average cost of funds. To date, no indicators of impairment
exist other than those resulting in the restructuring charges already recorded.
Long-lived assets to
be disposed of by sale or other means are reported at the lower of carrying amount or fair value, less costs to sell.
Foreign Currency Translation and Transactions
Assets and liabilities of the Company's foreign operations are translated into U.S. dollars using the
exchange rate in effect at the balance sheet date. Results of operations are translated using the average exchange rate prevailing
throughout the period. The effects of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S.
dollars are included in accumulated other comprehensive income (loss), while gains and losses resulting from foreign currency transactions
are included in other non-operating expense (income). Net income of the Company's foreign operations for fiscal 2019, 2018 and
2017 amounted to $7,180, $776 and $7,414, respectively. Total assets of the Company's foreign operations were $115,789 and $135,801
at March 30, 2019 and March 31, 2018, respectively.
Fair Value of Measurements
Fair value is the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date (exit price). Inputs used to measure fair value are within a hierarchy consisting of three levels. Level 1
inputs represent unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs represent unadjusted
quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets
or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3 inputs represent unobservable inputs for the asset or liability. Financial assets and liabilities are classified in their
entirety based on the lowest level of input that is significant to the fair value measurement.
The carrying amounts
reported in the balance sheet for cash and cash equivalents, short-term investments, accounts receivable, prepaids and other current
assets, and accounts payable and accruals, and other current liabilities approximate their fair value due to their short-term nature.
The carrying amounts of the Company's borrowings under the Revolver and Schaublin mortgage approximate
fair value, as these obligations have interest rates which vary in conjunction with current market conditions. The carrying value
of the mortgage on our Schaublin building approximates fair value as the rates since entering into the mortgage in fiscal 2013
have not significantly changed. Both borrowings have been classified as Level 2 in the valuation hierarchy.
Accumulated Other Comprehensive Income
(Loss)
The components of comprehensive
income (loss) that relate to the Company are net income, foreign currency translation adjustments and pension plan and postretirement
benefits, all of which are presented in the consolidated statements of stockholders’ equity and comprehensive income (loss).
The following summarizes
the activity within each component of accumulated other comprehensive income (loss), net of taxes:
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Currency
Translation
|
|
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Pension and
Postretirement
Liability
|
|
|
Total
|
|
Balance at March 31, 2018
|
|
$
|
2,213
|
|
|
$
|
(4,498
|
)
|
|
$
|
(2,285
|
)
|
Other comprehensive income before reclassifications
|
|
|
(5,514
|
)
|
|
|
(440
|
)
|
|
|
(5,954
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
—
|
|
|
|
772
|
|
|
|
772
|
|
Net current period other comprehensive income
|
|
|
(5,514
|
)
|
|
|
332
|
|
|
|
(5,182
|
)
|
Balance at March 30, 2019
|
|
$
|
(3,301
|
)
|
|
$
|
(4,166
|
)
|
|
$
|
(7,467
|
)
|
Share-Based Compensation
The Company recognizes
compensation cost relating to all share-based payment transactions in the financial statements based upon the grant-date fair value
of the instruments issued over the requisite service period. The fair value of each option grant was estimated on the date of grant
using the Black-Scholes pricing model.
Recent Accounting Pronouncements
Recent Accounting Standards Adopted
In May 2014, the Financial
Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09,
Revenue from Contracts with Customers
(Topic 606)
. The Company adopted this standard on April 1, 2018. This new guidance provides a five-step model to determine
when and how revenue is recognized, and requires an entity to recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. Our accounting policy as a result of adoption has been disclosed within our Summary of Significant Accounting Policies
of this Form 10-K. Refer to Note 3 – “Revenue from Contracts with Customers” for further details regarding required
disclosures.
In June 2018, the FASB
issued ASU No. 2018-07,
Compensation – Stock Compensation (Topic 718)
: Improvements to Nonemployee Share-Based Payment
Accounting, as part of its simplification initiative. This update will expand the scope of Topic 718 to include share-based payment
transactions for acquiring goods and services from nonemployees. This ASU also clarifies that Topic 718 does not apply to share-based
payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services
to customers as part of a contract accounted for under Topic 606. This update is effective for public companies for fiscal years
beginning after December 15, 2018, including interim periods within that year. Early adoption is permitted, but no earlier than
a company’s adoption of Topic 606. The Company has early adopted this ASU in the second quarter of fiscal 2019 and it did
not have a material impact on the Company’s consolidated financial statements.
In May 2017, the FASB
issued ASU No. 2017-09,
Compensation – Stock Compensation (Topic 718)
: Scope of Modification Accounting, in an effort
to reduce diversity in practice as it relates to applying modification accounting for changes to the terms and conditions of share-based
payment awards. This ASU was effective for public companies for financial statements issued for annual periods beginning after
December 15, 2017, including interim periods within those annual periods. Early adoption was permitted. The Company adopted this
ASU on April 1, 2018 and it did not have a material impact on the Company’s consolidated financial statements.
In March 2017, the
FASB issued ASU No. 2017-07,
Compensation – Retirement Benefits (Topic 715)
: Improving the Presentation of Net Periodic
Pension Cost and Net Periodic Postretirement Benefit Cost, in an effort to improve the presentation of these costs within the income
statement. Prior to this ASU, all components of both net periodic pension cost and net periodic postretirement cost were included
within the same line items as other compensation costs arising from services rendered by pertinent employees during the period
on the income statement. This ASU requires entities to include only the service cost component within those line items and all
other components are to be included within other non-operating expense. In addition, only the service cost component would be eligible
for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset). The
amendments in this ASU should be applied retrospectively for the presentation of the service cost component and the other components
of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after
the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement
benefit in assets. This ASU was effective for public companies for the financial statements issued for annual periods beginning
after December 15, 2017, including interim periods within those annual periods. A practical expedient allows the Company to use
the amount disclosed for net periodic benefit costs for the prior comparative periods as the estimation basis for applying the
retrospective presentation requirements. The Company retrospectively adopted the ASU on April 1, 2018 and utilized this practical
expedient. The adoption of this ASU resulted in the reclassification of $633 of net periodic benefit cost from compensation costs
($426 included within cost of sales and $207 within other, net) to other non-operating expense on the consolidated statement of
operations for the fiscal year ended March 31, 2018 and $893 of net periodic benefit cost from compensation costs ($615 included
within cost of sales and $278 within other, net) to other non-operating expense on the consolidated statement of operations for
the fiscal year ended April 1, 2017.
In October 2016, the
FASB issued ASU No. 2016-16,
Income Taxes (Topic 740)
: Intra-Entity Transfers of Assets Other Than Inventory, in an effort
to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Previous GAAP
prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold
to an outside party. This ASU established the requirement that an entity recognize the income tax consequences of an intra-entity
transfer of an asset other than inventory when the transfer occurs. This ASU was effective for public companies for the financial
statements issued for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Earlier
adoption was permitted as of the beginning of an interim or annual reporting period, with any adjustments reflected as of the beginning
of the fiscal year of adoption. The Company adopted this ASU on April 1, 2018 and it did not have a material impact on the Company’s
consolidated financial statements.
In August 2016, the
FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230)
: Classification of Certain Cash Receipts and Cash Payments,
which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU was
effective for public companies for the financial statements issued for annual periods beginning after December 15, 2017 and interim
periods within those annual periods. Earlier adoption was permitted as of the beginning of an interim or annual reporting period,
with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company adopted this ASU on April 1, 2018
and it did not have a material impact on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation – Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accountin
g. This ASU includes provisions intended to simplify various aspects
related to how share-based payments are accounted for and presented in the financial statements. The Company adopted this standard
on April 2, 2017. As a result of the adoption, the Company began recording the tax effects associated with stock-based compensation
through the income statement on a prospective basis which resulted in a tax benefit of $5,679 and $4,917 for the twelve months
ended March 30, 2019 and March 31, 2018, respectively. Prior to adoption, these amounts would have been recorded as an increase
to additional paid-in capital. This change may create volatility in the Company's effective tax rate. The adoption of this standard
also resulted in a cumulative effect change to opening retained earnings of $1,144 for previously unrecognized excess tax benefits.
In addition, the Company
will prospectively classify all tax-related cash flows resulting from share-based payments, including the excess tax benefits related
to the settlement of stock-based awards, as cash flows from operating activities in the statement of cash flows. Prior to the adoption
of this standard, these were shown as cash inflows from financing activities and cash outflows from operating activities.
The adoption of the
ASU also resulted in the Company removing the excess tax benefits from the assumed proceeds available to repurchase shares when
calculating diluted earnings per share on a prospective basis. The revised calculation increased the diluted weighted average common
shares outstanding by approximately 111 thousand shares in the period of adoption. The Company also made an accounting policy election
to continue to estimate forfeitures as it did prior to adoption.
Recent Accounting Standards Yet to Be
Adopted
In February 2018, the FASB issued ASU No. 2018-02,
Income Statement – Reporting Comprehensive
Income (Topic 220)
: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income which allows companies
to reclassify stranded tax effects resulting from the TCJA from accumulated other comprehensive income to retained earnings. These
stranded tax effects refer to the tax amounts included in accumulated other comprehensive income at the previous 35% U.S. corporate
statutory federal tax rate, for which the related deferred tax asset or liability was remeasured to the new 21% U.S. corporate
statutory federal tax rate in the period of the TCJA’s enactment. The new standard is effective for fiscal years beginning
after December 15, 2018, with early adoption permitted, and can be applied either in the period of adoption or retrospectively
to each period impacted by the TCJA. The Company is evaluating the effect of adopting this new accounting guidance, but does not
expect adoption will have a material impact on the Company’s financial position as the adjustment will be between accumulated
other comprehensive income and retained earnings, both of which are components of total stockholders’ equity.
In January 2017, the
FASB issued ASU No. 2017-04,
Intangibles—Goodwill and Other (Topic 350)
: Simplifying the Test for Goodwill Impairment.
The objective of this standard update is to simplify the subsequent measurement of goodwill, eliminating Step 2 from the goodwill
impairment test. Under this ASU, an entity should perform its annual goodwill impairment test by comparing the fair value of a
reporting unit with its carrying amount. An entity would recognize an impairment charge for the amount by which the carrying amount
exceeds the reporting unit’s fair value, assuming the loss recognized does not exceed the total amount of goodwill for the reporting
unit. The standard update is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The adoption
of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.
