Form 424B5 RBC Bearings INC

September 20, 2021 5:19 PM EDT

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The information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell, nor a solicitation of an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted.
 Filed Pursuant to Rule 424(b)(5)
 Registration No. 333-259669
Subject to Completion, Dated September 20, 2021
PRELIMINARY PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED SEPTEMBER 20, 2021
$400,000,000
[MISSING IMAGE: lg_rbcbearingsr-4c.jpg]
    % Series A Mandatory Convertible Preferred Stock
We are offering $400,000,000 in aggregate liquidation preference of our    % Series A Mandatory Convertible Preferred Stock (our “mandatory convertible preferred stock”). In addition, we have granted the underwriters an option, which is exercisable within 30 days after the date of this prospectus supplement, to purchase up to an additional $60,000,000 in aggregate liquidation preference of mandatory convertible preferred stock solely to cover over-allotments.
DIVIDENDS
The mandatory convertible preferred stock will accumulate cumulative dividends at a rate per annum equal to    % on the liquidation preference thereof, which is $100 per share of mandatory convertible preferred stock. Dividends on the mandatory convertible preferred stock will be payable when, as and if declared by our board of directors, out of funds legally available for their payment to the extent paid in cash, quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, beginning on January 15, 2022 and ending on, and including, October 15, 2024. Declared dividends on the mandatory convertible preferred stock will be payable, at our election, in cash, shares of our common stock or a combination of cash and shares of our common stock, in the manner, and subject to the provisions, described in this prospectus supplement.
MANDATORY CONVERSION
Unless previously converted or redeemed, each share of mandatory convertible preferred stock will automatically convert for settlement on or about October 15, 2024, into between           and           shares of our common stock (the “minimum conversion rate” and the “maximum conversion rate,” respectively). Each of the minimum conversion rate and the maximum conversion rate is subject to adjustment as described in this prospectus supplement.
The conversion rate that will apply to mandatory conversions will be determined based on the average of the “daily VWAPs” ​(as defined in this prospectus supplement) over the 20 consecutive “VWAP trading days” ​(as defined in this prospectus supplement) beginning on, and including, the 21st “scheduled trading day” ​(as defined in this prospectus supplement) immediately before October 15, 2024. The conversion rate applicable to mandatory conversions may in certain circumstances be increased to compensate preferred stockholders for certain unpaid accumulated dividends.
EARLY CONVERSION
Holders of our mandatory convertible preferred stock will have the right to convert all or any portion of their shares of mandatory convertible preferred stock into shares of our common stock at any time until the close of business on the mandatory conversion date. Early conversions that are not in connection with a “make-whole fundamental change” ​(as defined in this prospectus supplement) will be settled at the minimum conversion rate. In addition, the conversion rate applicable to such an early conversion may in certain circumstances be increased to compensate holders of our mandatory convertible preferred stock for certain unpaid accumulated dividends.
If a make-whole fundamental change occurs, then preferred stockholders will, in certain circumstances, be entitled to convert their mandatory convertible preferred stock at an increased conversion rate for a specified period of time and receive an amount to compensate them for certain unpaid accumulated dividends and any remaining future scheduled dividend payments.
OPTIONAL REDEMPTION
If an “acquisition non-occurrence event” ​(as defined in this prospectus supplement) occurs, then we will have the right to redeem all, but not less than all, of the mandatory convertible preferred stock at the redemption price described in this prospectus supplement.
ADDITIONAL OFFERINGS
Concurrently with this offering of our mandatory convertible preferred stock, we expect to offer 3,000,000 shares of our common stock (the “Common Stock Concurrent Offering”), plus up to an additional 450,000 shares of our common stock that the underwriters of the Common Stock Concurrent Offering have the option to purchase from us. The Common Stock Concurrent Offering is being made pursuant to a separate prospectus supplement and accompanying prospectus in a public offering registered under the Securities Act of 1933, as amended (the “Securities Act”). In addition to this offering, one of our subsidiaries intends to offer $500.0 million in aggregate principal amount of its senior unsecured notes (the “Senior Notes”). The offering of Senior Notes (the “Senior Notes Offering” and, together with the Common Stock Concurrent Offering, the “Additional Offerings”) is expected to be made pursuant to a confidential offering memorandum only to qualified institutional buyers (as defined in Rule 144A under the Securities Act) or to non-U.S. persons (as defined in Regulation S under the Securities Act) outside the United States in transactions that are exempt from the registration and prospectus-delivery requirements of the Securities Act. The completion of this offering is not contingent on the completion of either of the Additional Offerings, and neither of the Additional Offerings is contingent on the completion of this offering or the other Additional Offering. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell, or the solicitation of an offer to buy, any shares of our common stock offered pursuant to the Common Stock Concurrent Offering or the Senior Notes.
LISTING; COMMON STOCK
No public market currently exists for the mandatory convertible preferred stock. We intend to apply to list the mandatory convertible preferred stock on the Nasdaq Global Select Market under the symbol “ROLLP.” If the listing is approved, we expect trading to commence within 30 days after the date the mandatory convertible preferred stock is first issued. Our common stock is listed on the Nasdaq Global Select Market under the symbol “ROLL.” On September 16, 2021, the last reported sale price of our common stock was $212.24 per share.
Per Share
Total
Public offering price
$       $      
Underwriting discounts and commissions(1)
$ $
Proceeds, before expenses, to us
$ $
(1)
For additional information about underwriting compensation, see “Underwriting.”
Investing in our mandatory convertible preferred stock involves risks that are described in the “Risk Factors” sections in this prospectus supplement and in the accompanying prospectus, the “Risk Factors” section in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021 and in the other documents filed by us with the Securities and Exchange Commission (the “SEC”) that are incorporated by reference herein and in the accompanying prospectus.
Neither the Securities and Exchange Commission nor any state or foreign securities commission or regulatory authority has approved or disapproved of the mandatory convertible preferred stock or the shares of our common stock issuable in respect thereof or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the mandatory convertible preferred stock in book-entry form through the facilities of The Depository Trust Company on or about           , 2021.
Joint Book-Running Managers
Goldman Sachs & Co. LLC
Wells Fargo Securities
BofA Securities
Citigroup
Truist Securities
Co-Managers
Citizens Capital Markets
KeyBanc Capital Markets
Fifth Third Securities
Regions Securities LLC
Morgan Stanley
ACADEMY SECURITIES
William Blair
Prospectus supplement dated           , 2021.

 
TABLE OF CONTENTS
Prospectus Supplement
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Prospectus
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We are responsible for the information contained in this prospectus supplement, the accompanying prospectus and any free writing prospectus prepared by us or on our behalf. Neither we nor any of the underwriters have authorized anyone to provide you with additional or different information.
 
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You should not assume that the information included or incorporated by reference in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the respective dates of the documents in which the information is contained. Our business, financial condition, results of operations and prospects could have changed since those dates.
You should not consider any information included or incorporated by reference in this prospectus supplement or the accompanying prospectus to be legal, tax or investment advice.
You should consult your own counsel, accountant and other advisors for legal, tax, business, financial and related advice regarding any purchase of the mandatory convertible preferred stock. Neither we nor any of the underwriters make any representation regarding the legality of an investment in the mandatory convertible preferred stock by any person under applicable investment or similar laws.
This prospectus supplement and the accompanying prospectus do not constitute an offer to sell or the solicitation of an offer to purchase any mandatory convertible preferred stock in any jurisdiction or to any person where the offer or solicitation is not permitted.
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement and the accompanying prospectus are part of a registration statement on Form S-3 that we filed with the SEC utilizing an automatic shelf registration process. In this prospectus supplement, we provide you with specific information about the mandatory convertible preferred stock that we are selling in this offering and about the offering itself. This prospectus supplement also adds, updates and changes information contained or incorporated by reference in the accompanying prospectus. The accompanying prospectus contains more general information, some of which may not apply to this offering of mandatory convertible preferred stock. Both this prospectus supplement and the accompanying prospectus include or incorporate by reference important information about us, our mandatory convertible preferred stock and other information you should know before investing in our mandatory convertible preferred stock. To the extent that any statement that we make in this prospectus supplement is inconsistent with the statements made in the accompanying prospectus, the statements made in the accompanying prospectus are deemed modified or superseded by the statements made in this prospectus supplement. You should read both this prospectus supplement and the accompanying prospectus as well as additional information described in “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference” before investing in our mandatory convertible preferred stock.
The representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference in this prospectus supplement and the accompanying prospectus or as an exhibit to the registration of which this prospectus supplement and the accompanying prospectus form a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.
 
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BASIS OF PRESENTATION
General
Unless we state otherwise or the context otherwise requires, references appearing in this prospectus supplement to “RBC,” the “Company,” “our company,” “we,” “us” and “our” should be read to refer to (i) for periods prior to the completion of the Pending Acquisition, RBC Bearings Incorporated and its consolidated subsidiaries and (ii) after giving effect to the Pending Acquisition (as defined below), RBC Bearings Incorporated and its consolidated subsidiaries, which will include Dodge; references appearing in this prospectus supplement to “Dodge” refer to the Dodge Mechanical Power Transmission Business of ABB Asea Brown Boveri Ltd; and references to “ABB” refer to ABB Asea Brown Boveri Ltd.
On July 24, 2021, RBC entered into a Stock and Asset Purchase Agreement (the “Purchase Agreement”) with ABB, pursuant to which RBC agreed to acquire Dodge (the “Pending Acquisition”). In connection with the Pending Acquisition, RBC will purchase all of the outstanding equity interests in certain entities and certain other assets relating to Dodge. Following the completion of the Pending Acquisition, RBC will assume the liabilities resulting from, arising out of or relating to Dodge, other than certain liabilities excluded by the Purchase Agreement.
The Pending Acquisition is expected to be completed in RBC’s third fiscal quarter ending January 1, 2022, subject to certain customary closing conditions as set forth in the Purchase Agreement, including regulatory review. In light of the significance of the Pending Acquisition, this prospectus supplement incorporates by reference RBC’s Current Report on Form 8-K filed with the SEC on September 20, 2021, which contains unaudited pro forma condensed combined financial information, including (a) unaudited pro forma condensed combined statements of operations for the fiscal year ended April 3, 2021 and for the three months ended July 3, 2021 based on the historical financial statements of RBC and Dodge, combined and adjusted to give effect to the Pending Acquisition and the Financing Transactions (as defined below) and the other related adjustments presented therein as if they had occurred on March 29, 2020, the first day of RBC’s fiscal year 2021 and the beginning of RBC’s annual period presented in the unaudited pro forma condensed combined statements of operations and (b) an unaudited pro forma condensed combined balance sheet as of July 3, 2021 based on the historical financial statements of RBC and Dodge, combined and adjusted to give effect to the Pending Acquisition and the Financing Transactions and the other related adjustments presented therein as if they had occurred on July 3, 2021 (collectively, the “Pro Forma Financial Information”). This prospectus supplement also includes summary unaudited pro forma condensed combined financial information that is derived from the Pro Forma Financial Information and should be read together with RBC’s Current Report on Form 8-K filed with the SEC on September 20, 2021 in its entirety. See “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference.”
Since RBC will be treated as the acquirer of Dodge for accounting purposes, the Pro Forma Financial Information is presented using RBC’s historical reporting periods. RBC and Dodge have different fiscal year end dates. As a result, Dodge’s revenues and net income for the three months ended March 31, 2021 are excluded from the unaudited pro forma condensed combined statements of operations for the fiscal year ended April 3, 2021. Dodge’s revenues and net income for the three months ended March 31, 2021, unadjusted for the impact of the Pending Acquisition and the Financing Transactions, were $169.0 million and $26.4 million, respectively.
The Pro Forma Financial Information is derived from the pro forma condensed combined financial information included as Exhibit 99.3 to RBC’s Current Report on Form 8-K filed with the SEC on September 20, 2021, which is incorporated by reference herein and should be read in its entirety. See “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference.” The unaudited pro forma condensed combined financial information presented herein has been prepared solely for informational purposes. As a result, the unaudited pro forma condensed combined financial information is not intended to represent and does not purport to be indicative of what the combined company financial condition or results of operations would have been had the Pending Acquisition and the Financing Transactions occurred at an earlier date or on the dates assumed. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial
 
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condition and results of operations of our combined company. The actual results of our combined company may differ significantly from those reflected in the unaudited pro forma condensed combined financial information.
We have also incorporated by reference herein the (i) audited combined financial statements of Dodge as of and for the fiscal years ended December 31, 2020 and 2019 and (ii) unaudited condensed combined financial statements of Dodge, which consist of the combined balance sheet as of June 30, 2021, the related combined statements of income and comprehensive income for the three and six months ended June 30, 2021 and 2020, and the combined statements of changes in equity and cash flows for the six months ended June 30, 2021 and 2020 (collectively, the “Dodge Financial Information”), which are included as Exhibits 99.1 and 99.2 to RBC’s Current Report on Form 8-K filed with the SEC on September 20, 2021 and should be read in its entirety. See “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference.”
The unaudited condensed combined financial statements of Dodge incorporated by reference herein were prepared on a basis consistent with the audited combined financial statements of Dodge. In the opinion of management, the unaudited condensed combined financial statements of Dodge include all adjustments, consisting only of normal and recurring adjustments, necessary for a fair statement of the results for those periods. The results of operations for any interim period are not necessarily indicative of the results to be expected for a full fiscal year or any future period.
The Dodge Financial Information incorporated by reference herein has been presented on a “carve-out” basis from ABB’s consolidated financial statements using the historical results of operations, cash flows, assets and liabilities of Dodge and include allocations of corporate expenses and shared expenses from ABB. These allocations reflect significant assumptions, and the combined financial statements may not fully reflect what Dodge’s financial position, results of operations or cash flows would have been had it been a standalone company during the periods presented. As a result, the Dodge Financial Information incorporated by reference herein is not necessarily indicative of Dodge’s future results of operations, financial position or cash flows.
RBC has a fiscal year consisting of 52 or 53 weeks, ending on the Saturday closest to March 31. By contrast, the fiscal year for Dodge ends on December 31 of each year. In this prospectus supplement, unless we indicate otherwise or the context otherwise requires, any reference to a year in the context of RBC’s financial data preceded by the word “fiscal” refers to the fiscal year ended on the Saturday closest to March 31 of that year. Any reference to a year not preceded by “fiscal” refers to a calendar year ending on December 31. Unless otherwise noted, any reference to a year in the context of Dodge’s financial data preceded by the word “fiscal” refers to the fiscal year ended December 31 of that year.
Certain amounts, percentages and other figures presented in this prospectus supplement have been subject to rounding adjustments and therefore may not represent the arithmetic summation or calculation of the figures that precede them. All references in this prospectus supplement to “$” mean U.S. dollars.
Non-GAAP Financial Measures
We evaluate the performance of our business through certain financial measures (the “non-GAAP financial measures”) that are not recognized under the generally accepted accounting principles in the United States of America (“U.S. GAAP”). These non-GAAP financial measures, including, with respect to Dodge, EBITDA and EBITDA Margin, and, with respect to RBC, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Free Cash Flow and Free Cash Flow Conversion (each, as defined herein), are presented because management believes these measures provide additional information regarding Dodge’s and our operating performance, and because management believes they are useful to investors in evaluating Dodge’s or our operating performance compared to that of other peer companies. In addition, management believes that these non-GAAP financial measures are useful to assess Dodge’s and our operating performance trends because they exclude certain non-cash items or unusual or non-recurring items that are not expected to continue in the future, and certain other items.
All non-GAAP financial measures, including EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Free Cash Flow and Free Cash Flow Conversion, have limitations
 
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as analytical tools, and should not be considered in isolation or as a substitute or alternative to net income or loss, operating income or loss, cash flows from operating activities, total indebtedness or any other financial measures of operating performance, liquidity, indebtedness or otherwise derived in accordance with U.S. GAAP. We compensate for the limitations of non-GAAP financial measures by relying primarily on our financial measures derived in accordance with U.S. GAAP and using the non-GAAP financial measures only for supplemental purposes. The presentation of these non-GAAP financial measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items.
For the definitions of Dodge’s EBITDA and EBITDA Margin, see “Prospectus Supplement Summary.” For the definitions of and additional information about RBC’s Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Free Cash Flow and Free Cash Flow Conversion, a description of how these measures are calculated, the limitations of these measures and a reconciliation to their most directly comparable U.S. GAAP measures, see “Summary Historical and Unaudited Pro Forma Condensed Financial Information — RBC — Non-GAAP Financial Measures.”
 
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PROSPECTUS SUPPLEMENT SUMMARY
The following summary highlights, and should be read together with, the information contained elsewhere in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein, including our Annual Report on Form 10-K for the fiscal year ended April 3, 2021, our Quarterly Report on Form 10-Q for the quarter ended July 3, 2021, our Current Reports on Form 8-K filed with the SEC on July 26, 2021 and on September 20, 2021, and the sections titled “Summary Historical and Unaudited Pro Forma Condensed Financial Informationand “Management’s Discussion and Analysis of Dodge’s Financial Condition and Results of Operations” in this prospectus supplement. This summary may not contain all of the information that may be important to you, and you should carefully read this entire prospectus supplement, the accompanying prospectus, any free writing prospectus we may provide to you in connection with this offering, especially the information set forth under “Risk Factors” and the documents incorporated by reference herein and therein before making an investment decision. You may obtain a copy of the documents incorporated by reference by following the instructions in the sections titled “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference” in this prospectus supplement.
Our Company
RBC Bearings Incorporated, together with its consolidated 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. While we manufacture products in all major bearings 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 build a strong reputation as a trusted, leading supplier in many of the product markets in which we primarily compete. We currently have 43 facilities located in seven countries, of which 31 are manufacturing facilities.
We serve a broad range of end markets where we can add value with our specialty precision bearings and engineered products, components, and applications. We classify our customers into two principal categories: industrial and aerospace. These principal end markets utilize a large number of both commercial and specialized bearings and engineered products. Although we provide a relatively small percentage of total bearing and engineered products supplied to each of our principal end markets, we have broadened our end markets, products, customer base and geographic reach over the past several years and we believe we have leading market positions in many of the specialized product markets in which we primarily compete:

Industrial market (net sales of $256 million, or 42% of our net sales for the fiscal year ended April 3, 2021):   We manufacture bearings and engineered products for a wide range of diversified industrial markets, including construction and mining, oil and natural resource extraction, heavy truck, submarine, rail and train, packaging, semiconductor machinery, wind, canning and the general industrial markets. Our products target market applications in which our engineering and manufacturing capabilities provide us with a competitive advantage in the marketplace.

Aerospace market (net sales of $353 million, or 58% of our net sales for the fiscal year ended April 3, 2021):   We supply bearings and engineered products for use in commercial, private and military aircraft and aircraft engines, guided weaponry, space and satellites and vision and optical systems. We supply precision products for many of the commercial aircraft currently operating worldwide and are the primary bearing supplier for many of the aircraft original equipment manufacturers’ (“OEMs”) product lines. Commercial aerospace customers generally require precision products, often of special materials, made to unique designs and specifications. Many of our aerospace bearings and engineered component products are designed and certified during the original development of the aircraft being served, which often makes us the primary bearing supplier for the life of that aircraft. Furthermore, we have a broad range of products that are used throughout the aircraft (e.g., fuselage, engine, auxiliary power unit, flight control actuation,
 
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landing gear, interior cabin), which allows us to serve and generate revenue from multiple aspects of most commercial aircraft.
In the fiscal year ended April 3, 2021 (“fiscal 2021”), we had net sales of $609 million, operating income of $111 million, net income of $90 million and Adjusted EBITDA of $174 million, or Adjusted EBITDA Margin of 29%. For the twelve months ended July 3, 2021, we had net sales of $609 million, operating income of $113 million, net income of $93 million and Adjusted EBITDA of $176 million, or Adjusted EBITDA Margin of 29%. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales, expressed as a percentage. We present Adjusted EBITDA and Adjusted EBITDA Margin, which are non-GAAP financial measures, to supplement our results of operations presented in accordance with U.S. GAAP. Our calculation of these non-GAAP financial measures may differ from similarly-titled non-GAAP financial measures reported by our peer companies. These non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with U.S. GAAP. For our definitions of and additional information about Adjusted EBITDA and Adjusted EBITDA Margin, a description of how these measures are calculated, the limitations of these measures and a reconciliation to their most directly comparable U.S. GAAP measures, see “Summary Historical and Unaudited Pro Forma Condensed Financial Information — RBC — Non-GAAP Financial Measures.”
Pending Acquisition of the Dodge Business
Acquisition Agreement
On July 24, 2021, we entered into a Purchase Agreement with ABB pursuant to which we agreed to acquire Dodge. In connection with the Pending Acquisition, we will purchase all of the outstanding equity interests in certain entities, including Dodge Mechanical Power Transmission Company Inc. and certain other assets relating to Dodge, for total consideration of approximately $2.9 billion in cash, subject to adjustment as provided for in the Purchase Agreement. The Pending Acquisition is expected to be completed in our third fiscal quarter ending January 1, 2022, subject to customary closing conditions, including regulatory review.
The Purchase Agreement includes customary representations and warranties, which do not survive the consummation of the Pending Acquisition (the “Closing”), as well as customary covenants from the respective parties, including, among others, ABB’s covenant not to engage in certain kinds of transactions during the period between the execution of the Purchase Agreement and the Closing, three-year noncompetition and employee non-solicitation covenants in favor of RBC, and a requirement that RBC and ABB use reasonable best efforts and that RBC take such other actions as are necessary to obtain regulatory approvals for the Pending Acquisition as described in the Purchase Agreement. The Closing is subject to customary closing conditions for transactions of this type, including, among others: (1) expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; (2) subject to certain materiality exceptions, the accuracy of the representations and warranties contained in the Purchase Agreement; (3) compliance by the parties in all material respects with their respective obligations under the Purchase Agreement; (4) the absence of any law or order prohibiting the Closing; and (5) no Business Material Adverse Effect (as defined in the Purchase Agreement) having occurred. The Purchase Agreement also contains customary termination rights for each of the parties, including if any of the conditions to the Closing have not been satisfied within six months of the execution of the Purchase Agreement. The Purchase Agreement also provides us with indemnification rights with respect to liabilities retained by ABB, breaches of ABB’s pre-Closing covenants contained in the Purchase Agreement, and the taxes of Dodge for the period prior to the Closing. ABB is entitled to indemnification with respect to liabilities of Dodge, breaches of RBC’s pre-Closing covenants contained in the Purchase Agreement, and certain tax matters.
The Purchase Agreement is described in more detail in our Current Report on Form 8-K filed with the SEC on July 26, 2021 (the “Pending Acquisition 8-K”), which is incorporated by reference into this prospectus supplement and the accompanying prospectus. The foregoing summary description does not purport to be complete and is qualified in its entirety by reference to the complete text of the Purchase Agreement, which was filed as Exhibit 2.1 to the Pending Acquisition 8-K. Certain financial statements
 
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relating to Dodge and certain pro forma financial information on our combined company after giving effect to the Pending Acquisition and the Financing Transactions (as defined below) are also provided in our Current Report on Form 8-K filed with the SEC on September 20, 2021 and incorporated by reference in this prospectus supplement.
Overview of Dodge
Dodge is a leading manufacturer of mounted bearings and mechanical products with market-leading brand recognition. Dodge manufactures a complete line of mounted bearings, enclosed gearing and precision components across a diverse set of industrial end markets. Dodge primarily operates across the construction and mining aftermarket, food & beverage, warehousing and general machinery verticals. Dodge predominantly manufactures its products in the United States, with a smaller manufacturing facility in China, and its global operations comprises approximately 1,500 employees located in six countries as of June 30, 2021. In total Dodge operates six manufacturing facilities and two R&D centers.
Dodge’s products are sold to a diverse customer base consisting of OEMs and distributors, serving markets in the United States and throughout the world. OEMs primarily use the products in new installations, which expands Dodge’s installed base and typically leads to future replacement product sales. Dodge has established strong long-term relationships with its customers, driven by industry leading pre- and post-order support, logistics and an e-commerce platform. Additionally, Dodge’s lifecycle solutions support its customers by providing remanufacturing services, monitoring and high-value component replacement.
Demand for Dodge’s products is closely tied to growth trends in the economy and levels of industrial activity and capital investment. Specific drivers of demand for Dodge’s products include process automation, efforts in energy conservation and productivity improvement, regulatory and safety requirements, new technologies and replacement of worn parts. Dodge’s products are typically critical components of customers’ end applications, and the end user’s cost associated with their failure is high. Consequently, end users of Dodge’s products base their purchasing decisions on the quality, reliability, efficiency and availability of Dodge’s products, as well as on the quality of Dodge’s customer service.
Dodge’s revenues primarily consist of product sales across three product lines, mounted bearings, enclosed gearing and precision components:

Mounted bearings (48% of Dodge’s revenues for the fiscal year ended December 31, 2020):   Offers fully assembled bearings with a wide range of shaft attachment methods, rolling elements, housings and seal choices. Products include ball bearings, roller bearings and plain bearings, which are used in light to heavy loads, clean, corrosive and harsh environments. Applications include unit & bulk handling, industrial air handling, large rotor fans, food processing, roll-out tables, and forest pulp and paper processing.

Enclosed gearing (35% of Dodge’s revenues for the fiscal year ended December 31, 2020): Consisting of products such as Tigear, Quantis Gearmotor, Torque Arm, MagnaGear, Maxum and Controlled Start Transmission (“CST”), with a focus on reliability that delivers industry-leading performance and value-added product features providing better uptime and less maintenance.

Precision components (14% of Dodge’s revenues for the fiscal year ended December 31, 2020): Includes products such as mechanical drive components, couplings and conveyor components and offers coupling solutions for both elastomeric and metallic design with the potential to increase torque capacity, accommodate shaft misalignment and extend life, and complete pulley assembly packages including the pulley, shafting, bearings, couplings and gearing. This is a complementary offering that drives incremental sales of high margin mounted bearings and enclosed gearing products.
 
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Additionally, Dodge has a growing line of business in the service area which allows for high margin sales on repairs and maintenance activities associated with its large gearing components. Dodge has also developed digital solutions for monitoring and managing components using “smart” technology.
[MISSING IMAGE: tm2127414d5-pc_fiscal4c.jpg]
(1)
Includes services and other revenues.
(2)
Other end-markets include forest products, oil & gas, power and water.
For the twelve months ended June 30, 2021, Dodge had revenues of $612 million, net income of $83 million and EBITDA of $153 million, or EBITDA Margin of 25%. Dodge’s EBITDA is defined as its net income excluding income tax expense, interest expense, depreciation and amortization. Please refer to the Dodge Financial Information, which has been filed by RBC on a Current Report on Form 8-K on September 20, 2021, and which is incorporated by reference herein. Dodge’s EBITDA Margin is defined as Dodge’s EBITDA divided by its revenues, expressed as a percentage. The below table presents a summary of certain key financial metrics of Dodge for the periods indicated:
(in thousands,
except percentages)
Year Ended
December 31,
2020
Year Ended
December 31,
2019
Six Months
Ended June 30,
2021
Twelve Months
Ended June 30,
2021
Net income
$ 67,564 $ 77,001 $ 50,772 $ 83,353
Income tax expense
$ 22,179 $ 25,083 $ 16,654 $ 27,324
Interest expense
$ 356 $ 211 $ 323 $ 710
Depreciation and amortization
$ 44,466 $ 44,074 $ 19,490 $ 41,722
EBITDA
$ 134,565 $ 146,369 $ 87,239 $ 153,109
Revenues
$ 549,997 $ 612,390 $ 335,923 $ 611,866
EBITDA Margin
24.5% 23.9% 26.0% 25.0%
We present Dodge’s EBITDA and EBITDA Margin, which are non-GAAP financial measures, to supplement Dodge’s results of operations presented in accordance with U.S. GAAP. Our calculation of these non-GAAP financial measures may differ from similarly-titled non-GAAP financial measures reported by Dodge’s peer companies. These non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with U.S. GAAP.
Strategic Rationale
We believe the Pending Acquisition will be highly synergistic given our position in the bearings industry. Our business and Dodge’s business are highly complementary, each bringing new offerings,
 
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new end markets and economies of scale to the combined organization. We believe that our deep knowledge of the industry and Dodge and our experience executing other acquisitions would position us well to successfully integrate Dodge into our existing portfolio. See “— Pending Acquisition of the Dodge Business” for more information on the Pending Acquisition.
We believe that the Pending Acquisition could strengthen and accelerate our financial profile, capabilities, footprint and customer base in the following ways:

Creates a strongly-positioned manufacturer of bearings and precision products.   The Pending Acquisition could create a strongly-positioned manufacturer that would benefit from combined brand recognition for premium performance critical bearings and precision products sold to both OEMs and the industrial aftermarket. The Dodge brand is a well-known premium choice for bearings, mechanical components and systems, and is produced primarily with world-class U.S.-centric manufacturing capabilities. Dodge’s product offerings, capabilities and end markets are highly complementary to ours. The combined company would have a competitive position across end markets with a diversified client base and expansive geographic footprint.