In September 2016,
the FASB issued ASU No. 2016-13, Financial Instruments –
Credit Losses (Topic 326)
, Measurement of Credit Losses on
Financial Instruments, which changes how entities will measure credit losses for most financial assets and certain other instruments
that are not measured at fair value through net income. The new guidance will replace the current incurred loss approach with an
expected loss model. The new expected credit loss impairment model will apply to most financial assets measured at amortized cost
and certain other instruments, including trade and other receivables, loans, held-to-maturity debt instruments, net investments
in leases, loan commitments and standby letters of credit. Upon initial recognition of the exposure, the expected credit loss model
requires entities to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected
credit losses should consider historical information, current information and reasonable and supportable forecasts, including estimates
of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating expected credit
losses. ASU 2016-13 does not prescribe a specific method to make the estimate, so its application will require significant judgment.
This ASU is effective for public companies in fiscal years beginning after December 15, 2019, including interim periods within
those fiscal years. The Company is currently evaluating the effect that the adoption of this ASU will have on the Company’s consolidated
financial statements.
In February 2016, the
FASB issued ASU No. 2016-02,
Leases (Topic 842)
. The core principle of this ASU is that an entity should recognize on its
balance sheet assets and liabilities arising from a lease. In accordance with that principle, ASU 2016-02 requires that a lessee
recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying
leased asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease
by a lessee will depend on the lease classification as a finance or operating lease. This new accounting guidance is effective
for public companies for fiscal years beginning after December 15, 2018 and early adoption is permitted. The Company has formed
an implementation team to assess its leases as defined under the new accounting standard and anticipates making certain changes
to existing processes, policies and systems during implementation. The Company expects to recognize right-of-use assets and lease
liabilities for operating lease commitments on the consolidated balance sheet but does not expect the amended guidance to have
a material impact on cash flows, results of operations or debt covenant compliance.
The Company has elected
the modified retrospective transition method which permits the application of the new lease standard at the adoption date and recognize
a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company has elected not
to apply the recognition requirements to short-term leases, and will recognize the lease payments in the income statement on a
straight-line basis over the lease term and variable payments in the period in which the obligation for those payments is incurred.
The Company has elected the following practical expedients (which must be elected as a package and applied consistently to all
leases): an entity need not reassess whether any expired or existing contracts are or contain leases; an entity need not reassess
the lease classification for any expired or existing leases; and an entity need not reassess initial direct costs for any existing
leases. The Company has also elected the practical expedient which permits the inclusion of lease and nonlease components as a
single component and account for it as a lease. This election must be made by asset class.
Other new pronouncements
issued but not effective until after March 30, 2019 are not expected to have a material impact on our financial position, results
of operations or liquidity.
3.
|
Revenue from Contracts with Customers
|
Adoption Method and Impact
The Company adopted
ASC Topic 606 using the modified retrospective method and applied the related provisions to all open contracts. The Company recognized
the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings.
The comparative information has not been restated and continues to be reported under the accounting standards in effect for those
periods. As a result of adoption, the Company recognized a $277 decrease to retained earnings at the beginning of the 2019 fiscal
year for the cumulative effect of adoption of this standard, representing the impact to prior results had the over-time revenue
recognition model been applied to service contracts. Contract assets of $1,323 and contract liabilities of $754 were recorded,
along with an $847 reduction to work-in-process inventory as a result of the ASC Topic 606 adoption using the modified retrospective
method.
In addition, as
a result of the accounting changes resulting from this new accounting standard, sales, operating income and net income for the
fiscal year ended March 30, 2019 increased by $1,278, $666 and $574, respectively. Basic and diluted net income per common share
each increased by $0.02 for the fiscal year ended March 30, 2019 as revenue from service contracts was accelerated into the period
as a result of the change to an over-time revenue recognition model. On the consolidated balance sheet, work-in-process inventory
was $1,260 lower at March 30, 2019 than it would have been under the previous accounting guidance. In addition, prepaids and other
current assets, accrued expenses and other current liabilities, and retained earnings increased by $1,895, $2,058 and $297, respectively.
The changes in other current assets and accrued expenses were directly related to the activity within the customer contract assets
and liabilities.
Disaggregation of Revenue
The Company operates
in four business segments with similar economic characteristics, including nature of the products and production processes, distribution
patterns and classes of customers. Revenue is disaggregated within these business segments by our two principal end markets: aerospace
and industrial. Comparative information of the Company’s overall revenues for the years ended March 30, 2019, March 31, 2018
and April 1, 2017 are as follows:
Principal
End Markets:
|
|
|
|
|
|
For
the Fiscal Year Ended
|
|
|
|
March
30, 2019
|
|
|
|
Aerospace
|
|
|
Industrial
|
|
|
Total
|
|
Plain
|
|
$
|
238,259
|
|
|
$
|
84,992
|
|
|
$
|
323,251
|
|
Roller
|
|
|
70,682
|
|
|
|
73,150
|
|
|
|
143,832
|
|
Ball
|
|
|
21,621
|
|
|
|
50,686
|
|
|
|
72,307
|
|
Engineered Products
|
|
|
100,571
|
|
|
|
62,555
|
|
|
|
163,126
|
|
|
|
$
|
431,133
|
|
|
$
|
271,383
|
|
|
$
|
702,516
|
|
|
|
For the Fiscal Year Ended
|
|
|
|
March 31, 2018
|
|
|
|
Aerospace
|
|
|
Industrial
|
|
|
Total
|
|
Plain
|
|
$
|
220,649
|
|
|
$
|
76,059
|
|
|
$
|
296,708
|
|
Roller
|
|
|
65,496
|
|
|
|
66,525
|
|
|
|
132,021
|
|
Ball
|
|
|
18,076
|
|
|
|
49,730
|
|
|
|
67,806
|
|
Engineered Products
|
|
|
114,490
|
|
|
|
63,924
|
|
|
|
178,414
|
|
|
|
$
|
418,711
|
|
|
$
|
256,238
|
|
|
$
|
674,949
|
|
|
|
For the Fiscal Year Ended
|
|
|
|
April 1, 2017
|
|
|
|
Aerospace
|
|
|
Industrial
|
|
|
Total
|
|
Plain
|
|
$
|
211,624
|
|
|
$
|
66,076
|
|
|
$
|
277,700
|
|
Roller
|
|
|
61,461
|
|
|
|
48,022
|
|
|
|
109,483
|
|
Ball
|
|
|
16,972
|
|
|
|
41,476
|
|
|
|
58,448
|
|
Engineered Products
|
|
|
113,787
|
|
|
|
55,970
|
|
|
|
169,757
|
|
|
|
$
|
403,844
|
|
|
$
|
211,544
|
|
|
$
|
615,388
|
|
In addition to disaggregating
revenue by segment and principal end markets, the Company believes information about the timing of transfer of goods or services,
type of customer and distinguishing service revenue from product sales is also relevant. Refer to Note 2 – “Summary
of Significant Accounting Policies” for further details.
Remaining Performance Obligations
Remaining performance
obligations represent the transaction price of orders meeting the definition of a contract in the new revenue standard for which
work has not been performed or has been partially performed and excludes unexercised contract options. The duration of the majority
of our contracts, as defined by ASC Topic 606, is less than one year. The Company has elected to apply the practical expedient,
which allows companies to exclude remaining performance obligations with an original expected duration of one year or less. Performance
obligations having a duration of more than one year are concentrated in contracts for certain products and services provided to
the U.S. government or its contractors. The aggregate amount of the transaction price allocated to remaining performance obligations
for such contracts with a duration of more than one year was approximately $219,298 at March 30, 2019. The Company expects to recognize
revenue on approximately 71% and 95% of the remaining performance obligations over the next 12 and 24 months, respectively, with
the remainder recognized thereafter.
Contract Balances
The timing of revenue
recognition, invoicing and cash collections affect accounts receivable, unbilled receivables (contract assets) and customer advances
and deposits (contract liabilities) on the consolidated balance sheets.
Contract Assets
(Unbilled Receivables)
- Pursuant to the over-time revenue recognition model, revenue may be recognized prior to the customer
being invoiced. An unbilled receivable is recorded to reflect revenue that is recognized when (1) the cost-to-cost method is applied
and (2) such revenue exceeds the amount invoiced to the customer.
Contract Liabilities
(Deferred Revenue)
- The Company may receive a customer advance or deposit, or have an unconditional right to receive a customer
advance, prior to revenue being recognized. Since the performance obligations related to such advances may not have been satisfied,
a contract liability is established. Advance payments are not considered a significant financing component as the timing of the
transfer of the related goods or services is at the discretion of the customer.
These assets and liabilities
are reported on the consolidated balance sheet on an individual contract basis at the end of each reporting period. As of March
30, 2019 and March 31, 2018, accounts receivable with customers, net, were $130,735 and $116,890, respectively. The tables below
represent a roll-forward of contract assets and contract liabilities for the twelve-month period ended March 30, 2019:
Contract Assets - Current
(1)
|
|
|
|
|
|
|
|
|
|
Balance at April 1, 2018
|
|
$
|
1,323
|
|
Additional revenue recognized in excess of billings
|
|
|
3,928
|
|
Less: amounts billed to customers
|
|
|
(3,356
|
)
|
Balance at March 30, 2019
|
|
$
|
1,895
|
|
(1) Included within prepaid expenses and other current assets on the consolidated balance sheet.
|
Contract Liabilities – Current
(2)
|
|
|
|
|
|
|
|
|
|
Balance at April 1, 2018
|
|
$
|
14,450
|
|
Payments received prior to revenue being recognized
|
|
|
14,773
|
|
Revenue recognized
|
|
|
(19,769
|
)
|
Reclassification to/from noncurrent
|
|
|
667
|
|
Balance at March 30, 2019
|
|
$
|
10,121
|
|
(2) Included within accrued expenses and other current liabilities on the consolidated balance sheet.
|
Contract Liabilities – Noncurrent
(3)
|
|
|
|
|
|
|
|
|
|
Balance at April 1, 2018
|
|
$
|
1,254
|
|
Reclassification to/from current
|
|
|
(667
|
)
|
Balance at March 30, 2019
|
|
$
|
587
|
|
(3) Included within other non-current liabilities on the consolidated balance sheet.
|
As of March 30, 2019,
the Company does not have any contract assets classified as noncurrent on the consolidated balance sheet.
4.
|
Allowance for Doubtful Accounts
|
The activity in the
allowance for doubtful accounts consists of the following:
Fiscal
Year Ended
|
|
|
Balance at
Beginning of
Year
|
|
|
Additions
|
|
|
Other*
|
|
|
Write-offs
|
|
|
Balance at
End of Year
|
|
March 30, 2019
|
|
|
$
|
1,326
|
|
|
$
|
203
|
|
|
$
|
(85
|
)
|
|
$
|
(14
|
)
|
|
$
|
1,430
|
|
March 31, 2018
|
|
|
|
1,213
|
|
|
|
125
|
|
|
|
73
|
|
|
|
(85
|
)
|
|
|
1,326
|
|
April 1, 2017
|
|
|
|
1,324
|
|
|
|
96
|
|
|
|
(157
|
)
|
|
|
(50
|
)
|
|
|
1,213
|
|
*Foreign currency,
disposition and acquisition transactions.
Inventories
are summarized below:
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
Raw materials
|
|
$
|
48,690
|
|
|
$
|
44,102
|
|
Work in process
|
|
|
90,820
|
|
|
|
77,890
|
|
Finished goods
|
|
|
195,491
|
|
|
|
184,132
|
|
|
|
$
|
335,001
|
|
|
$
|
306,124
|
|
6.
|
Property, Plant and Equipment
|
Property, plant and
equipment consist of the following:
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
Land
|
|
$
|
18,735
|
|
|
$
|
19,723
|
|
Buildings and improvements
|
|
|
86,477
|
|
|
|
86,237
|
|
Machinery and equipment
|
|
|
289,467
|
|
|
|
259,645
|
|
|
|
|
394,679
|
|
|
|
365,605
|
|
Less: accumulated depreciation and amortization
|
|
|
(186,784
|
)
|
|
|
(173,092
|
)
|
|
|
$
|
207,895
|
|
|
$
|
192,513
|
|
7.
|
Restructuring of Operations
|
Sale of Miami Division
On November 28, 2018,
the Company sold its Avborne Accessory Group, Inc. subsidiary (“Miami division”) for a sales price of $22,284, subject
to a final working capital adjustment. The Miami division, which is based in Miami, Florida, provides maintenance, repair and overhaul
services (“MRO”) for a wide variety of aircraft accessories. As a result of the transaction, the Company recorded an
after-tax loss of $12,754 associated with the restructuring in the third quarter of fiscal 2019 attributable to the Engineered
Products segment. The $12,754 loss was comprised of $22,284 of proceeds received less transaction costs of $1,690, charges associated
with goodwill of $6,691, intangible assets of $20,373 and other net assets of $10,332, partially offset by a $4,048 tax benefit.
The pre-tax loss of $16,802 was recognized within other, net within the consolidated statement of operations. Prior to the transaction,
the Franklin, IN division, which was previously included within Avborne Accessory Group, Inc., was transferred to a separate subsidiary
of the Company named Airtomic LLC. In the fourth quarter of fiscal 2019, the Company recognized income of $258 upon realization
of actual costs associated with the wind-down of the business.
Restructuring of Canadian Operations
In the second quarter
of fiscal 2018, the Company reached a decision to restructure its manufacturing operation in Montreal, Canada. After completing
its obligations, the Company closed its RBC Canada location and consolidated certain residual assets into other locations. As a
result, the Company recorded an after-tax charge of $5,577 associated with the restructuring in the second quarter of fiscal 2018
attributable to the Engineered Products segment. The $5,577 charge included a $1,337 impairment of fixed assets and a $5,157 impairment
of intangible assets offset by a $917 tax benefit. The impairment charges were recognized within other, net within the consolidated
statement of operations. The Company determined that the market approach was the most appropriate method to estimate the fair value
of the fixed assets using comparable sales data and actual quotes from potential buyers in the market place. The fixed assets were
comprised of land, a building, machinery and equipment. The Company assessed the fair value of the intangible assets in accordance
with ASC 360-10, which were comprised of customer relationships, product approvals, tradenames and trademarks. These fair value
measurements were classified as Level 3 in the valuation hierarchy. In the third and fourth quarters of fiscal 2018, the Company
incurred restructuring charges of $1,091 and $100, respectively, comprised primarily of employee termination costs and building
maintenance costs. These costs were recorded within other, net within the consolidated statement of operations and are all attributable
to the Engineered Products segment. The impact from restructuring in fiscal 2019 has been immaterial. The total cumulative impact
resulting from the restructuring was $6,743 in after-tax charges, all attributable to the Engineered Products segment.
8.
|
Goodwill and Intangible Assets
|
Goodwill
Goodwill balances,
by segment, consist of the following:
|
|
Roller
|
|
|
Plain
|
|
|
Ball
|
|
|
Engineered Products
|
|
|
Total
|
|
March 31, 2018
|
|
$
|
16,007
|
|
|
$
|
79,597
|
|
|
$
|
5,623
|
|
|
$
|
166,897
|
|
|
$
|
268,124
|
|
Disposition
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,691
|
)
|
|
|
(6,691
|
)
|
Translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
March 30, 2019
|
|
$
|
16,007
|
|
|
$
|
79,597
|
|
|
$
|
5,623
|
|
|
$
|
160,204
|
|
|
$
|
261,431
|
|
$6,691 of goodwill
was included in the net loss on the sale of the Miami division during the third quarter of fiscal 2019. Miami was previously included
within the Engineered Products (“EP”) Reporting Unit (“RU”). When a business within an RU is sold, the
Company is required to perform an interim goodwill impairment test on that RU which consists of two steps. First, the Company determines
the fair value of the RU and compares it to its carrying amount. Second, if the carrying amount of the RU exceeds its fair value,
an impairment loss is recognized for any excess of the carrying amount of the RU’s goodwill over the goodwill’s implied fair
value. The Company conducted this interim test over the EP RU as of the date of sale (November 28, 2018) using the same approach
used during our most recent annual test (the income approach, also known as the discounted cash flow method). The discount rate
utilized for the EP RU for our interim test was 11.0% and is indicative of the return an investor would expect to receive for investing
in such a business. The terminal growth rate used for our interim test was 2.5%. The Company has determined that, at that date,
no impairment of goodwill existed and fair value of the EP RU exceeded the carrying value in total by approximately 21.9%. The
Company performed the annual impairment testing during the fourth quarter of fiscal 2019 for all of the Company’s RUs. All
of the Company’s RUs passed the impairment assessment.
Intangible Assets
|
|
|
|
|
March 30, 2019
|
|
|
March 31, 2018
|
|
|
|
Weighted Average Useful Lives
|
|
|
Gross Carrying Amount
|
|
|
Accumulated
Amortization
|
|
|
Gross Carrying Amount
|
|
|
Accumulated
Amortization
|
|
Product approvals
|
|
|
24
|
|
|
$
|
50,878
|
|
|
$
|
10,481
|
|
|
$
|
50,878
|
|
|
$
|
8,351
|
|
Customer relationships and lists
|
|
|
24
|
|
|
|
96,458
|
|
|
|
19,149
|
|
|
|
106,583
|
|
|
|
16,499
|
|
Trade names
|
|
|
10
|
|
|
|
15,959
|
|
|
|
7,447
|
|
|
|
18,734
|
|
|
|
6,765
|
|
Distributor agreements
|
|
|
5
|
|
|
|
722
|
|
|
|
722
|
|
|
|
722
|
|
|
|
722
|
|
Patents and trademarks
|
|
|
16
|
|
|
|
10,534
|
|
|
|
5,540
|
|
|
|
9,657
|
|
|
|
4,810
|
|
Domain names
|
|
|
10
|
|
|
|
437
|
|
|
|
437
|
|
|
|
437
|
|
|
|
430
|
|
Other
|
|
|
3
|
|
|
|
2,473
|
|
|
|
2,325
|
|
|
|
1,433
|
|
|
|
1,303
|
|
|
|
|
|
|
|
|
177,461
|
|
|
|
46,101
|
|
|
|
188,444
|
|
|
|
38,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-amortizable repair station certifications
|
|
|
n/a
|
|
|
|
24,281
|
|
|
|
—
|
|
|
|
34,200
|
|
|
|
—
|
|
Total
|
|
|
22
|
|
|
$
|
201,742
|
|
|
$
|
46,101
|
|
|
$
|
222,644
|
|
|
$
|
38,880
|
|
$9,919 of net assets
associated with the repair station certifications, $8,674 of net assets associated with customer relationships, and $1,780 of net
assets associated with trade names were included in the net loss on the sale of the Miami division during the third quarter of
fiscal 2019.
Amortization expense
for definite-lived intangible assets during fiscal years 2019, 2018 and 2017 was $9,666, $9,344 and $9,272, respectively. Estimated
amortization expense for the five succeeding fiscal years and thereafter is as follows:
2020
|
|
|
$
|
8,050
|
|
2021
|
|
|
|
8,001
|
|
2022
|
|
|
|
7,882
|
|
2023
|
|
|
|
7,802
|
|
2024
|
|
|
|
7,670
|
|
2025 and thereafter
|
|
|
|
91,955
|
|
9.
|
Accrued Expenses and Other Current Liabilities
|
The significant components
of accrued expenses and other current liabilities are as follows:
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
Employee compensation and related benefits
|
|
$
|
14,485
|
|
|
$
|
14,240
|
|
Taxes
|
|
|
4,789
|
|
|
|
2,939
|
|
Deferred revenue
|
|
|
10,121
|
|
|
|
13,613
|
|
Workers compensation
|
|
|
2,685
|
|
|
|
2,086
|
|
Legal
|
|
|
1,184
|
|
|
|
1,228
|
|
Other
|
|
|
6,806
|
|
|
|
6,671
|
|
|
|
$
|
40,070
|
|
|
$
|
40,777
|
|
Credit Facility
In connection with the Sargent Aerospace & Defense acquisition on April 24, 2015, the Company entered
into a credit agreement (the “Credit Agreement”) and related Guarantee, Pledge Agreement and Security Agreement with
Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer,
and the other lenders party thereto and terminated the Company’s prior credit agreement with JP Morgan. The Credit Agreement
provided the Company with a $200,000 term loan (the “Term Loan”) and a $350,000 revolving credit facility and was to
expire on April 24, 2020.