Significantly enhances scale.   The Pending Acquisition would approximately double the scale of our business as measured by net sales and Adjusted EBITDA. Our net sales for the twelve months ended July 3, 2021 were $609 million, as compared to $1,221 million on a combined basis after including Dodge’s revenues for the twelve months ended June 30, 2021. For the twelve months ended July 3, 2021, our operating income was $113 million, our Adjusted EBITDA was $176 million and Dodge’s EBITDA was $153 million. Furthermore, we expect to substantially increase scale, product depth and reach in the important market of industrial distribution where Dodge holds a leading position, with Dodge’s revenues consistently representing over 60% of total revenues in the market.

Diversifies business mix.   For the fiscal year ended April 3, 2021, we derived 42% of our net sales from industrial end markets and 58% from aerospace end markets. Pro forma for the Pending Acquisition, approximately 70% of our net sales would have been derived from industrial end markets for the fiscal year ended April 3, 2021. We believe that pro forma for the Pending Acquisition, approximately 48% of our net sales for the fiscal year ended April 3, 2021 would have been derived from new industrial end markets where we have historically underserved or not been present. Furthermore, for the fiscal year ended April 3, 2021, we estimate that approximately a quarter of our net sales were made to the defense end market.
[MISSING IMAGE: tm2127414d5-pc_strat4c.jpg]
(1)
Gives pro forma effect to the Pending Acquisition as if it had occurred on March 29, 2020. See “Summary Historical and Unaudited Pro Forma Condensed Financial Information.”

Highly attractive recurring revenue base.   Dodge’s large installed base of existing products used throughout the industry and installed over decades creates a significant replacement demand driven by “like-for-like” purchasing preference, resulting in strong aftermarket sales. Furthermore, Dodge has strong customer relationships that span over 40 years on average with its top customers.
 
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Strong synergies.   We are pursuing synergies across four core aspects of our business enterprise capable of reaching approximately $70 million to $100 million by the fifth fiscal year following consummation of the Pending Acquisition primarily through cost savings, with the remaining synergies expected from revenue integration. The key sources of our synergy plan include (i) selling our products through Dodge’s sales force, which is approximately seven times larger than ours, (ii) selling Dodge products to our customers, (iii) supply chain integration by supplying Dodge with a significant part of their components that we can manufacture and provide, (iv) expanding Dodge’s product margin by partnering with our manufacturing facilities in lower cost countries, (v) applying our product development process and material science to Dodge’s products, and (vi) a few facility rationalizations. We intend to implement various integration strategies soon after closing of the Pending Acquisition to begin capturing these expected synergies while minimizing any material costs and any interruption to the two businesses. However, there is no assurance of when, or if, we will be able to achieve the anticipated synergies from the Pending Acquisition. See “Risk Factors — Risks Related to the Pending Acquisition — We may fail to realize some or all of the anticipated benefits of the Pending Acquisition or those benefits may take longer to realize than expected” in the accompanying prospectus.
Our Business Strategy
Currently, our strategy is built around maintaining our role as a leading manufacturer of precision bearings and components through the following efforts:

Developing innovative solutions.   By leveraging our design and manufacturing expertise and our extensive customer relationships, we continue to develop new products for markets in which there are substantial growth opportunities.

Expanding customer base and penetrating end markets.   We continually seek opportunities to access new customers, geographic locations and bearing platforms with existing products or profitable new product opportunities.

Increasing aftermarket sales.   We believe that increasing our aftermarket sales of replacement parts will further enhance the continuity and predictability of our net sales and enhance our profitability. Such sales include sales to third party distributors, and sales to OEMs for replacement products and aftermarket services. We expect to increase our percentage of net sales derived from the replacement market by continuing to gain market share with new and existing OEMs.

Pursuing selective acquisitions.   The acquisition of businesses that complement or expand our operations has been and continues to be an important element of our business strategy. We believe that there will continue to be consolidation within the industry that may present us with acquisition opportunities.
We have demonstrated expertise in acquiring and integrating bearing and precision engineered component manufacturers that have complementary products or distribution channels and have provided significant margin enhancement. We have consistently increased the profitability of acquired businesses through a process of methods and systems improvement coupled with the introduction of complementary and proprietary new products. From 1990 through our fiscal year ended April 3, 2021, we have completed 27 acquisitions (excluding Dodge), which have broadened our end markets, products, customer base and geographic reach.
Our Competitive Strengths
We believe that we are well-positioned to meet our obligations to customers, grow our business and create shareholder value because of the following factors:

Manufacturer of highly engineered precision bearings and products.   We focus primarily on highly technical or regulated bearing products and engineered products for specialized markets that require sophisticated design, testing and manufacturing capabilities. For the
 
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majority of our products, the culmination of our lengthy design and engineering process is the receipt of a product approval or certification, generally obtained from either the OEM, the Department of Defense or the Federal Aviation Administration, which allows us to supply the product to the OEM customer and to the aftermarket. These approvals often give us a competitive advantage as we are often the only approved supplier of a given bearing or engineered product for a particular customer. We believe our unique expertise has enabled us to garner leading positions in many of the product markets in which we primarily compete.

Track record of sales growth.   We have a demonstrated ability to grow our business at an approximately 7% net sales Compound Annual Growth Rate (“CAGR”) over the last 19 years, or approximately 8% net sales CAGR excluding fiscal 2021 (which was impacted by the global COVID-19 pandemic). We believe our culture of continuous improvement has sustained a high-single digit net sales growth through the cycle, which is a key management target that is rigorously pursued.
[MISSING IMAGE: tm2127414d5-bc_rbcbear4clr.jpg]
(1)
The net sales figures in the above graph for years prior to our adoption of Accounting Standards Codification 606, Revenue From Contracts with Customers in fiscal 2019 have not been modified and reflect the accounting standards in effect at the relevant time.

Culture of continuous improvement driving margin expansion.   We have established a proven strategy for sustained margin improvement of our business. Our ongoing commitment to process engineering excellence allows us to manufacture many proprietary products cost effectively that other providers find challenging. We continually evaluate our manufacturing and other operations to maximize efficiencies in order to maintain competitive prices while maximizing our profit margins. We maintain highly coordinated plants and perform frequent and ongoing reviews of our cost structure to assess profitability of each product line by facility. Furthermore, many of our long-term agreements have mechanisms to pass through inflationary cost increases. For our smaller customers without long-term agreements and our industrial distribution channel we are typically able to implement price increases to offset cost increases.

Stable revenue from aftermarket sales.   We have long-term customer relationships and frequent replacement cycles that provide steady net sales. Our extensive installed base of proprietary products results in strong consistent aftermarket sales. Our long-term agreements provide stability and predictability of net sales. In fiscal 2021, we estimate that a substantial portion of our net sales were generated under long-term contracts. We serve a broad range of end markets where we can add value with our specialty precision bearings and engineered products, components, and applications. With the Pending Acquisition, we will significantly increase our net sales from aftermarket sales given that Dodge’s aftermarket revenue represents a significant portion of their total revenue. Dodge’s large installed base of existing products used throughout the industry and installed over decades creates a significant replacement demand driven by “like-for-like” purchasing preference. Furthermore, Dodge has strong customer
 
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relationships that span over 40 years on average with its top customers and sells to over 2,300 distributor locations globally with over 800 OEMs served.

Competitive advantages.   We are active in markets with sustainable growth where we believe opportunities for profitable expansion and defensible franchises exist. We estimate that a substantial portion of our fiscal 2021 net sales is from sole/single-source or proprietary products requiring lengthy and difficult approval processes. Our competitive advantage is driven by (i) strong customer relationships with long-term contracts, (ii) the nature of our highly specialized products that require high customer service levels, extensive technical support, short lead times and small production runs, (iii) typical product development life cycles of 3 to 10 years, and (iv) high switching costs due to the stringent and lengthy certification process for many OEM, commercial aerospace, and defense market products. Furthermore, the highly technical or regulated bearing products and engineered products we provide typically present only a small fraction of the total production cost for most of the machines, aircraft and mechanical systems into which our products are integral and often mission-critical.

Attractive financial characteristics with strong margin, free cash flow and highly variable cost structure.   We have a strong focus on operational excellence that has provided high margins over recent years. We have historically generated significant free cash flow, which we define as cash provided by operating activities less capital expenditures (“Free Cash Flow”). Over the last three fiscal years, we have generated approximately $326 million of Free Cash Flow, increasing from $67 million in fiscal 2019 to $141 million in fiscal 2021 (without giving effect to the Pending Acquisition). Furthermore, we have a highly variable cost structure, which allows us to preserve free cash flow and reduce costs in weaker economic periods, as evidenced by our financial performance in fiscal 2021. The below table presents a summary of certain key financial metrics for the periods indicated:
($ in thousands)
Fiscal Year
Ended
April 3,
2021
Fiscal Year
Ended
March 28,
2020
Fiscal Year
Ended
March 30,
2019
Net sales
$ 608,984 $ 727,461 $ 702,516
Operating income
$ 111,458 $ 156,785 $ 132,035
Adjusted EBITDA(1)
$ 174,255 $ 209,220 $ 195,504
Adjusted EBITDA Margin(1)
28.6% 28.8% 27.8%
($ in thousands)
Fiscal Year
Ended
April 3,
2021
Fiscal Year
Ended
March 28,
2020
Fiscal Year
Ended
March 30,
2019
Cash provided by operating activities
$ 152,453 $ 155,621 $ 108,547
Capital Expenditures
(11,772) (37,297) (41,346)
Free Cash Flow(1), (2), (3)
$ 140,681 $ 118,324 $ 67,201
Adjusted Net Income(1), (2)
96,888 126,398 119,681
Free Cash Flow Conversion(1), (3)
145.2% 93.6% 56.2%
(1)
We present Adjusted EBITDA, Free Cash Flow, Adjusted Net Income and Free Cash Flow Conversion, which are non-GAAP financial measures, to supplement our results of operations presented in accordance with U.S. GAAP. Our calculation of these non-GAAP financial measures may differ from similarly-titled non-GAAP financial measures reported by our peer companies. These non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with U.S. GAAP. For our definitions of and additional information about Free Cash Flow, Adjusted Net Income and Free Cash Flow Conversion, a description of how these measures are calculated, the limitations of these measures and a reconciliation to their most directly comparable U.S. GAAP measures, see “Summary Historical and Unaudited Pro Forma Condensed Financial Information — RBC — Non-GAAP Financial Measures.”
(2)
Adjusted Net Income is defined as net income excluding the impact of costs related to restructuring and consolidation and certain one-off items, including costs related to a certain cybersecurity incident that occurred during February 2021, further details of which are provided in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021, which is incorporated by reference in this prospectus supplement.
(3)
Free Cash Flow Conversion is defined as free cash flow divided by Adjusted Net Income.
 
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Highly experienced management team.   Our executive management team has extensive operational experience and deep industry knowledge, as well as significant prior experience executing and successfully integrating strategic acquisitions. Notably, Dr. Michael Hartnett has been the Chief Executive Officer of RBC Bearings since 1992, leading our company’s growth and strategic positioning for almost three decades with most of his direct reports having been with the Company for 20 to 25 years. Likewise, the Dodge management team, which will continue to manage and operate Dodge following the Pending Acquisition, has many decades of industry and operating expertise. We expect we will benefit from the knowledge and experience of both management teams as we successfully integrate Dodge into our existing portfolio.
Concurrent Financing Transactions
Concurrently with, or following the closing of, this offering of mandatory convertible preferred stock, we intend to enter into a series of transactions described below (collectively, the “Financing Transactions”). We intend to use the net proceeds from the Financing Transactions to fund a portion of the cash purchase price for the Pending Acquisition, to pay acquisition-related fees and expenses, and for other general corporate purposes.
Common Stock Concurrent Offering
Concurrently with this offering, we expect to offer 3,000,000 shares of our common stock, plus up to an additional 450,000 shares of our common stock that the underwriters of the Common Stock Concurrent Offering have the option to purchase from us. The Common Stock Concurrent Offering is being made pursuant to a separate prospectus supplement and accompanying prospectus in a public offering registered under the Securities Act.
We estimate that the net proceeds to us from the Common Stock Concurrent Offering, if it is consummated, will be approximately $605.6 million (or approximately $696.5 million if the underwriters of the Common Stock Concurrent Offering fully exercise their option to purchase additional shares of common stock), based on an assumed public offering price of $212.24, the last reported sale price of our common stock on Nasdaq on September 16, 2021 and after deducting underwriting discounts and commissions and our estimated offering expenses.
The Common Stock Concurrent Offering is expected to close on or about the same date as the closing of this offering of mandatory convertible preferred stock, subject to customary closing conditions. We cannot assure you that the Common Stock Concurrent Offering will be completed or, if completed, on what terms. The completion of this offering is not contingent on the completion of the Common Stock Concurrent Offering, and the completion of the Common Stock Concurrent Offering is not contingent on the completion of this offering. Accordingly, you should not assume that the Common Stock Concurrent Offering will be consummated or that we will receive any additional proceeds from the Common Stock Concurrent Offering. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell, or the solicitation of an offer to buy, any common stock we are offering in the Common Stock Concurrent Offering.
See “The Additional Offerings — Common Stock Concurrent Offering.”
The New Credit Agreement
We are currently in active negotiations with certain lenders to enter into the New Credit Agreement (as defined below) with our subsidiary, Roller Bearing Company of America, Inc., as borrower, which is expected to provide for certain term loans in an aggregate principal amount not to exceed $1.3 billion (the “Term Facility”) and a revolving credit facility in an aggregate principal amount not to exceed $500.0 million (the “Revolving Facility”). We expect to use the proceeds of the Term Facility to consummate the Pending Acquisition, including for the payment of permitted expenses and fees related thereto, and the proceeds of borrowings under the Revolving Facility may be used for the payment of permitted expenses and fees related to the Pending Acquisition, for working capital or for other general corporate purposes.
The completion of this offering is not contingent on our entry into the Term Facility or the Revolving Facility, and our entry into the Term Facility and the Revolving Facility is not contingent on the completion
 