On May 31, 2018, the Company paid off the remaining balance of the Term Loan and wrote off $987 in unamortized
debt issuance costs associated with the Term Loan which were recorded within other non-operating expense on the consolidated statements
of operations.
On January 31, 2019, the Company amended the Credit Agreement with Wells Fargo Bank, National Association,
as Administrative Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer, and the other lenders party thereto. The
Credit Agreement as so amended (the “Amended Credit Agreement”) now provides the Company with a $250,000 revolving
credit facility (the “Revolver”). The Revolver expires on January 31, 2024. Debt issuance costs associated with the
Amended Credit Agreement totaled $852 and will be amortized through January 31, 2024 along with the unamortized debt issuance costs
remaining from the Credit Agreement.
Amounts outstanding under the Revolver generally bear interest at (a) a base rate determined by reference
to the higher of (1) Wells Fargo’s prime lending rate, (2) the federal funds effective rate plus 1/2 of 1% and (3) the one-month
LIBOR rate plus 1%, or (b) LIBOR plus a specified margin, depending on the type of borrowing being made. The applicable margin
is based on the Company's consolidated ratio of total net debt to consolidated EBITDA at each measurement date. Currently, the
Company's margin is 0.00% for base rate loans and 0.75% for LIBOR loans.
The Amended Credit
Agreement requires the Company to comply with various covenants, including among other things, a financial covenant to maintain
a ratio of consolidated net debt to adjusted EBITDA not greater than 3.50 to 1. The Amended Credit Agreement allows the Company
to, among other things, make distributions to shareholders, repurchase its stock, incur other debt or liens, or acquire or dispose
of assets provided that the Company complies with certain requirements and limitations of the Amended Credit Agreement. As of March
30, 2019, the Company was in compliance with all such covenants.
The Company’s domestic subsidiaries have guaranteed the Company’s obligations under the Amended
Credit Agreement. The Company’s obligations under the Amended Credit Agreement and the domestic subsidiaries’ guarantee
are secured by a pledge of substantially all of the domestic assets of the Company and its domestic subsidiaries.
Approximately $3,990 of the Revolver is being utilized to provide letters of credit to secure the Company’s
obligations relating to certain insurance programs. As of March 30, 2019, $1,912 in unamortized debt issuance costs remain. The
Company has the ability to borrow up to an additional $206,760 under the Revolver as of March 30, 2019.
Other Notes Payable
On October 1, 2012, one of our foreign divisions, Schaublin, purchased the land and building, that it
occupied and had been leasing for CHF 14,067 (approximately $14,910 ). Schaublin obtained a 20-year fixed-rate mortgage of CHF
9,300 (approximately $9,857) at an interest rate of 2.9%. The balance of the purchase price of CHF 4,767 (approximately $5,053)
was paid from cash on hand. The balance on this mortgage as of March 30, 2019 was CHF 6,278, or $6,308.
The balances payable under all borrowing
facilities are as follows:
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
Revolver and term loan facilities
|
|
$
|
39,250
|
|
|
$
|
169,250
|
|
Debt issuance cost
|
|
|
(1,912
|
)
|
|
|
(2,968
|
)
|
Other
|
|
|
6,308
|
|
|
|
7,073
|
|
Total debt
|
|
|
43,646
|
|
|
|
173,355
|
|
Less: current portion
|
|
|
467
|
|
|
|
19,238
|
|
Long-term debt
|
|
$
|
43,179
|
|
|
$
|
154,117
|
|
The current portion of long-term debt as of both March 30, 2019 and March 31, 2018 includes the current
portion of the Schaublin mortgage and the current portion of the Revolver and Term Loan.
The Company’s required future annual principal payments for the next five years and thereafter are
$467 for fiscal 2020, $467 for fiscal 2021, $467 for fiscal 2022, $467 for fiscal 2023, $39,717 for fiscal 2024 and $3,973 thereafter.
11.
|
Other Non-Current Liabilities
|
The significant components
of other non-current liabilities consist of:
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
Other postretirement benefits
|
|
$
|
2,358
|
|
|
$
|
2,450
|
|
Non-current income tax liability
|
|
|
19,854
|
|
|
|
20,176
|
|
Deferred compensation
|
|
|
15,425
|
|
|
|
13,620
|
|
Other
|
|
|
994
|
|
|
|
884
|
|
|
|
$
|
38,631
|
|
|
$
|
37,130
|
|
At March 30, 2019,
the Company has one consolidated noncontributory defined benefit pension plan covering union employees in its Heim division plant
in Fairfield, Connecticut, its Bremen subsidiary plant in Plymouth, Indiana and former union employees of the Tyson subsidiary
in Glasgow, Kentucky and the Nice subsidiary in Kulpsville, Pennsylvania.
Plan assets are comprised primarily of equity
and fixed income investments, as follows:
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
Cash and cash equivalents
|
|
$
|
925
|
|
|
$
|
1,107
|
|
U.S. equity mutual funds
|
|
|
20,310
|
|
|
|
18,881
|
|
International equity mutual funds
|
|
|
1,876
|
|
|
|
1,985
|
|
Fixed income mutual funds
|
|
|
3,052
|
|
|
|
2,936
|
|
|
|
$
|
26,163
|
|
|
$
|
24,909
|
|
The fair value of the
above investments is determined using quoted market prices of identical instruments. Therefore, the valuation inputs within the
fair value hierarchy established by ASC 820 are classified as Level 1 of the valuation hierarchy.
The following tables set
forth the funded status of the Company’s defined benefit pension plan and the amount recognized in the balance sheet at March 30,
2019 and March 31, 2018:
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
24,570
|
|
|
$
|
25,049
|
|
Service cost
|
|
|
258
|
|
|
|
232
|
|
Interest cost
|
|
|
885
|
|
|
|
904
|
|
Actuarial gain
|
|
|
389
|
|
|
|
(38
|
)
|
Benefits paid
|
|
|
(1,595
|
)
|
|
|
(1,577
|
)
|
Benefit obligation at end of year
|
|
$
|
24,507
|
|
|
$
|
24,570
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
24,909
|
|
|
$
|
23,154
|
|
Actual return on plan assets
|
|
|
1,349
|
|
|
|
1,832
|
|
Employer contributions
|
|
|
1,500
|
|
|
|
1,500
|
|
Benefits paid
|
|
|
(1,595
|
)
|
|
|
(1,577
|
)
|
Fair value of plan assets at end of year
|
|
$
|
26,163
|
|
|
$
|
24,909
|
|
|
|
|
|
|
|
|
|
|
Overfunded status at end of year
|
|
$
|
1,656
|
|
|
$
|
339
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
$
|
1,656
|
|
|
$
|
339
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
37
|
|
|
$
|
71
|
|
Net actuarial loss
|
|
|
7,307
|
|
|
|
7,596
|
|
Accumulated other comprehensive loss
|
|
$
|
7,344
|
|
|
$
|
7,667
|
|
Amounts included in accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost in 2020:
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
35
|
|
Net actuarial loss
|
|
|
887
|
|
Total
|
|
$
|
922
|
|
Benefits under the
union plans are not a function of employees’ salaries; thus, the accumulated benefit obligation equals the projected benefit obligation.
The following table
sets forth net periodic benefit cost of the Company’s plan for the three fiscal years in the period ended March 30, 2019:
|
|
Fiscal Year Ended
|
|
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
|
April 1,
2017
|
|
Components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
258
|
|
|
$
|
232
|
|
|
$
|
251
|
|
Interest cost
|
|
|
885
|
|
|
|
904
|
|
|
|
889
|
|
Expected return on plan assets
|
|
|
(1,667
|
)
|
|
|
(1,610
|
)
|
|
|
(1,581
|
)
|
Amortization of prior service cost
|
|
|
35
|
|
|
|
35
|
|
|
|
60
|
|
Amortization of losses
|
|
|
995
|
|
|
|
1,207
|
|
|
|
1,394
|
|
Net periodic benefit cost
|
|
$
|
506
|
|
|
$
|
768
|
|
|
$
|
1,013
|
|
The assumptions used
in determining the net periodic benefit cost information are as follows:
|
|
FY 2019
|
|
|
FY 2018
|
|
|
FY 2017
|
|
Discount rate
|
|
|
3.70
|
%
|
|
|
3.70
|
%
|
|
|
3.40
|
%
|
Expected long-term rate of return on plan assets
|
|
|
6.75
|
%
|
|
|
7.00
|
%
|
|
|
7.00
|
%
|
The discount rate used
in determining the funded status as of March 30, 2019 and March 31, 2018 was 3.50% and 3.70%, respectively.
To determine the postretirement
net periodic benefit costs in fiscal 2019, the RP-2014 adjusted to 2006 blue collar mortality table projected to the measurement
date with Scale MP-2018 was used. To determine the postretirement net periodic benefit costs in fiscal 2018, the RP-2014 adjusted
to 2006 blue collar mortality table projected to the measurement date with Scale MP-2017 was used. To determine the postretirement
net periodic benefit costs in fiscal 2017, the RP-2014 adjusted to 2006 blue collar mortality table projected to the measurement
date with Scale MP-2016 was used.
In developing the overall
expected long-term return on plan assets assumption, a building block approach was used in which rates of return in excess of inflation
were considered separately for equity securities and debt securities. The excess returns were weighted by the representative target
allocation and added along with an appropriate rate of inflation to develop the overall expected long-term return on plan assets
assumption. The Company’s long-term target allocation of plan assets is 70% equity and 30% fixed income investments.
The Company’s investment
program objective is to achieve a rate of return on plan assets which will fund the plan liabilities and provide for required benefits
while avoiding undue exposure to risk to the plan and increases in funding requirements.
The following benefit
payments, which reflect future service as appropriate, are expected to be paid. The benefit payments are based on the same assumptions
used to measure the Company’s benefit obligation at the end of fiscal 2019:
2020
|
|
|
$
|
1,705
|
|
2021
|
|
|
|
1,722
|
|
2022
|
|
|
|
1,737
|
|
2023
|
|
|
|
1,743
|
|
2024
|
|
|
|
1,734
|
|
2025-2029
|
|
|
|
8,132
|
|
Although no contributions
are required for fiscal 2020, the Company expects to make cash contributions in the $750 to $1,500 range.
One of the Company’s foreign operations, Schaublin, sponsors a pension plan for its approximately
146 employees in conformance with Swiss pension law. The plan is funded with a reputable (S&P rating A+) Swiss insurer. Through
the insurance contract, the Company has effectively transferred all investment and mortality risk to the insurance company, which
guarantees the federally mandated annual rate of return and the conversion rate at retirement. As a result, the plan has no unfunded
liability; the interest cost is exactly offset by actual return. Thus, the net periodic cost is equal to the amount of annual premium
paid by the Company. For fiscal years 2019, 2018 and 2017, the Company made contribution and premium payments equal to $887, $889
and $875, respectively.
The Company also has
defined contribution plans under Section 401(k) of the Internal Revenue Code for all of its employees not covered by a collective
bargaining agreement. Employer contributions under this plan, ranging from 10%-100% of eligible amounts contributed by employees,
amounted to $1,889, $1,714 and $1,585 in fiscal 2019, 2018 and 2017, respectively.
Effective September 1,
1996, the Company adopted a non-qualified Supplemental Executive Retirement Plan (“SERP”) for a select group of highly
compensated management employees designated by the Board of the Company. The SERP allowed eligible employees to elect to defer,
until termination of their employment, the receipt of up to 25% of their salary. In August 2008, the plan was modified, allowing
eligible employees to elect to defer up to 75% of their current salary and up to 100% of bonus compensation. Employer contributions
under this plan equal the lesser of 25% of the deferrals, or 1.75% of the employee’s annual salary, which vest in full after
one year of service following the effective date of the SERP. Employer contributions under this plan amounted to $312, $271 and
$256 in fiscal 2019, 2018 and 2017, respectively.
|
13.
|
Postretirement Health Care and Life Insurance Benefits
|
The Company, for the
benefit of employees at its Heim, West Trenton, Bremen and PIC facilities and former union employees of its Tyson and Nice subsidiaries,
sponsors contributory defined benefit health care plans that provide postretirement medical and life insurance benefits to union
employees who have attained certain age and/or service requirements while employed by the Company. The plans are unfunded and costs
are paid as incurred. Postretirement benefit obligations are included in “Accrued expenses and other current liabilities”
and “Other non-current liabilities” in the consolidated balance sheet.
The following table
set forth the funded status of the Company’s postretirement benefit plans, the amount recognized in the balance sheet at
March 30, 2019 and March 31, 2018:
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
2,671
|
|
|
$
|
2,963
|
|
Service cost
|
|
|
47
|
|
|
|
33
|
|
Interest cost
|
|
|
91
|
|
|
|
98
|
|
Actuarial gain
|
|
|
(131
|
)
|
|
|
(297
|
)
|
Benefits paid
|
|
|
(131
|
)
|
|
|
(126
|
)
|
Benefit obligation at end of year
|
|
$
|
2,547
|
|
|
$
|
2,671
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
—
|
|
|
$
|
—
|
|
Company contributions
|
|
|
131
|
|
|
|
126
|
|
Benefits paid
|
|
|
(131
|
)
|
|
|
(126
|
)
|
Fair value of plan assets at end of year
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Underfunded status at end of year
|
|
$
|
(2,547
|
)
|
|
$
|
(2,671
|
)
|
Amounts recognized in the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
Current liability
|
|
$
|
(189
|
)
|
|
$
|
(221
|
)
|
Non-current liability
|
|
|
(2,358
|
)
|
|
|
(2,450
|
)
|
Net liability recognized
|
|
$
|
(2,547
|
)
|
|
$
|
(2,671
|
)
|
Amounts recognized in accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
12
|
|
|
$
|
15
|
|
Net actuarial loss
|
|
|
(191
|
)
|
|
|
(85
|
)
|
Accumulated other comprehensive loss
|
|
$
|
(179
|
)
|
|
$
|
(70
|
)
|
Amounts included in accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost in 2020:
|
|
|
|
Prior service cost
|
|
$
|
3
|
|
Net actuarial loss
|
|
|
(20
|
)
|
Total
|
|
$
|
(17
|
)
|
|
|
Fiscal Year Ended
|
|
Components of net periodic benefit cost:
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
|
April 1,
2017
|
|
Service cost
|
|
$
|
47
|
|
|
$
|
33
|
|
|
$
|
41
|
|
Interest cost
|
|
|
91
|
|
|
|
98
|
|
|
|
102
|
|
Prior service cost amortization
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
Amount of loss recognized
|
|
|
(25
|
)
|
|
|
(4
|
)
|
|
|
26
|
|
Net periodic benefit cost
|
|
$
|
116
|
|
|
$
|
130
|
|
|
$
|
172
|
|
The Company measures
its plans as of the last day of the fiscal year.
The plans contractually limit the benefit to be provided for certain groups of current and future retirees.
As a result, there is no health care trend associated with these groups. The discount rate used in determining the accumulated
postretirement benefit obligation was 3.50% at March 30, 2019 and 3.70% at March 31, 2018. The discount rate used in determining
the net periodic benefit cost was 3.70% for fiscal 2019, 3.70% for fiscal 2018, and 3.40% for fiscal 2017. To determine the postretirement
net periodic benefit costs in fiscal 2019, the RP-2014 adjusted to 2006 blue collar mortality table projected to the measurement
date with Scale MP-2018 was used. To determine the postretirement net periodic benefit costs in fiscal 2018, the RP-2014 adjusted
to 2006 blue collar mortality table projected to the measurement date with Scale MP-2017 was used. To determine the postretirement
net periodic benefit costs in fiscal 2017, the RP-2014 adjusted to 2006 blue collar mortality table projected to the measurement
date with Scale MP-2016 was used.
The following benefit
payments, which reflect future service as appropriate, are expected to be paid. The benefit payments are based on the same assumptions
used to measure the Company’s benefit obligation at the end of fiscal 2019:
2020
|
|
|
$
|
189
|
|
2021
|
|
|
|
185
|
|
2022
|
|
|
|
185
|
|
2023
|
|
|
|
193
|
|
2024
|
|
|
|
184
|
|
2025-2029
|
|
|
|
937
|
|
Income before income taxes for the Company's domestic and foreign operations is as follows:
|
|
Fiscal Year Ended
|
|
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
|
April 1,
2017
|
|
Domestic
|
|
$
|
115,747
|
|
|
$
|
116,513
|
|
|
$
|
94,629
|
|
Foreign
|
|
|
10,343
|
|
|
|
3,338
|
|
|
|
10,255
|
|
Total income before income taxes
|
|
$
|
126,090
|
|
|
$
|
119,851
|
|
|
$
|
104,884
|
|
The provision for income taxes consists
of the following:
|
|
Fiscal Year Ended
|
|
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
|
April 1,
2017
|
|
Current tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
18,200
|
|
|
$
|
28,555
|
|
|
$
|
21,903
|
|
State
|
|
|
2,908
|
|
|
|
1,313
|
|
|
|
887
|
|
Foreign
|
|
|
4,693
|
|
|
|
3,544
|
|
|
|
3,148
|
|
|
|
|
25,801
|
|
|
|
33,412
|
|
|
|
25,938
|
|
Deferred tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(4,111
|
)
|
|
|
(273
|
)
|
|
|
8,299
|
|
State
|
|
|
(756
|
)
|
|
|
457
|
|
|
|
245
|
|
Foreign
|
|
|
(37
|
)
|
|
|
(886
|
)
|
|
|
(221
|
)
|
|
|
|
(4,904
|
)
|
|
|
(702
|
)
|
|
|
8,323
|
|
Total income taxes
|
|
$
|
20,897
|
|
|
$
|
32,710
|
|
|
$
|
34,261
|
|
On December 22, 2017, the United States enacted significant changes to the U.S. tax law following the
passage and signing of the TCJA. The legislation significantly changes U.S. tax law by, among other things, lowering corporate
income tax rates, implementing a territorial tax system and imposing a one-time repatriation tax on undistributed foreign earnings.
The Act permanently reduces the U.S. corporate income tax rate from 35% to 21% effective for tax years beginning after December
31, 2017. The primary impacts of the TCJA reflected in the consolidated financial statements relate to the remeasurement of deferred
tax assets and liabilities resulting from the change in the corporate rate and a one-time mandatory transition tax on accumulated
earnings of foreign operations. The SEC provided guidance that allows the Company to record provisional amounts if the accounting
assessment is incomplete for impacts of the Act, with the requirement that the accounting be finalized in a period not to exceed
one year form the date of enactment. As of December 22, 2018 the Company has completed the accounting for the tax effects of the
Act and there have been no material changes to previously recorded amounts.
No additional income tax provision has been made on any remaining undistributed foreign earnings not subject
to the one-time net charge related to the taxation of unremitted foreign earnings or any additional outside basis difference as
these amounts continue to be indefinitely reinvested in foreign operations.
One of the international
tax law changes provided for with TCJA relates to the taxation of a corporation’s global intangible low-taxed income (“GILTI”)
for tax years beginning after December 31, 2017. The Company has evaluated this provision of TCJA and the application of ASC 740,
and does not believe that GILTI will have a significant impact.
An additional tax law change provided under TCJA introduced new rules for the treatment of certain foreign
income, including FDII for tax years beginning after December 31, 2017. The Company has evaluated this provision of TCJA and believes
that FDII results in a favorable impact on the application of ASC 740.
In addition to the impact of a full fiscal year with a lower U.S. federal statutory tax rate, the Company
recorded a net tax benefit of $1,651 in fiscal 2019 resulting from the Tax Reform Act.