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of this offering. As of the date of this prospectus supplement, we have yet to agree to the terms of or enter into definitive documentation for the New Credit Agreement and the terms thereof remain subject to change. The foregoing summary of the anticipated terms of the New Credit Agreement has been prepared in good faith based upon assumptions that management considers reasonable as of the date hereof, but remains subject to uncertainties and contingencies which may be beyond our control. No assurances can be given that the New Credit Agreement will be executed on such terms, or at all, and the foregoing summary should not be viewed as fact. The actual terms of the New Credit Agreement may differ significantly from the foregoing summary and no representation or warranty is made with respect to the predictive accuracy thereof.
See “Description of Indebtedness.”
Potential Offering of Senior Notes
In addition to this offering, one of our subsidiaries, Roller Bearing Company of America, Inc. (the “Senior Notes Issuer”), intends to offer $500.0 million in aggregate principal amount of Senior Notes. The offering of Senior Notes is expected to be made pursuant to a confidential offering memorandum only to qualified institutional buyers (as defined in Rule 144A under the Securities Act) or to non-U.S. persons (as defined in Regulation S under the Securities Act) outside the United States in transactions that are exempt from the registration and prospectus delivery requirements of the Securities Act.
We expect that the Senior Notes Issuer will deposit the proceeds from the sale of the Senior Notes into a segregated escrow account pending the consummation of the Pending Acquisition. The release of the escrow proceeds will be subject to the satisfaction of certain conditions, including consummation of the Pending Acquisition (the date of such release, the “Completion Date”). We expect that the Senior Notes will be redeemable by us if the Pending Acquisition is not consummated and in other customary circumstances.
Prior to the Completion Date, we expect that the Senior Notes will be secured by a first priority security interest in the funds held in the escrow account and will not be guaranteed. From and after the Completion Date, we expect that the Senior Notes will be guaranteed by certain of the Senior Notes Issuer’s existing and future wholly owned domestic subsidiaries that guarantee the New Credit Agreement. We expect the Senior Notes to contain customary covenants, restrictions and events of default for a transaction of this type.
The completion of this offering is not contingent on the Senior Notes Offering and the completion of the Senior Notes Offering is not contingent on the completion of this offering. Accordingly, you should not assume that the Senior Notes Offering will be consummated or that we or our subsidiaries will receive any additional proceeds from the Senior Notes Offering. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell, or the solicitation of an offer to buy, any Senior Notes. As of the date of this prospectus supplement, we have yet to agree to the terms of or enter into definitive documentation for the Senior Notes Offering. The terms of the Senior Notes remain subject to change and may differ materially from what we expect. The foregoing summary of the anticipated terms of the Senior Notes Offering reflects assumptions that management considers to be reasonable as of the date hereof, but remains subject to uncertainties and contingencies which may be beyond our control. No assurances can be given that the Senior Notes Offering will be consummated on the terms anticipated by management, if at all.
See “The Additional Offerings — Senior Notes Offering” of this prospectus supplement and “Risk Factors — Risks Related to the Pending Acquisition — We may not complete the Financing Transactions on terms acceptable to us, within the time frame we anticipate or at all” of the accompanying prospectus.
Summary of Risk Factors
Investing in our mandatory convertible preferred stock involves risks and uncertainties. Before making an investment in our mandatory convertible preferred stock, you should carefully consider all of the information in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein, including in the “Risk Factors” sections of the accompanying prospectus
 
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and in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021. Below is a concise description of certain material risk factors that are further described in the “Risk Factors” sections of this prospectus supplement and the accompanying prospectus. The summary does not purport to summarize all of the risks that you should consider in making your decision to invest in any shares of mandatory convertible preferred stock and should be read together with the risks set forth under the “Risk Factors” sections of this prospectus supplement and the accompanying prospectus and the additional risks described in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021 and in the other documents that are incorporated by reference herein and in the accompanying prospectus.
Risks Related to the Pending Acquisition

We may not complete the Pending Acquisition within the time frame we anticipate or at all.

We may not complete the Financing Transactions on terms acceptable to us, within the time frame we anticipate or at all.

We may fail to realize some or all of the anticipated benefits of the Pending Acquisition or those benefits may take longer to realize than expected.

We may not be able to efficiently integrate Dodge into our operations.

We have incurred significant transaction costs and may incur integration costs in connection with the Pending Acquisition.

The unaudited pro forma condensed combined financial information are presented for illustrative purposes only and our actual financial condition and results of operations following completion of the Pending Acquisition and the Financing Transactions may differ materially.
Risks Related to Dodge’s Business

Dodge’s operations in emerging markets expose it to risks associated with conditions in those markets.

If Dodge is unable to obtain performance and other guarantees from financial institutions, it may be prevented from bidding on, or obtaining, some contracts, or its costs with respect to such contracts could be higher.
Risks Related to the Offering, our Mandatory Convertible Preferred Stock and our Common Stock

The mandatory convertible preferred stock will be junior to our indebtedness and will be structurally junior to the liabilities of our subsidiaries.

We conduct all of our operations through our subsidiaries and will rely on our subsidiaries to pay cash dividends on the mandatory convertible preferred stock

The market price and trading volume of our common stock may be volatile, which could result in rapid and substantial losses for our stockholders.

You will bear the risk of fluctuations in the trading price of our common stock.

If the trading price of our common stock increases, then a direct investment in our common stock will earn higher returns from such increase than would an investment in the mandatory convertible preferred stock.

We may not have sufficient funds to pay, or may choose not to pay, dividends on the mandatory convertible preferred stock. In addition, regulatory and contractual restrictions may prevent us from declaring or paying dividends.

Not all events that may adversely affect the trading price of the mandatory convertible preferred stock and our common stock will result in an adjustment to the boundary conversion rates and the boundary conversion prices.

The make-whole fundamental change provisions may not adequately compensate you for any loss in the value of the mandatory convertible preferred stock that may result from a make-whole fundamental change.
 
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The mandatory convertible preferred stock has only limited voting rights.

You will have no rights with respect to our common stock until the mandatory convertible preferred stock is converted, but you may be adversely affected by certain changes made with respect to our common stock.

We may issue preferred stock in the future that ranks equally with the mandatory convertible preferred stock with respect to dividends or liquidation rights, which may adversely affect the rights of preferred stockholders.

There is currently no trading market for the mandatory convertible preferred stock. If an active trading market does not develop, then preferred stockholders may be unable to sell their mandatory convertible preferred stock at desired times or prices, or at all.

The trading price of our common stock, the condition of the financial markets, prevailing interest rates and other factors could significantly affect the trading price of the mandatory convertible preferred stock.

The issuance or sale of shares of our common stock (or rights to acquire shares of our common stock), could depress the trading price of our common stock and the mandatory convertible preferred stock.

You may be diluted by future issuances of our common stock or instruments convertible into shares of common stock.

Recent and future regulatory actions, changes in market conditions and other events may adversely affect the trading price and liquidity of the mandatory convertible preferred stock and the ability of investors to implement a convertible arbitrage trading strategy.

You may be subject to tax if we adjust, or fail to adjust, the boundary conversion rates, even though you will not receive a corresponding cash distribution.

Provisions of the mandatory convertible preferred stock could delay or prevent an otherwise beneficial takeover of us.

If the Pending Acquisition is not completed, our management will have broad discretion to use the net proceeds from this offering.

We will not be obligated to redeem mandatory convertible preferred stock if the Pending Acquisition is not completed.

This offering is not contingent on the consummation of the Term Facility, the Revolving Facility or the Additional Offerings.

The accounting method for the mandatory convertible preferred stock may result in lower reported net earnings attributable to common stockholders and lower reported diluted earnings per share.

Because the mandatory convertible preferred stock will initially be held in book-entry form, preferred stockholders must rely on DTC’s procedures to exercise their rights and remedies.

Reports published by securities or industry analysts, including projections in those reports that exceed our actual results, could adversely affect our share price and trading volume.

We do not currently intend to pay dividends on our common stock.

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

Quarterly performance can be affected by the timing of government product inspections and approvals.
 
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Corporate Information
Our principal executive office is located at One Tribology Center, 102 Willenbrock Road, Oxford, CT 06478, and our telephone number is (203) 267-7001. Our website is www.rbcbearings.com. The information on, or that can be accessed through, our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus and the inclusion of our website address in this prospectus supplement and the accompanying prospectus is intended as an inactive textual reference only.
 
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THE OFFERING
The summary below describes the principal terms of the mandatory convertible preferred stock. Certain of the terms of the mandatory convertible preferred stock described below are subject to important limitations and exceptions that are described in more detail under the caption “Description of Mandatory Convertible Preferred Stock.” As used in this section, “we,” “our” and “us” refer to RBC Bearings Incorporated and not to any of its subsidiaries.
Issuer
RBC Bearings Incorporated.
Securities Offered
     % Series A Mandatory Convertible Preferred Stock.
Amount Offered
$400,000,000 in aggregate liquidation preference of mandatory convertible preferred stock. We have granted the underwriters an option, which is exercisable within 30 days after the date of this prospectus supplement, to purchase up to an additional $60,000,000 in aggregate liquidation preference of mandatory convertible preferred stock solely to cover over-allotments.
Public Offering Price
$      per share of mandatory convertible preferred stock.
Liquidation Preference
$100 per share of mandatory convertible preferred stock.
Minimum Conversion Rate
    shares of common stock per share of mandatory convertible preferred stock, subject to adjustment.
Maximum Conversion Rate
    shares of common stock per share of mandatory convertible preferred stock, subject to adjustment.
Minimum Conversion Price
$      per share of common stock, subject to adjustment. The initial minimum conversion price is equal to the public offering price per share of our common stock in the Common Stock Concurrent Offering.
Maximum Conversion Price
$      per share of common stock, subject to adjustment.
Floor Price
35% of the minimum conversion price. The initial floor price is $      per share of common stock.
Dividend Payment Dates
January 15, April 15, July 15 and October 15 of each year, beginning on January 15, 2022 and ending on, and including, October 15, 2024.
Regular Record Dates
January 1, April 1, July 1 and October 1 immediately preceding the applicable dividend payment date.
Dividends
The mandatory convertible preferred stock will accumulate cumulative dividends at a rate per annum equal to    % on the liquidation preference thereof, regardless of whether or not declared or funds are legally available for their payment. Subject to the other provisions described in this prospectus supplement, such dividends will be payable when, as and if declared by our board of directors, out of funds legally available for their payment to the extent paid in cash, quarterly in arrears on each dividend payment date to the preferred stockholders of record as of the close of business on the regular record date immediately preceding the applicable dividend payment date. No interest, dividend or other amount will accrue or accumulate on any dividend on the mandatory convertible preferred stock that is not declared or paid on the applicable dividend payment date.
 
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If declared in full for payment in cash, the first scheduled dividend on the mandatory convertible preferred stock payable on January 15, 2022 will be approximately $     per share, assuming that the initial closing of this offering of mandatory convertible preferred stock occurs on           , 2021. Each subsequent scheduled quarterly dividend, if declared in full for payment in cash, will be $  per share.
Declared dividends on the mandatory convertible preferred stock will be payable, at our election, in cash, shares of our common stock or a combination of cash and shares of our common stock, in the manner, and subject to the provisions, described in this prospectus supplement. If we elect to pay any portion of a declared dividend in shares of our common stock, then those shares will be valued at the “dividend stock price” ​(as defined in this prospectus supplement). However, the number of shares of common stock that we will deliver as payment for any declared dividend will be limited to a maximum number equal to the total dollar amount of the declared dividend (including any portion thereof that we have not elected to pay in shares of our common stock) divided by the floor price. If the number of shares that we deliver is limited as a result of this provision, then we will, to the extent we are legally able to do so, declare and pay the related deficiency in cash.
See “Description of Mandatory Convertible Preferred Stock — Dividends.”
Mandatory Conversion
Unless previously converted or redeemed, each share of mandatory convertible preferred stock will automatically convert, for settlement on the “mandatory conversion settlement date,” which is scheduled to occur on or about October 15, 2024.
The conversion rate that will apply to mandatory conversions (the “mandatory conversion rate”) will be determined based on the average of the “daily VWAPs” ​(as defined in this prospectus supplement) over the “mandatory conversion observation period,” which is the 20 consecutive “VWAP trading days” ​(as defined in this prospectus supplement) beginning on, and including, the 21st “scheduled trading day” ​(as defined in this prospectus supplement) immediately before October 15, 2024. We refer to this average as the “mandatory conversion stock price.” As more fully described under the caption “Description of Mandatory Convertible Preferred Stock — Conversion Provisions of the Mandatory Convertible Preferred Stock — Mandatory Conversion,” the mandatory conversion rate will generally be as follows:
[MISSING IMAGE: tm2127414d5-fc_mandatrybw.jpg]
 