An analysis of the
difference between the provision for income taxes and the amount computed by applying the U.S. statutory income tax rate to pre-tax
income follows:
|
|
Fiscal Year Ended
|
|
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
|
April 1,
2017
|
|
Income taxes using U.S. federal statutory rate
|
|
$
|
26,479
|
|
|
$
|
37,825
|
|
|
$
|
36,710
|
|
State income taxes, net of federal benefit
|
|
|
1,714
|
|
|
|
1,221
|
|
|
|
676
|
|
Domestic production activities deduction
|
|
|
—
|
|
|
|
(1,374
|
)
|
|
|
(1,803
|
)
|
Revaluation of deferred tax liabilities due to federal rate change
|
|
|
282
|
|
|
|
(9,318
|
)
|
|
|
—
|
|
Stock-based compensation
|
|
|
(5,155
|
)
|
|
|
(4,905
|
)
|
|
|
—
|
|
Foreign rate differential
|
|
|
2,484
|
|
|
|
1,604
|
|
|
|
(662
|
)
|
Transition tax
|
|
|
(161
|
)
|
|
|
9,166
|
|
|
|
—
|
|
Research and development credits
|
|
|
(1,765
|
)
|
|
|
(1,293
|
)
|
|
|
(1,163
|
)
|
Foreign derived intangible income (FDII)
|
|
|
(1,772
|
)
|
|
|
—
|
|
|
|
—
|
|
U.S. unrecognized tax positions
|
|
|
(951
|
)
|
|
|
452
|
|
|
|
(290
|
)
|
Other - net
|
|
|
(258
|
)
|
|
|
(668
|
)
|
|
|
793
|
|
|
|
$
|
20,897
|
|
|
$
|
32,710
|
|
|
$
|
34,261
|
|
Net deferred tax assets (liabilities) are
comprised of the following:
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Postretirement benefits
|
|
$
|
560
|
|
|
$
|
577
|
|
Employee compensation accruals
|
|
|
4,034
|
|
|
|
1,620
|
|
Inventory
|
|
|
9,298
|
|
|
|
7,688
|
|
Stock compensation
|
|
|
4,734
|
|
|
|
4,917
|
|
Tax loss and credit carryforwards
|
|
|
9,863
|
|
|
|
4,952
|
|
State tax
|
|
|
1,270
|
|
|
|
1,134
|
|
Other
|
|
|
187
|
|
|
|
77
|
|
Total gross deferred tax assets
|
|
|
29,946
|
|
|
|
20,965
|
|
Valuation allowance
|
|
|
(3,643
|
)
|
|
|
(2,318
|
)
|
Total deferred tax assets
|
|
$
|
26,303
|
|
|
$
|
18,647
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
Property, plant and equipment
|
|
$
|
(16,312
|
)
|
|
$
|
(13,648
|
)
|
Pension
|
|
|
(388
|
)
|
|
|
(78
|
)
|
Intangible assets
|
|
|
(16,465
|
)
|
|
|
(16,670
|
)
|
Total deferred tax liabilities
|
|
$
|
(33,165
|
)
|
|
$
|
(30,396
|
)
|
|
|
|
|
|
|
|
|
|
Total net deferred liabilities
|
|
$
|
(6,862
|
)
|
|
$
|
(11,749
|
)
|
The Company evaluates
deferred tax assets to ensure that the estimated future taxable income will be sufficient in character (i.e. capital versus ordinary
income treatment), amount and timing to result in their recovery. After considering the positive and negative evidence, a valuation
allowance has been recorded on foreign tax credits and on certain state credits and state net operating losses as it is more likely
than not (i.e. greater than a 50% likelihood) that these items will not be utilized. For the Company’s fiscal year ended
March 30, 2019 the valuation allowance increased by $1,325 which pertained to an increase of U.S. federal and state credits. For
the Company’s fiscal year ended March 31, 2018 the valuation allowance increased by $1,400 which pertained to an increase
of state credits. These valuation allowances are required because management has determined, based on financial projections and
available tax strategies, that it is unlikely the net operating losses and credits will be utilized before they expire. If events
or circumstances change, valuation allowances are adjusted at that time resulting in an income tax benefit or charge.
At March 30, 2019,
the Company has state net operating losses in different jurisdictions at varying amounts up to $7,332, which expire at various
dates through 2038. At March 30, 2019, the Company has U.S. federal and state credits in different jurisdictions at varying amounts
up to $5,668 which will expire at various dates through 2039. At March 30, 2019, the Company has foreign credits in different jurisdictions
at varying amounts up to $936 which will expire at various dates through 2038.
The TCJA required a
mandatory deemed repatriation of certain undistributed earnings of the Company’s foreign operations as of December 31,
2017. If the earnings were distributed in the form of cash dividends, the Company would not be subject to additional U.S. income
taxes but could be subject to foreign income and withholding taxes. Under accounting standards (ASC 740) a deferred tax liability
is not recorded for the excess of the tax basis over the financial reporting (book) basis of an investment in a foreign subsidiary
if the indefinite reinvestment criteria is met. A provision has not been made for additional U.S. and foreign taxes at
March 30, 2019 on approximately $11,708 of undistributed earnings of foreign operations because the Company intends to reinvest
these funds indefinitely to support foreign growth opportunities. It is not practicable to estimate the unrecognized deferred tax
liability on these undistributed earnings. These earnings could become subject to additional tax under certain circumstances including,
but not limited to, loans to the Company, or upon sale or pledging of the subsidiary’s stock.
Uncertain Tax Positions
Unrecognized income tax benefits represent
income tax positions taken on income tax returns but not yet recognized in the consolidated financial statements. If recognized,
substantially all of the unrecognized tax benefits for the Company’s fiscal years ended March 30, 2019 and March 31, 2018
would affect the effective income tax rate.
A reconciliation of the beginning and ending
amount of unrecognized tax benefits is as follows:
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
|
April 1,
2017
|
|
Balance, beginning of year
|
|
$
|
11,935
|
|
|
$
|
13,775
|
|
|
$
|
14,297
|
|
Gross (decreases) increases – tax positions taken during a prior period
|
|
|
624
|
|
|
|
(2,475
|
)
|
|
|
(488
|
)
|
Gross increases – tax positions taken during the current period
|
|
|
2,697
|
|
|
|
1,146
|
|
|
|
1,280
|
|
Reductions due to settlement with taxing authorities
|
|
|
—
|
|
|
|
—
|
|
|
|
(223
|
)
|
Reductions due to lapse of the applicable statute of limitations
|
|
|
(1,777
|
)
|
|
|
(511
|
)
|
|
|
(1,091
|
)
|
Balance, end of year
|
|
$
|
13,479
|
|
|
$
|
11,935
|
|
|
$
|
13,775
|
|
The Company recognizes the interest and penalties accrued related to unrecognized tax benefits in income
tax expense. The Company recognized expense of $45 and $284 and a benefit of $36 related to interest and penalties on its statement
of operations for the fiscal years ended March 30, 2019, March 31, 2018 and April 1, 2017, respectively. The Company has approximately
$1,193 and $1,148 of accrued interest and penalties at March 30, 2019 and March 31, 2018, respectively.
The Company believes
it is reasonably possible that some of its unrecognized tax positions may be effectively settled by the end of the Company’s
fiscal year ending March 28, 2020 due to the closing of audits and the statute of limitations expiring in varying jurisdictions.
The decrease, pertaining primarily to federal and state credits and state tax, is estimated to be $1,197.
The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign
jurisdictions. With few exceptions, the Company is no longer subject to state or foreign income tax examinations by tax authorities
for years ending before April 2, 2005. The Company is no longer subject to U.S. federal tax examination by the Internal Revenue
Service for years ending before March 28, 2016.
15. Stockholders’
Equity
Long-Term Equity Incentive Plans
2005 Long-Term Incentive Plan
The 2005 Long-Term
Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock and performance awards. Directors,
officers and other employees and persons who engage in services for the Company are eligible for grants under the Plan. The purpose
of the Plan is to provide these individuals with incentives to maximize stockholder value and otherwise contribute to the Company’s
success and to enable the Company to attract, retain and reward the best available persons for positions of responsibility.
1,139,170 shares of common stock were authorized for issuance under the Plan, subject to adjustment in
the event of a reorganization, stock split, merger or similar change in the Company’s corporate structure or in the outstanding
shares of common stock. An amendment to increase the number of shares available for issuance under the 2005 Long-Term Incentive
Plan from 1,139,170 to 1,639,170 was approved by shareholder vote in September 2006. A further amendment to increase the number
of shares available for issuance under the 2005 Long-Term Incentive Plan from 1,639,170 to 2,239,170 was approved by shareholder
vote in September 2007. A further amendment to increase the number of shares available for issuance under the 2005 Long-Term Incentive
Plan from 2,239,170 to 2,939,170 was approved by shareholder vote in September, 2010. The 2005 Stock Option Plan has been terminated
and no additional stock options or restricted stock will be granted pursuant to the Plan. The Company’s Board also has the
authority to administer the Plan and to take all actions that the Compensation Committee is otherwise authorized to take under
the Plan. The terms and conditions of each award made under the Plan, including vesting requirements, is set forth consistent with
the Plan in a written agreement with the grantee.
2013 Long-Term Incentive Plan
The 2013 Long-Term
Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock and performance awards. The purpose
of the Plan is to provide our directors, officers and other employees and persons who engage in services for us with incentives
to maximize stockholder value and otherwise contribute to our success and to enable us to attract, retain and reward the best available
persons for positions of responsibility.
1,500,000 shares of
common stock were authorized for issuance under the Plan, subject to adjustment in the event of a reorganization, stock split,
merger or similar change in the Company’s corporate structure or in the outstanding shares of common stock. The Company may
grant shares of restricted stock to its employees and directors in the future under the Plan. The Company’s Compensation
Committee will administer the Plan. The Company’s Board also has the authority to administer the Plan and to take all actions
that the Compensation Committee is otherwise authorized to take under the Plan. The terms and conditions of each award made under
the Plan, including vesting requirements, is set forth consistent with the Plan in a written agreement with the grantee.
2017 Long-Term Incentive Plan
The 2017 Long-Term
Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock and performance awards. Directors,
officers and other employees and persons who engage in services for the Company are eligible for grants under the Plan. The purpose
of the Plan is to provide these individuals with incentives to maximize stockholder value and otherwise contribute to the Company’s
success and to enable the Company to attract, retain and reward the best available persons for positions of responsibility.