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However, if an “unpaid accumulated dividend amount” ​(as defined in this prospectus supplement) exists as of the last VWAP trading day of the mandatory conversion observation period (the “mandatory conversion date”), then we will, in certain circumstances described in this prospectus supplement, increase the applicable conversion rate to compensate preferred stockholders for such unpaid accumulated dividend amount. For purposes of calculating the increase to the applicable conversion rate, our common stock will be valued at the greater of (i) the “dividend make-whole stock price” ​(as defined in this prospectus supplement) and (ii) the floor price. However, if the floor price exceeds the dividend make-whole stock price, then we will, to the extent we are legally able to do so, declare and pay the related deficiency in cash to the converting preferred stockholders.
See “Description of Mandatory Convertible Preferred Stock — Conversion Provisions of the Mandatory Convertible Preferred Stock — Mandatory Conversion.”
Early Conversion at the Option of the Preferred
Stockholders
Preferred stockholders will have the right to convert all or any portion of their shares of mandatory convertible preferred stock at any time until the close of business on the mandatory conversion date. Early conversions (other than in connection with a make-whole fundamental change) will be settled at the minimum conversion rate.
However, if an unpaid accumulated dividend amount exists as of the relevant early conversion date, then we will, in certain circumstances described in this prospectus supplement, increase the applicable conversion rate to compensate preferred stockholders for such unpaid accumulated dividend amount. For purposes of calculating the increase to the applicable conversion rate, our common stock will be valued at the greater of the dividend make-whole stock price and the floor price. If the floor price exceeds the dividend make-whole stock price, then we will have no obligation to pay the related deficiency in cash or any other consideration.
Early Conversion in Connection with a Make-Whole Fundamental Change
If a “make-whole fundamental change” ​(as defined in this prospectus supplement) occurs, then preferred stockholders will, in certain circumstances, be entitled to convert their mandatory convertible preferred stock at an increased conversion rate for a specified period of time. We refer to such a conversion as a “make-whole fundamental change conversion.”
In addition, upon a make-whole fundamental change conversion, we will, in certain circumstances described in this prospectus supplement, pay an additional amount to converting preferred stockholders to compensate them for the unpaid accumulated dividend amount, if any, and a “future dividend present value amount” ​(as defined in this prospectus supplement). We will pay this additional amount in cash, to the extent we are legally able to do so, unless we elect to pay all or
 
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any portion thereof in shares of our common stock. If we elect to pay all or any portion of the unpaid accumulated dividend amount or future dividend present value amount in shares of our common stock, then those shares will be valued at the greater of the dividend make-whole stock price and the floor price. However, if the floor price exceeds the dividend make-whole stock price, then we will, to the extent we are legally able to do so, declare and pay the related deficiency in cash to the converting preferred stockholders.
See “Description of Mandatory Convertible Preferred Stock — Conversion Provisions of the Mandatory Convertible Preferred Stock — Conversion During a Make-Whole Fundamental Change Conversion Period.”
Optional Redemption
We expect to use the net proceeds from this offering and, if they are consummated, the Term Facility, the Revolving Facility and the Additional Offerings to fund a portion of the cash purchase price for the Pending Acquisition, to pay acquisition-related fees and expenses, and for other general corporate purposes. If the Pending Acquisition has not closed as of the close of business on January 26, 2022, or if, before such time, the Purchase Agreement is terminated in accordance with its terms or our board of directors determines, in its reasonable judgment, that the Pending Acquisition will not occur, then we will have the right to redeem all, but not less than all, of the mandatory convertible preferred stock.
If the average of the last reported sale prices per share of our common stock for the five consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice (such average, the “redemption stock price”) does not exceed the minimum conversion price, then the redemption price per share of mandatory convertible preferred stock will consist of cash in an amount equal to the liquidation preference per share plus accumulated and unpaid dividends to, but excluding, the redemption date (subject to the right of preferred stockholders as of the close of business on a regular record date for a declared dividend to receive that declared dividend). If the redemption stock price exceeds the minimum conversion price, then the redemption price will consist of a “redemption option value share amount” and a “redemption dividend value dollar amount” ​(each, as defined in this prospectus supplement), which will be payable, at our election, in cash, shares of our common stock or a combination of cash and shares of our common stock, in the manner, and subject to the provisions, described in this prospectus supplement.
See “Description of Mandatory Convertible Preferred Stock — Optional Redemption Upon an Acquisition Non-Occurrence Event.”
Voting Rights
The mandatory convertible preferred stock will have no voting rights except as described in this prospectus supplement or as provided in our certificate of incorporation (as defined below) or required by the Delaware General Corporation Law.
 
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If accumulated dividends on the outstanding mandatory convertible preferred stock have not been declared and paid in an aggregate amount corresponding to six or more dividend periods, whether or not consecutive, then, subject to the other provisions described in this prospectus supplement, we will cause the authorized number of our directors to be increased by two and the holders of the mandatory convertible preferred stock, voting together as a single class with the holders of each class or series of “voting parity stock” ​(as defined in this prospectus supplement), if any, will have the right to elect two directors (the “preferred stock directors”) to fill such two new directorships at our next annual meeting of stockholders (or, if earlier, at a special meeting of our stockholders called for such purpose in accordance with the procedures described below under the caption “Description of Mandatory Convertible Preferred Stock — Voting Rights — Right to Designate Two Preferred Stock Directors Upon a Dividend Non-Payment Event”). If, thereafter, all accumulated and unpaid dividends on the outstanding mandatory convertible preferred stock have been paid in full, then the right of the holders of the mandatory convertible preferred stock to elect two preferred stockholders will terminate. Upon the termination of such right with respect to the mandatory convertible preferred stock and all other outstanding voting parity stock, if any, the term of office of each person then serving as a preferred stock director will immediately and automatically terminate and the authorized number of our directors will automatically decrease by two.
Subject to the exceptions and limitations described in this prospectus supplement, the affirmative vote or consent of preferred stockholders, and holders of each class or series of voting parity stock, if any, representing at least two thirds of the combined outstanding voting power of the mandatory convertible preferred stock and such voting parity stock will be required for certain transactions or events, including (i) certain amendments to our certificate of incorporation or the certificate of designations establishing the terms of the mandatory convertible preferred stock; (ii) certain consolidations, combinations and mergers involving us; and (iii) certain binding or statutory share exchanges or reclassifications involving the mandatory convertible preferred stock.
Ranking
The mandatory convertible preferred stock will rank as follows:

senior to (i) “dividend junior stock” ​(as defined in this prospectus supplement, and which includes our common stock) with respect to the payment of dividends; and (ii) “liquidation junior stock” ​(as defined in this prospectus supplement, and which includes our common stock) with respect to the distribution of assets upon our liquidation, dissolution or winding up;

equally with (i) “dividend parity stock” ​(as defined in this prospectus supplement) with respect to the payment of dividends; and (ii) “liquidation parity stock” ​(as defined in this prospectus supplement) with respect to the distribution of assets upon our liquidation, dissolution or winding up;

junior to (i) “dividend senior stock” ​(as defined in this
 
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prospectus supplement) with respect to the payment of dividends; and (ii) “liquidation senior stock” ​(as defined in this prospectus supplement) with respect to the distribution of assets upon our liquidation, dissolution or winding up;

junior to our existing and future indebtedness and other liabilities; and

structurally junior to all of our subsidiaries’ existing and future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) capital stock.
As of July 3, 2021, excluding intercompany indebtedness, we had approximately $10.8 million of consolidated indebtedness outstanding, and one of our subsidiaries expects to issue $500.0 million in aggregate principal amount of Senior Notes in the Senior Notes Offering, and we expect to enter into the New Credit Agreement, which we expect to provide a Term Facility in an amount not to exceed $1.3 billion and a Revolving Facility in an amount not to exceed $500.0 million.
Listing
No public market currently exists for the mandatory convertible preferred stock. We intend to apply to list the mandatory convertible preferred stock on the Nasdaq Global Select Market under the symbol “ROLLP.” If the listing is approved, we expect trading to commence within 30 days after the date the mandatory convertible preferred stock is first issued.
Nasdaq Global Select Market Symbol for our Common
Stock
Our common stock is listed on the Nasdaq Global Select Market under the symbol “ROLL.” On September 16, 2021, the last reported sale price of our common stock was $212.24 per share.
Transfer Agent, Paying Agent and Conversion Agent
Computershare Trust Company, N.A.
Concurrent Offering of Common Stock
Concurrently with this offering, we expect to offer 3,000,000 shares of our common stock, plus up to an additional 450,000 shares of our common stock that the underwriters of the Common Stock Concurrent Offering have the option to purchase from us. The Common Stock Concurrent Offering is being made pursuant to a separate prospectus supplement in a public offering registered under the Securities Act. The completion of this offering is not contingent on the completion of the Common Stock Concurrent Offering, and the completion of the Common Stock Concurrent Offering is not contingent on the completion of this offering. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell, or the solicitation of an offer to buy, any of the shares of our common stock we are offering in the Common Stock Concurrent Offering. See “The Additional Offerings — Common Stock Concurrent Offering.”
Potential Offering of Senior
Notes
In addition to this offering, one of our subsidiaries, Roller Bearing Company of America, Inc., intends to offer
 
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$500.0 million in aggregate principal amount of Senior Notes. The offering of Senior Notes is expected to be made pursuant to a confidential offering memorandum only to qualified institutional buyers (as defined in Rule 144A under the Securities Act) or to non-U.S. persons (as defined in Regulation S under the Securities Act) outside the United States in transactions that are exempt from the registration and prospectus-delivery requirements of the Securities Act. The completion of this offering is not contingent on the completion of the Senior Notes Offering, and the completion of the Senior Notes Offering is not contingent on the completion of this offering. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell, or the solicitation of an offer to buy, any of the Senior Notes. As of the date of this prospectus supplement, we have yet to agree to the terms of or enter into definitive documentation for the Senior Notes Offering. The terms of the Senior Notes remain subject to change and may differ materially from what we expect. The foregoing summary of the anticipated terms of the Senior Notes Offering reflects assumptions that management considers to be reasonable as of the date hereof, but remains subject to uncertainties and contingencies which may be beyond our control. No assurances can be given that the Senior Notes Offering will be consummated on the terms anticipated by management, if at all. See “The Additional Offerings — Senior Notes Offering” of this prospectus supplement and “Risk Factors — Risks Related to the Pending Acquisition — We may not complete the Financing Transactions on terms acceptable to us, within the time frame we anticipate or at all” of the accompanying prospectus.
The New Credit Agreement
We are currently in active negotiations with certain lenders to enter into the New Credit Agreement with our subsidiary, Roller Bearing Company of America, Inc., as borrower, which is expected to provide a Term Facility in an amount not to exceed $1.3 billion and a Revolving Facility in an amount not to exceed $500.0 million. As of the date of this prospectus supplement, we have yet to agree to the terms of or enter into definitive documentation for the New Credit Agreement and the terms thereof remain subject to change. No assurances can be given that the New Credit Agreement will be executed on such terms, or at all. See “Description of Indebtedness.”
Shares Outstanding After this Offering and the Common Stock Concurrent Offering
Immediately after the consummation of this offering, 4,000,000 (or 4,600,000, if the underwriters fully exercise their option to purchase additional mandatory convertible preferred stock) shares of mandatory convertible preferred stock will be outstanding, at an assumed price of $100 per share of mandatory convertible preferred stock. If the Common Stock Concurrent Offering is consummated, 28,420,621 (or, if the underwriters of the Common Stock Concurrent Offering fully exercise their option to purchase additional shares of common stock, 28,870,621) shares of our common stock will be outstanding immediately after the consummation of the Common Stock Concurrent Offering, assuming we offer
 
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3,000,000 shares of common stock in the Common Stock Concurrent Offering (or 3,450,000 shares of common stock if the underwriters of the Common Stock Concurrent Offering fully exercise their option to purchase additional shares of common stock).
Use of Proceeds
We estimate that the net proceeds to us from this offering will be approximately $387.2 million (or approximately $445.4 million if the underwriters fully exercise their option to purchase additional mandatory convertible preferred stock), based on an assumed price of $100 per share of mandatory convertible preferred stock and after deducting underwriting discounts and commissions and our estimated offering expenses. We estimate that the net proceeds to us from the Common Stock Concurrent Offering, if it is consummated, will be approximately $605.6 million (or approximately $696.5 million if the underwriters of the Common Stock Concurrent Offering fully exercise their option to purchase additional shares of common stock), assuming we offer 3,000,000 shares of common stock in the Common Stock Concurrent Offering (or 3,450,000 shares of common stock if the underwriters of the Common Stock Concurrent Offering fully exercise their option to purchase additional shares of common stock) and based on an assumed public offering price of $212.24, the last reported sale price of our common stock on Nasdaq on September 16, 2021, after deducting underwriting discounts and commissions and our estimated offering expenses. Additionally, we expect that the New Credit Agreement will provide for a Term Facility in an amount not to exceed $1.3 billion and a Revolving Facility in an amount not to exceed $500.0 million. We estimate that the proceeds from the Senior Notes Offering, if it is consummated, will be approximately $500.0 million, before deducting the initial purchasers’ discounts and commissions and before deducting estimated offering expenses. However, the terms of the Senior Notes remain subject to change and may differ materially from what we expect.
We intend to use the net proceeds from this offering and, if they are consummated, the Term Facility, the Revolving Facility and the Additional Offerings to fund a portion of the cash purchase price for the Pending Acquisition, to pay acquisition-related fees and expenses, and for other general corporate purposes. The completion of this offering is not contingent on the consummation of the Term Facility, the Revolving Facility or the Additional Offerings.
Risk Factors
Investing in our mandatory convertible preferred stock involves a high degree of risk. See “Risk Factors” included in this prospectus supplement, the accompanying prospectus and other information included or incorporated by reference in this prospectus supplement and the accompanying prospectus for a discussion of factors you should carefully consider before deciding to invest in the mandatory convertible preferred stock.
Material U.S. Federal Income Tax Considerations
For a description of material U.S. federal income tax consequences of purchasing, owning, converting and disposing
 