1,500,000 shares of
common stock were authorized for issuance under the Plan, subject to adjustment in the event of a reorganization, stock split,
merger or similar change in the Company’s corporate structure or in the outstanding shares of common stock. The Company may
grant shares of restricted stock to its employees and directors in the future under the Plan. The Company’s Compensation
Committee will administer the Plan. The Company’s Board also has the authority to administer the Plan and to take all actions
that the Compensation Committee is otherwise authorized to take under the Plan. The terms and conditions of each award made under
the Plan, including vesting requirements, is set forth consistent with the Plan in a written agreement with the grantee.
Stock Options.
Under the 2013 and 2017 Long-Term Incentive Plans, the Compensation Committee or the Board may approve
the award of grants of incentive stock options and other non-qualified stock options. The Compensation Committee also has the authority
to approve the grant of options that will become fully vested and exercisable automatically upon a change in control. The Compensation
Committee may not, however, approve an award to any one person in any calendar year for options to purchase common stock equal
to more than 10% of the total number of shares authorized under the Plan, and it may not approve an award of incentive options
first exercisable in any calendar year whose underlying shares have a fair market value greater than $100 determined at the time
of grant. The Compensation Committee will approve the exercise price and term of any option in its discretion; however, the exercise
price may not be less than 100% of the fair market value of a share of common stock on the date of grant. Under the 2005 Long-Term
Incentive Plan, any incentive stock option must be exercised within 10 years of the date of grant. Under the 2013 Long-Term
Incentive Plan, any incentive stock option must be exercised within 7 years of the date of grant. Under the 2017 Long-Term Incentive
Plan, any incentive stock option must be exercised within 7 years of the date of grant. Under all three Plans, the exercise price
of an incentive option awarded to a person who owns stock constituting more than 10% of the Company’s voting power may not
be less than 110% of such fair market value on such date and the option must be exercised within five years of the date of grant.
As of March 30, 2019, there were outstanding options to purchase 30,200 shares of common stock granted under the 2005 Long-Term
Incentive Plan, all of which were exercisable. There were 515,100 outstanding options to purchase shares of common stock granted
under the 2013 Long-Term Incentive Plan, 107,562 of which were exercisable. There were 197,840 outstanding options to purchase
shares of common stock granted under the 2017 Long-Term Incentive Plan, none of which were exercisable.
Restricted Stock.
Under the 2013 and 2017 Long-Term Incentive Plans, the Compensation Committee may approve the award of restricted stock subject
to the conditions and restrictions, and for the duration that it determines in its discretion. Under the 2017 Long-Term Incentive
Plan, the number of shares that may be used for restricted stock or restricted unit grants under the Plan may not exceed fifty
percent (50%) of the total authorized number of Shares pursuant to the Plan. As of March 30, 2019, there were 271,876 and 46,005
shares of restricted stock outstanding under the 2013 and 2017 Long-Term Incentive Plans, respectively. There were no shares of
restricted stock outstanding under the 2005 Long-Term Incentive Plan as of March 30, 2019.
Stock Appreciation
Rights.
The Compensation Committee may approve the grant of stock appreciation rights, or SARs, subject to the terms and conditions
contained in the Plan. Under the 2013 and 2017 Long-Term Incentive Plans, the exercise price of a SAR must equal the fair
market value of a share of the Company’s common stock on the date the SAR was granted. Upon exercise of a SAR, the grantee
will receive an amount in shares of our common stock equal to the difference between the fair market value of a share of common
stock on the date of exercise and the exercise price of the SAR, multiplied by the number of shares as to which the SAR is exercised.
There were no SARs issued or outstanding under the 2005, 2013 or 2017 Long-Term Incentive Plans as of March 30, 2019.
Performance Awards.
The Compensation Committee may approve the grant of performance awards contingent upon achievement by the grantee or by the Company,
of set goals and objectives regarding specified performance criteria, over a specified performance cycle. Awards may include specific
dollar-value target awards, performance units, the value of which is established at the time of grant, and/or performance shares,
the value of which is equal to the fair market value of a share of common stock on the date of grant. The value of a performance
award may be fixed or fluctuate on the basis of specified performance criteria. A performance award may be paid out in cash and/or
shares of common stock or other securities. There were no performance awards issued or outstanding under the 2005, 2013 or 2017
Long-Term Incentive Plans as of March 30, 2019.
Amendment and Termination
of the Plan.
The Board may amend or terminate the 2013 and 2017 Long-Term Incentive Plans at its discretion, except that
no amendment will become effective without prior approval of the Company’s stockholders if such approval is necessary for
continued compliance with the performance-based compensation exception of Section 162(m) of the Internal Revenue Code or any
stock exchange listing requirements. The 2005 Long-Term Incentive Plan terminated on the tenth anniversary of its adoption. Subject
to the provisions of an Award Agreement, which may be more restrictive, no termination of the Plan shall materially and adversely
affect any of the rights or obligations of any person, without his or her written consent, under any grant of options or other
incentives theretofore granted under the Plan.
A summary of the status
of the Company’s stock options outstanding as of March 30, 2019 and changes during the year then ended is presented below. All
cashless exercises of options and warrants are handled through an independent broker.
|
|
|
Number Of
Common Stock
Options
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted
Average
Contractual Life (Years)
|
|
|
Intrinsic Value
|
|
Outstanding, March 31, 2018
|
|
|
|
937,417
|
|
|
$
|
76.03
|
|
|
|
5.2
|
|
|
$
|
45,151
|
|
Awarded
|
|
|
|
201,315
|
|
|
|
133.21
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
(352,552
|
)
|
|
|
66.01
|
|
|
|
|
|
|
|
|
|
Forfeitures
|
|
|
|
(43,040
|
)
|
|
|
84.07
|
|
|
|
|
|
|
|
|
|
Outstanding, March 30, 2019
|
|
|
|
743,140
|
|
|
$
|
95.82
|
|
|
|
5.3
|
|
|
$
|
23,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, March 30, 2019
|
|
|
|
137,762
|
|
|
$
|
71.07
|
|
|
|
3.8
|
|
|
$
|
7,728
|
|
The fair value for
the Company’s options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average
assumptions, which are updated to reflect current expectations of the dividend yield, expected life, risk-free interest rate and
using historical volatility to project expected volatility:
|
|
Fiscal Year Ended
|
|
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
|
April 1,
2017
|
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Expected weighted-average life (yrs.)
|
|
|
5.0
|
|
|
|
5.0
|
|
|
|
5.0
|
|
Risk-free interest rate
|
|
|
2.77
|
%
|
|
|
2.02
|
%
|
|
|
1.17
|
%
|
Expected volatility
|
|
|
25.16
|
%
|
|
|
24.17
|
%
|
|
|
28.45
|
%
|
The weighted average
fair value per share of options granted was $37.02 in fiscal 2019, $26.73 in fiscal 2018, and $20.58 in fiscal 2017.
The Company recorded
$3,725 (net of taxes of $1,119) in compensation in fiscal 2019 related to option awards. As of March 30, 2019, there was $13,597
of unrecognized compensation costs related to options which is expected to be recognized over a weighted average period of 3.5
years. The total fair value of options that vested in fiscal 2019, 2018 and 2017 was $28,006, $27,113 and $19,899, respectively.
The total intrinsic value of options exercised in fiscal 2019, 2018 and 2017 was $26,060, $16,002 and $21,188, respectively.
Of the total awards outstanding at March 30, 2019, 734,814 are either fully vested or are expected to
vest. These shares have a weighted average exercise price of $95.82, an intrinsic value of $23,040 and a weighted average contractual
term of 5.3 years.
A summary of the status
of the Company’s restricted stock outstanding as of March 30, 2019 and the changes during the year then ended is presented
below.
|
|
Number Of
Restricted Stock
Shares
|
|
|
Weighted-Average
Grant Date Fair Value
|
|
Non-vested, March 31, 2018
|
|
|
304,978
|
|
|
$
|
87.75
|
|
Granted
|
|
|
144,020
|
|
|
|
133.05
|
|
Vested
|
|
|
(118,047
|
)
|
|
|
82.13
|
|
Forfeitures
|
|
|
(13,070
|
)
|
|
|
95.66
|
|
Non-vested, March 30, 2019
|
|
|
317,881
|
|
|
$
|
110.03
|
|
The Company recorded
$8,645 (net of taxes of $2,598) in compensation in fiscal 2019 related to restricted stock awards. These awards were valued at
the fair market value of the Company’s common stock on the date of issuance and are being amortized as expense over the applicable
vesting period. Unrecognized expense for restricted stock was $27,652 at March 30, 2019. This cost is expected to be recognized
over a weighted average period of approximately 3.0 years.
16.
Commitments
and Contingencies
The Company leases facilities under non-cancelable operating leases, which expire on various dates through
January 2029, with lease expense aggregating $5,384, $5,440, and $5,548 in fiscal 2019, 2018 and 2017, respectively.
The Company also has
non-cancelable operating leases for transportation, computer and office equipment, which expire at various dates. Lease expense
for fiscal 2019, 2018 and 2017 aggregated $1,788, $1,721 and $1,656, respectively.
Certain of the above
leases are renewable while none contain material contingent rent or concession clauses.
The aggregate future minimum lease payments
under operating leases are as follows:
2020
|
|
$
|
5,317
|
|
2021
|
|
|
4,280
|
|
2022
|
|
|
2,885
|
|
2023
|
|
|
1,863
|
|
2024
|
|
|
1,031
|
|
2025 and thereafter
|
|
|
2,593
|
|
As of March 30, 2019,
approximately 7.7% of the Company’s hourly employees in the U.S. and abroad were represented by labor unions.
The Company enters
into government contracts and subcontracts that are subject to audit by the government. In the opinion of the Company’s management,
the results of such audits, if any, are not expected to have a material impact on the cash flows, financial condition or results
of operations of the Company.
For fiscal 2019, 2018
and 2017, there were no audits by the government, the results of which, in the opinion of the Company’s management, had a
material impact on the cash flows, financial condition or results of operations of the Company.
The Company is subject
to federal, state and local environmental laws and regulations, including those governing discharges of pollutants into the air
and water, the storage, handling and disposal of wastes and the health and safety of employees. The Company also may be liable
under the Comprehensive Environmental Response, Compensation, and Liability Act or similar state laws for the costs of investigation
and cleanup of contamination at facilities currently or formerly owned or operated by the Company, or at other facilities at which
the Company may have disposed of hazardous substances. In connection with such contamination, the Company may also be liable for
natural resource damages, government penalties and claims by third parties for personal injury and property damage. Agencies responsible
for enforcing these laws have authority to impose significant civil or criminal penalties for non-compliance. The Company believes
it is currently in material compliance with all applicable requirements of environmental laws. The Company does not anticipate
material capital expenditures for environmental compliance in fiscal years 2020 or 2021.