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of the mandatory convertible preferred stock and owning and disposing of the shares of our common stock received upon conversion of the mandatory convertible preferred stock, see “Material U.S. Federal Income Tax Considerations.”
Book-Entry Form
We will initially issue the mandatory convertible preferred stock in the form of one or more global certificates registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), which we will deposit with the transfer agent as custodian for DTC. Beneficial interests in global certificates will be shown on, and transfers of mandatory convertible preferred stock represented by global certificates will be effected only through, the records maintained by DTC. Except in limited circumstances, we will not issue physical certificates representing any mandatory convertible preferred stock. See “Description of Mandatory Convertible Preferred Stock — Book Entry, Settlement and Clearance.”
The number of outstanding shares of our common stock presented in this prospectus supplement is based on 25,420,621 shares outstanding as of July 3, 2021. As of July 3, 2021, an aggregate of 544,292 shares of common stock were reserved for future issuance under our 2013 Long-Term Incentive Plan and 2017 Long-Term Incentive Plan (each, as defined and further described in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021 incorporated by reference in this prospectus supplement). On September 8, 2021, our 2021 Long-Term Incentive Plan (as defined in our Current Report on Form 8-K filed with the SEC on September 10, 2021) came into effect when it was approved by our stockholders. An aggregate of 1,500,000 shares of common stock are issuable under the 2021 Long-Term Incentive Plan and, as of the date of this prospectus supplement, we have yet to issue any awards under our 2021 Long-Term Incentive Plan. The outstanding share information set forth above assumes no issuance of shares of common stock reserved for issuance under our equity incentive plans. It excludes (i)             (or            , if the underwriters of this offering of mandatory convertible preferred stock fully exercise their option to purchase additional shares of mandatory convertible preferred stock) shares of common stock issuable upon conversion of the mandatory convertible preferred stock at the initial maximum conversion rate; and (ii) additional shares of common stock that we may elect to issue as payment for all or any portion of declared dividends on the mandatory convertible preferred stock. Additionally, the outstanding share information set forth above assumes:

no exercise of options outstanding under our 2013 Long-Term Incentive Plan. As of July 3, 2021, there were 190,847 outstanding options to purchase shares of common stock granted under the 2013 Long-Term Incentive Plan with a weighted average exercise price of $92.20; and

no exercise of options outstanding under our 2017 Long-Term Incentive Plan. As of July 3, 2021, there were 503,794 outstanding options to purchase shares of common stock granted under the 2017 Long-Term Incentive Plan with a weighted average exercise price of $156.77.
 
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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONDENSED
FINANCIAL INFORMATION
The information below is only a summary and should be read in conjunction with RBC’s audited and unaudited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021 and our Quarterly Report on Form 10-Q for the quarter ended July 3, 2021, as well as Dodge’s audited combined financial statements for the year ended December 31, 2020 and unaudited condensed combined financial statements for the three and six months ended June 30, 2021 and 2020, which are included in our Current Report on Form 8-K filed with the SEC on September 20, 2021, which are incorporated by reference herein, in addition to the section titled “Management’s Discussion and Analysis of Dodge’s Financial Condition and Results of Operations” in this prospectus supplement.
RBC
The following tables set forth certain summary historical consolidated financial information of RBC and summary unaudited pro forma condensed combined financial information of RBC and Dodge for the dates and periods indicated. The summary historical consolidated financial information of RBC has been derived from, and should be read in conjunction with, RBC’s audited and unaudited consolidated financial statements, which have been filed with the SEC and incorporated by reference herein.
The summary unaudited pro forma condensed combined financial information presented below has been derived by applying to the historical consolidated financial statements of RBC the pro forma adjustments described in the unaudited pro forma condensed combined financial information included as Exhibit 99.3 within RBC’s Current Report on Form 8-K filed with the SEC on September 20, 2021. Such unaudited pro forma condensed combined financial information gives effect to the Pending Acquisition and the Financing Transactions as if they had occurred on March 29, 2020, the first day of RBC’s fiscal year 2021 and the beginning of RBC’s annual period, in the case of the unaudited pro forma condensed combined statements of operations, and as of July 3, 2021, in the case of the unaudited pro forma condensed combined balance sheet. The unaudited pro forma condensed combined financial information contains estimated adjustments, based upon available information and certain assumptions that we believe are reasonable under the circumstances. The summary unaudited pro forma condensed combined financial information has been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial information included as Exhibit 99.3 within RBC’s Current Report on Form 8-K filed with the SEC on September 20, 2021, which is incorporated by reference herein and should be read in its entirety. See also the section below titled “ — Dodge” for certain summary historical combined information of Dodge.
The unaudited pro forma condensed combined financial information has been prepared by us solely for informational purposes in accordance with Regulation S-X Article 11, “Pro Forma Financial Information” and is not necessarily indicative of what our combined company’s financial condition or results of operations would have been had the Pending Acquisition and the Financing Transactions occurred at an earlier date or on the dates assumed. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial condition and results of operations of our combined company. The actual results of our combined company may differ significantly from those reflected in the unaudited pro forma combined financial information. The unaudited combined pro forma financial information does not include adjustments to reflect the realization of any costs from operating efficiencies, synergies or other restructuring activities that might result from the Pending Acquisition.
 
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RBC Historical
Pro Forma Combined
(in thousands, except share and per share
data)
Year Ended
April 3, 2021
Three Months
Ended
July 3, 2021
Year Ended
April 3, 2021
Three Months
Ended
July 3, 2021
Statement of Operations Information
Net sales
$ 608,984 $ 156,205 $ 1,158,981 $ 323,163
Cost of sales
374,878 92,432 759,084 198,993
Gross margin
234,106 63,773 399,897 124,170
Operating expenses:
Selling, general and administrative
106,000 29,802 184,289 54,196
Other, net
16,648 3,248 123,611 18,171
Total operating expenses
122,648 33,050 307,900 72,367
Operating income (loss)
111,458 30,723 91,997 51,803
Interest expense, net
1,430 319 54,338 13,509
Other non-operating (income)/expense
(31) (465) 359 (401)
Income (loss) before income taxes
110,059 30,869 37,300 38,695
Provision (benefit) for income taxes
20,426 4,870 5,694 6,974
Net income (loss)
$ 89,633 $ 25,999 $ 31,606 $ 31,721
Dividends on Preferred Stock
(20,000) (5,000)
Net income (loss) available to the stockholders
$ 89,633 $ 25,999 $ 11,606 $ 26,721
Net income (loss) per common share:
Basic
$ 3.61 $ 1.04 $ 0.42 $ 0.95
Diluted
$ 3.58 $ 1.03 $ 0.41 $ 0.94
(in thousands)
RBC Historical
As of July 3, 2021
Pro Forma Combined
As of July 3, 2021
Balance Sheet Information
Cash and cash equivalents
$ 175,771 $ 139,668
Marketable securities
120,320
Total current assets
786,124 861,848
Total assets
1,490,599 4,726,093
Total current liabilities
95,502 296,909
Long-term debt, less current portion
10,249 1,726,444
Total liabilities
216,223 2,503,368
Total stockholders’ equity
1,274,376 2,222,725
Total liabilities and stockholders’ equity
1,490,599 4,726,093
Non-GAAP Financial Measures
We present Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Free Cash Flow and Free Cash Flow Conversion, each of which are non-GAAP financial measures, to supplement our results of operations presented in accordance with U.S. GAAP. Our calculation of these non-GAAP financial measures may differ from similarly-titled non-GAAP financial measures reported by our peer companies. These non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with U.S. GAAP. See “Basis of Presentation — Non-GAAP Financial Measures.”
 
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(in thousands,
except percentages)
Year Ended
April 3,
2021
Year Ended
March 28,
2020
Year Ended
March 30,
2019
Three Months
Ended
July 3,
2021
Twelve Months
Ended
July 3,
2021
Adjusted EBITDA
$ 174,255 $ 209,220 $ 195,504 $ 45,264 $ 175,752
Adjusted EBITDA Margin
28.6% 28.8% 27.8% 29.0% 28.9%
Adjusted Net Income
$ 96,888 $ 126,398 $ 119,681 $ 26,319 $ 99,586
Free Cash Flow
$ 140,681 $ 118,324
 $67,201
$ 49,926 $ 146,123
Free Cash Flow Conversion
145.2% 93.6% 56.2% 189.7% 146.7%
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as operating income excluding the impact of costs related to restructuring and consolidation, depreciation and amortization, share-based stock compensation expense and certain other one-off items unrelated to the ordinary operations of our company. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales, expressed as a percentage.
We consider Adjusted EBITDA and Adjusted EBITDA Margin to be useful measures as they help illustrate underlying trends in our business and our historical operating performance on a more consistent basis. However, Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools, including: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect cash used for capital expenditures for the replacements of such assets in the future; and (b) Adjusted EBITDA and Adjusted EBITDA Margin do not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments.
A reconciliation of Adjusted EBITDA to operating income is presented below for the periods indicated. We encourage investors to review our financial information in its entirety, not to rely on any single financial measure and to view Adjusted EBITDA in conjunction with operating income.
(in thousands)
Year Ended
April 3,
2021
Year Ended
March 28,
2020
Year Ended
March 30,
2019
Three Months
Ended July 3,
2021
Twelve Months
Ended July 3,
2021
Operating Income
$ 111,458 $ 156,785 $ 132,035 $ 30,723 $ 113,367
Restructuring and consolidation
7,247 1,036 1,180 557 6,685
Depreciation and amortization
32,744 31,420 29,658 8,212 32,560
Share-based stock compensation expense
21,299 20,150 16,087 5,772 21,633
Inventory purchase accounting adjustment
368
Net gain on sale of Houston
building(1)
(1,440)
Net loss on sale of Miami division(2)
16,544
Acquisition costs
901
Cyber event costs(3)
1,507 1,507
Adjusted EBITDA
$ 174,255 $ 209,220 $ 195,504 $ 45,264 $ 175,752
(1)
Relates to the gain on the sale of a building owned in Houston, Texas, which is no longer used for our operations.
(2)
Relates to the loss on the sale of our Miami division, which was sold in the third quarter of the fiscal year ended March 30, 2019.
 
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(3)
Represents costs related to a certain cybersecurity incident that occurred during February 2021, further details of which are provided in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021, which is incorporated by reference in this prospectus supplement.
Adjusted Net Income
We define Adjusted Net Income as net income excluding the impact of costs related to restructuring and consolidation and certain one-off items, including costs related to a certain cybersecurity incident that occurred during February 2021, further details of which are provided in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021, which is incorporated by reference in this prospectus supplement. We consider Adjusted Net Income to be a useful measure that illustrates how management assesses the performance and growth of our business. However, Adjusted Net Income is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. Our calculation of Adjusted Net Income may differ from similarly-titled non-GAAP financial measures reported by our peer companies.
A reconciliation of Adjusted Net Income to net income is presented below for the periods indicated. We encourage investors to review our financial information in its entirety, not to rely on any single financial measure and to view Adjusted Net Income in conjunction with net income.
(in thousands)
Year Ended
April 3,
2021
Year Ended
March 28,
2020
Year Ended
March 30,
2019
Three Months
Ended July 3,
2021
Twelve Months
Ended July 3,
2021
Net Income
$ 89,633 $ 126,036 $ 105,193 $ 25,999 $ 92,943
Inventory purchase accounting adjustment
303
Net gain on sale of Houston
building(1)
(1,132)
Net loss on sale of Miami division(2)
12,496
Acquisition costs
769
Cyber event costs(3)
1,269 1,269
Restructuring and consolidation
5,848 827 1,012 469 5,421
Foreign exchange translation loss
187 738 (111) 11 137
Loss on extinguishment of long-term debt
815
Withholding tax associated with repatriation of cash
943
Discrete and other tax items
credit (benefit)
(49) (1,143) (667) (160) (184)
Adjusted Net Income
$ 96,888 $ 126,398 $ 119,681 $ 26,319 $ 99,586
(1)
Relates to the gain on the sale of a building owned in Houston, Texas, which is no longer used for our operations.
(2)
Relates to the loss on the sale of our Miami division, which was sold in the third quarter of the fiscal year ended March 30, 2019.
(3)
Represents costs related to a certain cybersecurity incident that occurred during February 2021, further details of which are provided in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021, which is incorporated by reference in this prospectus supplement.
Free Cash Flow and Free Cash Flow Conversion
We define Free Cash Flow as cash provided by operating activities less capital expenditures and we define Free Cash Flow Conversion as Free Cash Flow divided by Adjusted Net Income. We consider Free Cash Flow and Free Cash Flow Conversion to be useful measures that illustrate how management
 
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assesses the liquidity and profitability of our business. However, Free Cash Flow and Free Cash Flow Conversion should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. Our calculation of Free Cash Flow and Free Cash Flow Conversion may differ from similarly-titled non-GAAP financial measures reported by our peer companies. Additionally, Free Cash Flow and Free Cash Flow Conversion have limitations as analytical tools, including: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Free Cash Flow and Free Cash Flow Conversion do not reflect cash used for capital expenditures for the replacements of such assets in the future; and (b) Free Cash Flow and Free Cash Flow Conversion do not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments.
A reconciliation of Free Cash Flow to cash provided by operating activities is presented below for the periods indicated. We encourage investors to review our financial information in its entirety, not to rely on any single financial measure and to view Free Cash Flow in conjunction with cash provided by operating activities.
(in thousands)
Year Ended
April 3,
2021
Year Ended
March 28,
2020
Year Ended
March 30,
2019
Three Months
Ended July 3,
2021
Twelve Months
Ended July 3,
2021
Cash provided by operating
activities
$ 152,453 $ 155,621 $ 108,547 $ 53,293 $ 157,387
Capital expenditures
(11,772) (37,297) (41,346) (3,367) (11,264)
Free Cash Flow
$ 140,681 $ 118,324
 $67,201
$ 49,926 $ 146,123
Dodge
In light of the significance of the Pending Acquisition, we filed a Current Report on Form 8-K with the SEC on September 20, 2021 containing (i) audited combined financial statements of Dodge as of and for the fiscal years ended December 31, 2020 and 2019 and (ii) unaudited condensed combined financial statements of Dodge, which consist of the combined balance sheet as of June 30, 2021, the related combined statements of income and comprehensive income for the three and six months ended June 30, 2021 and 2020, and the combined statements of changes in equity and cash flows for the six months ended June 30, 2021 and 2020 (collectively, the “Dodge Combined Financial Statements”). The Current Report on Form 8-K filed with the SEC on September 20, 2021 is incorporated by reference herein and should be read in its entirety.
The following tables set forth certain summary historical combined financial information of Dodge for the dates and periods indicated. This financial information has been derived from, and should be read in conjunction with, the Dodge Combined Financial Statements, which have been filed with the SEC and incorporated by reference herein as described in the preceding paragraph, and the sections titled “Basis of Presentation” and “Management’s Discussion and Analysis of Dodge’s Financial Condition and Results of Operations” in this prospectus supplement. See also the section titled “Prospectus Supplement Summary” for a discussion of certain non-GAAP financial measures of Dodge.
Dodge Historical
(in thousands)
Six Months Ended
June 30, 2021
Year Ended
December 31, 2020
Statement of Income Information
Revenues
$ 335,923 $ 549,997
Cost of sales
(221,815) (381,736)
Gross profit
114,108 168,261
Operating expenses:
Selling, general and administrative expenses
(41,374) (70,850)
 
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Dodge Historical
(in thousands)
Six Months Ended
June 30, 2021
Year Ended
December 31, 2020
Non-order related research and development expenses
(6,250) (7,439)
Other income (expense), net
885 (449)
Interest and other finance expense
57 220
Income from operations, before income taxes
67,426 89,743
Income tax expense
(16,654) (22,179)
Net income
$ 50,772 $ 67,564
(in thousands)
Dodge Historical
As of June 30, 2021
Balance Sheet Information
Receivables, net
$ 90,744
Inventories, net
117,485
Total current assets
208,840
Total assets
1,363,106
Total current liabilities
136,407
Total liabilities
214,279
Total equity
1,148,827
Total liabilities and stockholders’ equity
1,363,106
 
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RISK FACTORS
Investing in our mandatory convertible preferred stock involves a high degree of risk. Before deciding to invest in our mandatory convertible preferred stock, you should carefully consider the discussion of risks and uncertainties described or referred to below and under the heading “Risk Factors” contained in the accompanying prospectus and in the documents that are incorporated by reference herein and therein, including those in our Annual Report on Form 10-K for the year ended April 3, 2021, our Quarterly Report on Form 10-Q for the quarter ended July 3, 2021 and other documents we file with the SEC. The occurrence of any of these risks may materially harm our business, results of operations and financial condition. As a result, the trading price of the mandatory convertible preferred stock and our common stock may decline, and you might lose part or all of your investment. When used in this section to discuss the terms of the mandatory convertible preferred stock, “we,” “our” and “us” refer to RBC Bearings Incorporated and not to its subsidiaries.
Important risks relating to our business and industry, including risks related to the Pending Acquisition and risks relating to the impact of the COVID-19 pandemic, which you should carefully consider, are described in the documents referred to above. Supplemental risk factors relating to Dodge’s business, this offering and our common stock follow below.
Risks Related to Dodge’s Business
Dodge’s operations in emerging markets expose it to risks associated with conditions in those markets.
Dodge has operations in certain emerging markets, including a manufacturing facility in China. Operations in emerging markets can present risks that are not encountered in countries with well-established economic and political systems, including:

economic instability, which could make it difficult for Dodge to anticipate future business conditions in these markets, cause delays in the placement of orders for projects that Dodge has been awarded and subject Dodge to volatile geographic markets,

political or social instability, which could make Dodge’s customers less willing to make cross-border investments in such regions and could complicate Dodge’s dealings with governments regarding permits or other regulatory matters, local businesses and workforces,

boycotts and embargoes that may be imposed by the international community on countries in which Dodge does business or where Dodge seeks to do business could adversely affect the ability of Dodge’s operations in those countries to obtain the materials necessary to fulfill contracts and Dodge’s ability to pursue business or establish operations in those countries,

foreign state takeovers of Dodge’s and Dodge’s customers’ facilities,

significant fluctuations in interest rates and currency exchange rates,

the imposition of unexpected taxes or other payments on Dodge’s revenues in these markets, and

the introduction of exchange controls and other restrictions by foreign governments.
Additionally, political and social instability resulting from increased violence in certain countries in which Dodge does business has raised concerns about the safety of Dodge’s personnel. These concerns may hinder Dodge’s ability to send personnel abroad and to hire and retain local personnel. Such concerns may require Dodge to increase security for personnel traveling to and working in affected countries or to restrict or wind-down operations in such countries, which may negatively impact Dodge and result in higher costs and inefficiencies. Consequently, Dodge’s exposure to the conditions in or affecting emerging markets may adversely affect Dodge’s business, financial condition, results of operations and liquidity.
If Dodge is unable to obtain performance and other guarantees from financial institutions, it may be prevented from bidding on, or obtaining, some contracts, or its costs with respect to such contracts could be higher.
In the normal course of Dodge’s business and in accordance with industry practice, it provides a number of guarantees including bid bonds, advance payment bonds or guarantees, performance bonds
 
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or guarantees and warranty bonds or guarantees, which guarantee its performance. These guarantees may include guarantees that a project will be completed on time or that a project or particular equipment will achieve other defined performance criteria. If Dodge fails to satisfy any defined criteria, it may be required to make payments in cash or in kind. Performance guarantees frequently are requested in relation to large projects.
Some customers of Dodge require that performance guarantees be issued by a financial institution. In considering whether to issue a guarantee on Dodge’s behalf, financial institutions consider its credit ratings. If, in the future, Dodge cannot obtain such a guarantee from a financial institution on commercially reasonable terms or at all, it could be prevented from bidding on, or obtaining, some contracts, or its costs with respect to such contracts could be higher, which would reduce the profitability of the contracts. If Dodge cannot obtain guarantees on commercially reasonable terms or at all from financial institutions in the future, there could be a material impact on its business, financial condition, results of operations or liquidity.
Risks Related to the Offering, our Mandatory Convertible Preferred Stock and our Common Stock
The mandatory convertible preferred stock will be junior to our indebtedness and will be structurally junior to the liabilities of our subsidiaries.
If we liquidate, dissolve or wind up, whether voluntarily or involuntarily, then our assets will be available to distribute to our equity holders, including holders of the mandatory convertible preferred stock, only if all of our then-outstanding indebtedness is first paid in full. The remaining assets, if any, would then be allocated among the holders of our equity securities in accordance with their respective liquidation rights. There may be insufficient remaining assets available to pay the liquidation preference and unpaid accumulated dividends on the mandatory convertible preferred stock. As of July 3, 2021, excluding intercompany indebtedness, we had approximately $10.8 million of consolidated indebtedness outstanding, one of our subsidiaries expects to issue $500.0 million in aggregate principal amount of Senior Notes in the Senior Notes Offering, and we expect to enter into the New Credit Agreement, which we expect to provide a Term Facility in an amount not to exceed $1.3 billion and a Revolving Facility in an amount not to exceed $500.0 million.
In addition, our subsidiaries will have no obligation to pay any amounts on the mandatory convertible preferred stock. If any of our subsidiaries liquidates, dissolves or winds up, whether voluntarily or involuntarily, then we, as a direct or indirect common equity owner of that subsidiary, will be subject to the prior claims of that subsidiary’s creditors, including trade creditors and preferred equity holders. We may never receive any amounts from that subsidiary, and, accordingly, the assets of that subsidiary may never be available to make payments on the mandatory convertible preferred stock.
We conduct all of our operations through our subsidiaries and will rely on our subsidiaries to pay cash dividends on the mandatory convertible preferred stock.
We are a holding company and conduct all of our operations through our subsidiaries. Accordingly, our ability to obtain funds sufficient to declare and pay dividends on the mandatory convertible preferred stock in cash will depend on the cash flows of our subsidiaries and their ability to make distributions to us. None of our subsidiaries is under any obligation to make payments to us, and any payments to us would depend on the earnings or financial condition of our subsidiaries and various business considerations. Statutory, contractual or other restrictions may also limit our subsidiaries’ ability to pay dividends or make distributions, loans or advances to us. For example, pursuant to our credit agreement, dated April 24, 2015, by and among RBC, Roller Bearing Company of America, Inc., Wells Fargo Bank, National Association, as administrative agent, collateral agent, swingline lender and letter of credit issuer (“Wells Fargo”) and the other lenders party thereto, as amended from time to time (the “Domestic Credit Facility”), we and certain of our subsidiaries are subject to limitations on our ability to declare dividends. Additionally, pursuant to our credit facility agreements (the “Foreign Credit Agreements”), each dated as of August 15, 2019, by and between our subsidiary, Schaublin SA (“Schaublin”), and Credit Suisse (Switzerland) Ltd., Schaublin is restricted from distributing any dividends insofar as any overdue amounts under the Foreign
 
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Credit Facilities remain outstanding. For these reasons, we may not have access to any assets or cash flows of our subsidiaries to declare and pay cash dividends on the mandatory convertible preferred stock.
The market price and trading volume of our common stock may be volatile, which could result in rapid and substantial losses for our stockholders.
The market price of our common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines significantly, you may be unable to sell any shares of common stock you receive upon the conversion of, or the payment of dividends on, your mandatory convertible preferred stock at or above your purchase price, if at all. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect the price of our common stock or result in fluctuations in the price or trading volume of our common stock include: variations in our quarterly operating results; failure to meet our sales estimates; publication of adverse research reports about us or the failure of securities analysts to cover our common stock after an offering; additions or departures of our executive officers and other key management personnel; our inability to efficiently integrate acquisitions, including our pending acquisition of Dodge, into our operations; adverse market reaction to any indebtedness we may incur or securities we may issue in the future; actions by stockholders; changes in market valuations of similar companies; speculation in the press or investment community; changes or proposed changes in laws or regulations or differing interpretations thereof affecting our business or enforcement of these laws and regulations, or announcements relating to these matters; and general market and economic conditions. Volatility in the market price of our common stock could also make us less attractive to certain investors and/or invite speculative trading in our common stock or other securities we may issue in the future. In addition, securities exchanges, and in particular Nasdaq, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of the equity securities of many companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.
You will bear the risk of fluctuations in the trading price of our common stock.
Unless previously converted or redeemed, each share of mandatory convertible preferred stock will automatically convert, for settlement on the mandatory conversion settlement date, which is scheduled to occur on or about October 15, 2024, subject to postponement in certain limited circumstances, into between the minimum conversion rate of       shares of our common stock and the maximum conversion rate of       shares of our common stock, subject to adjustment. The actual number of shares issuable upon mandatory conversion will be determined based on the average of the “daily VWAPs” ​(as defined in this prospectus supplement) over the “mandatory conversion observation period,” which is the 20 consecutive “VWAP trading days” ​(as defined in this prospectus supplement) beginning on, and including, the 21st “scheduled trading day” ​(as defined in this prospectus supplement) immediately before October 15, 2024. We refer to this average as the “mandatory conversion stock price.” If the mandatory conversion stock price is less than the minimum conversion price (which initially is $      per share, the public offering price per share of our common stock in the Common Stock Concurrent Offering, and is subject to adjustment), then the value of the shares of our common stock that you will receive upon mandatory conversion (excluding any shares issuable as payment for unpaid dividends) will be less than the liquidation preference of the mandatory convertible preferred stock, which is $100 per share of mandatory convertible preferred stock. Accordingly, if the trading price of our common stock declines, or does not increase, during the time between the pricing of this offering and the mandatory conversion observation period, you may incur a loss in your investment in the mandatory convertible preferred stock. Furthermore, if the trading price of our common stock declines during the period between the last day of the mandatory conversion observation period and the date that we deliver the shares due upon mandatory conversion, then the value of the shares you receive may be worth significantly less at the time you receive them than the value of those shares as of the last day of the mandatory conversion observation period. Accordingly, you will bear the entire risk of a decline in the market price of our common stock, and any such decline could be substantial.
 
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In addition, if we elect to pay any portion of a declared dividend on the mandatory convertible preferred stock in shares of our common stock, then the number of shares that we will deliver as payment will depend on the average of the daily VWAPs per share of common stock over the “dividend stock price observation period,” which is the five consecutive VWAP trading days beginning on, and including, the sixth scheduled trading day immediately before the relevant dividend payment date. If the trading price of our common stock declines during the period between the last day of the dividend stock price observation period and the date that we deliver the shares, then the value of the shares you receive as payment for the dividend may be worth significantly less than the dollar amount of the declared dividend.
If the trading price of our common stock increases, then a direct investment in our common stock will earn higher returns from such increase than would an investment in the mandatory convertible preferred stock.
The value of the shares of our common stock that you will receive upon mandatory conversion (excluding any shares issuable as payment for unpaid dividends) of your shares of mandatory convertible preferred stock, unless previously redeemed, will generally exceed the liquidation preference of the mandatory convertible preferred stock only if the mandatory conversion stock price exceeds the maximum conversion price, which initially is $      per share and is subject to adjustment. The maximum conversion price represents an increase of approximately    % over the minimum conversion price, which initially is the public offering price per share of our common stock in the Common Stock Concurrent Offering. In addition, if the mandatory conversion stock price is greater than the minimum conversion price and less than the maximum conversion price, then the value the shares of our common stock that you will receive upon mandatory conversion (excluding any shares issuable as payment for unpaid dividends) will generally be equal to the liquidation preference of the mandatory convertible preferred stock. Accordingly, if the trading price of our common stock price increases to, but does not exceed, the maximum conversion price, then the conversion value of the mandatory convertible preferred stock will generally be unaffected by such increase. Conversely, the value of a direct investment in our common stock will increase by the same percentage amount of such increase. For these reasons, a direct investment in our common stock may earn higher returns from an increase in the trading price of our common stock than an investment in the mandatory convertible preferred stock.
We may not have sufficient funds to pay, or may choose not to pay, dividends on the mandatory convertible preferred stock. In addition, regulatory and contractual restrictions may prevent us from declaring or paying dividends.
Our ability to declare and pay dividends on the mandatory convertible preferred stock will depend on many factors, including the following:

our financial condition, including the amount of cash we have on hand;

the amount of cash, if any, generated by our operations and financing activities;

our anticipated financing needs, including the amounts needed to service our indebtedness or other obligations;

the degree to which we decide to reinvest any cash generated by our operations or financing activities to fund our future operations;

the ability of our subsidiaries to distribute funds to us;

regulatory restrictions on our ability to pay dividends, including under the Delaware General Corporation Law (as described below); and

contractual restrictions on our ability to pay dividends, including restrictions under our existing indebtedness and potential restrictions under the Term Facility, the Revolving Facility, the Senior Notes and any other indebtedness that we may incur in the future.
In addition, our board of directors may choose not to pay accumulated dividends on the mandatory convertible preferred stock for any reason. Accordingly, you may receive less than the full amount of accumulated dividends on your mandatory convertible preferred stock. In addition, if we fail to declare and
 