Investigation and remediation
of contamination is ongoing at some of the Company’s sites. In particular, state agencies have been overseeing groundwater monitoring
activities at the Company’s facility in Hartsville, South Carolina and a corrective action plan at the Company’s facility
in Clayton, Georgia. At Hartsville, the Company is monitoring low levels of contaminants in the groundwater caused by former operations.
Plans are currently underway to conclude remediation and monitoring activities. In connection with the purchase of the Fairfield,
Connecticut facility in 1996, the Company agreed to assume responsibility for completing clean-up efforts previously initiated
by the prior owner. The Company submitted data to the state that the Company believes demonstrates that no further remedial action
is necessary, although the state may require additional clean-up or monitoring. In connection with the purchase of the Company’s
Clayton, Georgia facility, the Company agreed to take assignment of the hazardous waste permit covering such facility and to assume
certain responsibilities to implement a corrective action plan concerning the remediation of certain soil and groundwater contamination
present at that facility. The corrective action plan is ongoing. Although there can be no assurance, the Company does not expect
the costs associated with the above sites to be material.
From time to time, we are involved in litigation and administrative proceedings which arise in the ordinary
course of our business. We do not believe that any litigation or proceeding in which we are currently involved, either individually
or in the aggregate, is likely to have a material adverse effect on our business, financial condition, operating results, cash
flow or prospects.
17. Other,
Net
Other, net is comprised
of the following:
|
|
Fiscal
Year Ended
|
|
|
|
March
30,
2019
|
|
|
March
31,
2018
|
|
|
April
1,
2017
|
|
Plant consolidation and restructuring costs
|
|
$
|
16,906
|
|
|
$
|
7,685
|
|
|
$
|
4,124
|
|
Acquisition costs
|
|
|
—
|
|
|
|
—
|
|
|
|
55
|
|
Provision for doubtful accounts
|
|
|
203
|
|
|
|
125
|
|
|
|
96
|
|
Amortization of intangibles
|
|
|
9,666
|
|
|
|
9,344
|
|
|
|
9,272
|
|
Other expense (income)
|
|
|
339
|
|
|
|
(515
|
)
|
|
|
(844
|
)
|
|
|
$
|
27,114
|
|
|
$
|
16,639
|
|
|
$
|
12,703
|
|
18. Reportable
Segments
The Company operates
through operating segments for which separate financial information is available, and for which operating results are evaluated
regularly by the Company’s chief operating decision maker in determining resource allocation and assessing performance. Those operating
segments with similar economic characteristics and that meet all other required criteria, including nature of the products and
production processes, distribution patterns and classes of customers, are aggregated as reportable segments.
The Company has four
reportable business segments, Plain Bearings, Roller Bearings, Ball Bearings and Engineered Products, which are described below.
Plain Bearings.
Plain bearings are produced with either self-lubricating or metal-to-metal designs and consist of several sub-classes, including
rod end bearings, spherical plain bearings and journal bearings. Unlike ball bearings, which are used in high-speed rotational
applications, plain bearings are primarily used to rectify inevitable misalignments in various mechanical components.
Roller Bearings.
Roller bearings are anti-friction bearings that use rollers instead of balls. The Company manufactures four basic types of roller
bearings: heavy duty needle roller bearings with inner rings, tapered roller bearings, track rollers and aircraft roller bearings.
Ball Bearings.
The Company manufactures four basic types of ball bearings: high precision aerospace, airframe control, thin section and commercial
ball bearings which are used in high-speed rotational applications.
Engineered Products.
Engineered Products consist of highly engineered hydraulics, fasteners, collets and precision components used in aerospace,
marine and industrial applications.
The accounting policies
of the reportable segments are the same as those described in Part II, Item 8. “Financial Statements and Supplementary Data,”
Note 2 “Summary of Significant Accounting Policies.” Segment performance is evaluated based on segment net sales
and gross margin. Items not allocated to segment operating income include corporate administrative expenses and certain other amounts.
Identifiable assets by reportable segment consist of those directly identified with the segment’s operations. Corporate assets
consist of cash, fixed assets and certain prepaid expenses.
|
|
Fiscal
Year Ended
|
|
|
|
March
30,
2019
|
|
|
March
31,
2018
|
|
|
April
1,
2017
|
|
Net External Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
323,251
|
|
|
$
|
296,708
|
|
|
$
|
277,700
|
|
Roller
|
|
|
143,832
|
|
|
|
132,021
|
|
|
|
109,483
|
|
Ball
|
|
|
72,307
|
|
|
|
67,806
|
|
|
|
58,448
|
|
Engineered Products
|
|
|
163,126
|
|
|
|
178,414
|
|
|
|
169,757
|
|
|
|
$
|
702,516
|
|
|
$
|
674,949
|
|
|
$
|
615,388
|
|
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
129,297
|
|
|
$
|
115,886
|
|
|
$
|
110,636
|
|
Roller
|
|
|
61,559
|
|
|
|
55,160
|
|
|
|
41,865
|
|
Ball
|
|
|
29,846
|
|
|
|
27,965
|
|
|
|
22,772
|
|
Engineered Products
|
|
|
55,951
|
|
|
|
59,526
|
|
|
|
54,938
|
|
|
|
$
|
276,653
|
|
|
$
|
258,537
|
|
|
$
|
230,211
|
|
Selling,
General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
25,617
|
|
|
$
|
25,991
|
|
|
$
|
23,585
|
|
Roller
|
|
|
6,266
|
|
|
|
6,307
|
|
|
|
6,116
|
|
Ball
|
|
|
6,428
|
|
|
|
6,773
|
|
|
|
5,657
|
|
Engineered Products
|
|
|
19,664
|
|
|
|
21,071
|
|
|
|
19,065
|
|
Corporate
|
|
|
59,529
|
|
|
|
52,982
|
|
|
|
48,499
|
|
|
|
$
|
117,504
|
|
|
$
|
113,124
|
|
|
$
|
102,922
|
|
Operating
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
100,048
|
|
|
$
|
86,628
|
|
|
$
|
81,484
|
|
Roller
|
|
|
55,148
|
|
|
|
48,831
|
|
|
|
34,008
|
|
Ball
|
|
|
23,222
|
|
|
|
20,919
|
|
|
|
16,593
|
|
Engineered Products
|
|
|
16,183
|
|
|
|
25,081
|
|
|
|
30,884
|
|
Corporate
|
|
|
(62,566
|
)
|
|
|
(52,685
|
)
|
|
|
(48,383
|
)
|
|
|
$
|
132,035
|
|
|
$
|
128,774
|
|
|
$
|
114,586
|
|
Total
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
393,014
|
|
|
$
|
401,248
|
|
|
$
|
371,169
|
|
Roller
|
|
|
166,733
|
|
|
|
157,012
|
|
|
|
147,226
|
|
Ball
|
|
|
66,443
|
|
|
|
60,000
|
|
|
|
55,788
|
|
Engineered Products
|
|
|
458,058
|
|
|
|
465,479
|
|
|
|
474,339
|
|
Corporate
|
|
|
63,119
|
|
|
|
59,012
|
|
|
|
60,325
|
|
|
|
$
|
1,147,367
|
|
|
$
|
1,142,751
|
|
|
$
|
1,108,847
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
13,185
|
|
|
$
|
11,468
|
|
|
$
|
9,386
|
|
Roller
|
|
|
5,328
|
|
|
|
4,245
|
|
|
|
4,021
|
|
Ball
|
|
|
3,276
|
|
|
|
2,407
|
|
|
|
2,155
|
|
Engineered Products
|
|
|
18,715
|
|
|
|
7,209
|
|
|
|
4,591
|
|
Corporate
|
|
|
842
|
|
|
|
2,647
|
|
|
|
741
|
|
|
|
$
|
41,346
|
|
|
$
|
27,976
|
|
|
$
|
20,894
|
|
Depreciation & Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
9,849
|
|
|
$
|
9,296
|
|
|
$
|
9,075
|
|
Roller
|
|
|
4,029
|
|
|
|
4,109
|
|
|
|
4,198
|
|
Ball
|
|
|
1,971
|
|
|
|
1,752
|
|
|
|
1,836
|
|
Engineered Products
|
|
|
10,412
|
|
|
|
10,777
|
|
|
|
10,443
|
|
Corporate
|
|
|
3,397
|
|
|
|
2,426
|
|
|
|
1,820
|
|
|
|
$
|
29,658
|
|
|
$
|
28,360
|
|
|
$
|
27,372
|
|
Geographic External Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
633,381
|
|
|
$
|
592,818
|
|
|
$
|
540,774
|
|
Foreign
|
|
|
69,135
|
|
|
|
82,131
|
|
|
|
74,614
|
|
|
|
$
|
702,516
|
|
|
$
|
674,949
|
|
|
$
|
615,388
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 30,
2019
|
|
|
March 31,
2018
|
|
|
April 1,
2017
|
|
Geographic Long-Lived Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
165,533
|
|
|
$
|
150,716
|
|
|
$
|
144,389
|
|
Foreign
|
|
|
42,362
|
|
|
|
41,797
|
|
|
|
39,236
|
|
|
|
$
|
207,895
|
|
|
$
|
192,513
|
|
|
$
|
183,625
|
|
Intersegment Sales
|
|
|
|
|
|
|
|
|
|
Plain
|
|
$
|
6,292
|
|
|
$
|
5,209
|
|
|
$
|
4,061
|
|
Roll
|
|
|
14,650
|
|
|
|
13,262
|
|
|
|
15,202
|
|
Ball
|
|
|
3,363
|
|
|
|
2,408
|
|
|
|
1,732
|
|
Engineered Products
|
|
|
38,948
|
|
|
|
31,857
|
|
|
|
28,955
|
|
|
|
$
|
63,253
|
|
|
$
|
52,736
|
|
|
$
|
49,950
|
|
The net loss of $16,544
related to the sale of the Miami division during fiscal 2019 is included within the Engineered Products segment. All intersegment
sales are eliminated in consolidation.