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pay accumulated dividends on the mandatory convertible preferred stock in full, then the trading price of the mandatory convertible preferred stock will likely decline.
Provisions contained in the instruments governing our existing and future indebtedness may restrict or prohibit us from paying cash dividends on the mandatory convertible preferred stock. For example, we and certain of our subsidiaries are subject to limitations on our ability to declare dividends under the Domestic Credit Facility and Foreign Credit Agreements. If the terms of our indebtedness restrict or prohibit us from paying dividends, then we may seek to refinance that indebtedness or seek a waiver that would permit the payment of dividends. However, we may be unable or may choose not to refinance the indebtedness or obtain a waiver.
Under the Delaware General Corporation Law, we may declare dividends on the mandatory convertible preferred stock only out of our “surplus” ​(which generally means our total assets less total liabilities, each measured at their fair market values, less statutory capital), or, if there is no surplus, out of our net profits for the current or the immediately preceding fiscal year. We may not have sufficient surplus or net profits to declare and pay dividends on the mandatory convertible preferred stock.
If we are unable or decide not to pay accumulated dividends on the mandatory convertible preferred stock in cash, then we may, but are not obligated to, elect to pay dividends in shares of our common stock. However, the payment of dividends in shares of our common stock will expose you to dilution and the risk of fluctuations in the price of our common stock, as described further in this “Risk Factors” section.
If an “unpaid accumulated dividend amount” ​(as defined below under the caption “Description of Mandatory Convertible Preferred Stock — Definitions”) exists at the time any mandatory convertible preferred stock is converted, then we will, in certain circumstances, increase the applicable conversion rate to compensate preferred stockholders for such unpaid accumulated dividend amount. In the case of certain conversions in connection with a make-whole fundamental change, we may, in certain circumstances, instead choose to pay the unpaid accumulated dividend amount in cash, to the extent we are legally able to do so, as described below under the caption “Description of Mandatory Convertible Preferred Stock — Conversion Provisions of the Mandatory Convertible Preferred Stock — Conversion During a Make-Whole Fundamental Change Conversion Period.” If the applicable conversion rate is increased on account of an unpaid accumulated dividend amount, then for purposes of calculating the increase, our common stock will be valued at the greater of (i) the “dividend make-whole stock price” ​(as defined below under the caption “Description of Mandatory Convertible Preferred Stock — Definitions”) and (ii) the floor price, which is 35% of the minimum conversion price. If the floor price exceeds the dividend make-whole stock price, then we will, to the extent we are legally able to do so, declare and pay the related deficiency in cash to the converting preferred stockholders. However, in the case of an early conversion that is not in connection with a make-whole fundamental change, we will have no obligation to pay such deficiency in cash or any other consideration. Accordingly, you may not be fully compensated for unpaid accumulated dividends upon conversion.
Not all events that may adversely affect the trading price of the mandatory convertible preferred stock and our common stock will result in an adjustment to the boundary conversion rates and the boundary conversion prices.
Each of the minimum conversion rate and the maximum conversion rate (which we collectively refer to as the “boundary conversion rates”), and the minimum conversion price and the maximum conversion price (which we collectively refer to as the “boundary conversion prices”), are subject to adjustment for certain events, including:

certain stock dividends, splits and combinations;

the issuance of certain rights, options or warrants to holders of our common stock;

certain distributions of assets, debt securities, capital stock or other property to holders of our common stock;

cash dividends on our common stock; and

certain tender or exchange offers.
 
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See “Description of Mandatory Convertible Preferred Stock — Conversion Provisions of the Mandatory Convertible Preferred Stock — Boundary Conversion Rate Adjustments.” We are not required to adjust the boundary conversion rates or the boundary conversion prices for other events (such as third-party tender offers or an issuance of common stock (or securities exercisable for, or convertible into, common stock) for cash) that may adversely affect the trading price of the mandatory convertible preferred stock and our common stock. We have no obligation to consider the specific interests of the holders of the mandatory convertible preferred stock in engaging in any such offering or transaction. An event may occur that adversely affects the preferred stockholders and the trading price of the mandatory convertible preferred stock and the underlying shares of our common stock but that does not result in an adjustment to the boundary conversion rates and boundary conversion prices.
The make-whole fundamental change provisions may not adequately compensate you for any loss in the value of the mandatory convertible preferred stock that may result from a make-whole fundamental change.
If certain corporate events that constitute a “make-whole fundamental change” occur, then you will, in certain circumstances, be entitled to convert at the “make-whole fundamental change conversion rate” and receive an additional payment, in cash or shares of common stock, for a “future dividend present value amount.” See “Description of Mandatory Convertible Preferred Stock — Conversion Provisions of the Mandatory Convertible Preferred Stock — Conversion During a Make-Whole Fundamental Change Conversion Period.” The make-whole fundamental change conversion rate and the future dividend present value amount are designed to compensate preferred stockholders for the lost option value and the remaining scheduled dividend payments, respectively, of their mandatory convertible preferred stock. However, these provisions are subject to various limitations. For example, the make-whole fundamental change conversion rate is only an approximation of the lost option value and will not exceed the maximum conversion rate, and the number of shares that we may be required to deliver as payment for the future dividend present value amount may be limited based on the floor price prevailing at the time of the make-whole fundamental change. Accordingly, you may not be adequately compensated for any loss in the value of your mandatory convertible preferred stock that may result from a make-whole fundamental change.
Furthermore, the definition of make-whole fundamental change is limited to certain specific transactions, and these provisions will not protect preferred stockholders from other transactions that could significantly reduce the value of the mandatory convertible preferred stock. For example, a spin-off or sale of a subsidiary or business division with volatile earnings, or a change in our line of business, could significantly affect the trading characteristics of our common stock and reduce the value of the mandatory convertible preferred stock without constituting a make-whole fundamental change.
In addition, our obligation to pay the future dividend present value amount in connection with a make-whole fundamental change could be considered a penalty, in which case its enforceability would be subject to general principles of reasonableness and equitable remedies.
The mandatory convertible preferred stock has only limited voting rights.
The mandatory convertible preferred stock confers no voting rights except with respect to certain dividend arrearages, certain amendments to the terms of the mandatory convertible preferred stock and certain other limited circumstances, and except as required by the Delaware General Corporation Law. As a preferred stockholder, you will not be entitled to vote on an as-converted basis with holders of our common stock on matters on which our common stockholders are entitled to vote. For example, you will not have the right, as a preferred stockholder, to vote in the general election of our directors, although you will have a limited right, voting together with holders of any voting parity stock, to elect two directors if accumulated dividends on the mandatory convertible preferred stock have not been declared and paid in an aggregate amount corresponding to six or more dividend periods. See “Description of Mandatory Convertible Preferred Stock — Voting Rights — Right to Designate Two Preferred Stock Directors Upon a Dividend Non-Payment Event.” Accordingly, the voting provisions of the mandatory convertible preferred stock may not afford you meaningful protections for your investment.
 
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You will have no rights with respect to our common stock until the mandatory convertible preferred stock is converted, but you may be adversely affected by certain changes made with respect to our common stock.
You will have no rights with respect to our common stock, including voting rights, rights to respond to common stock tender offers, if any, and rights to receive dividends or other distributions on shares of our common stock, if any (other than through an adjustment to the boundary conversion rates, as described in ‘‘Description of Mandatory Convertible Preferred Stock — Conversion Provisions of the Mandatory Convertible Preferred Stock — Boundary Conversion Rate Adjustments”), prior to the conversion date with respect to a conversion of the mandatory convertible preferred stock, but your investment in the mandatory convertible preferred stock may be negatively affected by these events. Upon conversion, you will be entitled to exercise the rights of a holder of shares of our common stock only as to matters for which the record date occurs on or after the conversion date. For example, in the event that an amendment is proposed to our amended and restated certificate of incorporation or bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to the conversion date, you will not be entitled to vote on the amendment (subject to certain limited exceptions if it would adversely affect the special rights, preferences, privileges and voting powers of the mandatory convertible preferred stock), although you will nevertheless be subject to any changes in the powers, preferences or special rights of our common stock, even if your mandatory convertible preferred stock has been converted into shares of our common stock prior to the effective date of such change.
We may issue preferred stock in the future that ranks equally with the mandatory convertible preferred stock with respect to dividends or liquidation rights, which may adversely affect the rights of preferred stockholders.
Without the consent of any preferred stockholder, we may authorize and issue preferred stock that ranks equally with the mandatory convertible preferred stock with respect to the payment of dividends or the distribution of assets upon our liquidation, dissolution or winding up. If we issue any such preferred stock in the future, your rights as a holder of the mandatory convertible preferred stock will be diluted and the trading price of the mandatory convertible preferred stock may decline. The powers, preferences and rights of these additional series of preferred stock may be on parity with or (subject to certain consent rights of the holders of the mandatory convertible preferred stock, as described under the caption “Description of Mandatory Convertible Preferred Stock — Voting Rights — Voting and Consent Rights with Respect to Specified Matters”) senior to the mandatory convertible preferred stock, which may reduce its value. We have no obligation to consider the specific interests of the holders of the mandatory convertible preferred stock in engaging in any such offering or transaction.
There is currently no trading market for the mandatory convertible preferred stock. If an active trading market does not develop, then preferred stockholders may be unable to sell their mandatory convertible preferred stock at desired times or prices, or at all.
The mandatory convertible preferred stock is a new class of securities for which no market currently exists. We intend to apply to list the mandatory convertible preferred stock on the Nasdaq Global Select Market under the symbol “ROLLP.” If the listing is approved, we expect trading to commence within 30 days after the date the mandatory convertible preferred stock is first issued. However, our listing application may not be approved. Moreover, even if the listing is approved, a liquid trading market for the mandatory convertible preferred stock may not develop, and the listing may be subsequently withdrawn. Accordingly, you may not be able to sell your mandatory convertible preferred stock at the times you wish to or at favorable prices, if at all.
The liquidity of the trading market, if any, and future trading prices of the mandatory convertible preferred stock will depend on many factors, including, among other things, the trading price and volatility of our common stock, prevailing interest rates, our dividend yield, financial condition, results of operations, business, prospects and credit quality relative to our competitors, the market for similar securities and the overall securities market. Many of these factors are beyond our control. Historically, the market for convertible securities has been volatile. Market volatility could significantly harm the market for the
 
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mandatory convertible preferred stock, regardless of our financial condition, results of operations, business, prospects or credit quality.
The trading price of our common stock, the condition of the financial markets, prevailing interest rates and other factors could significantly affect the trading price of the mandatory convertible preferred stock.
We expect that the trading price of our common stock will significantly affect the trading price of the mandatory convertible preferred stock, which could result in greater volatility in the trading price of the mandatory convertible preferred stock than would be expected for non-convertible securities. The trading price of our common stock will likely continue to fluctuate in response to the factors described or referred to elsewhere in this section and under the caption “Cautionary Note Regarding Forward-Looking Statements,” among others, many of which are beyond our control.
In addition, the condition of the financial markets and changes in prevailing interest rates can have an adverse effect on the trading price of the mandatory convertible preferred stock. For example, prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, and we would expect an increase in prevailing interest rates to depress the trading price of the mandatory convertible preferred stock.
The issuance or sale of shares of our common stock (or rights to acquire shares of our common stock), including pursuant to the Common Stock Concurrent Offering, could depress the trading price of our common stock and the mandatory convertible preferred stock.
We may conduct future offerings of shares of our common stock, preferred stock or other securities that are convertible into or exercisable for our common stock to fund acquisitions, finance operations or for other purposes. Concurrently with this offering, we intend to issue common stock pursuant to the Common Stock Concurrent Offering. In addition, we may also issue shares of our common stock under our equity incentive plans. The market price of shares of our common stock and, accordingly, the mandatory convertible preferred stock could decrease significantly as a result of (i) future issuances or sales of a large number of shares of our common stock, including pursuant to the Common Stock Concurrent Offering, other issuances under the shelf registration statement on Form S-3 of which this prospectus supplement and the accompanying prospectus form a part, including as payment for dividends on the mandatory convertible preferred stock, (ii) future issuances or sales of rights to acquire shares of our common stock, (iii) any of our existing stockholders selling a substantial amount of our common stock, (iv) the conversion of a large number of instruments convertible into shares of our common stock, including the conversion of mandatory convertible preferred stock into shares of our common stock, or (v) the perception that such issuances, sales or conversions could occur, among other factors. These sales or conversions, or the possibility that these sales or conversions may occur, may also make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate. The terms of the mandatory convertible preferred stock will not restrict our ability to issue additional common stock or other junior securities in the future. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing or nature of our future offerings.
You may be diluted by future issuances of our common stock or instruments convertible into shares of common stock.
If we raise additional capital through future offerings of our common stock or other securities convertible into shares of our common stock (including common stock issued pursuant to the Common Stock Concurrent Offering and additional securities that may be issued pursuant to the shelf registration statement on Form S-3 of which this prospectus supplement and the accompanying prospectus form a part), our existing stockholders, including preferred stockholders who have received shares of our common stock upon conversion of, or for the payment of dividends on, their mandatory convertible preferred stock, could experience significant dilution in their percentage ownership of the Company. Moreover, any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.
 
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Recent and future regulatory actions, changes in market conditions and other events may adversely affect the trading price and liquidity of the mandatory convertible preferred stock and the ability of investors to implement a convertible arbitrage trading strategy.
We expect that many investors in the mandatory convertible preferred stock, including potential purchasers of the mandatory convertible preferred stock from investors in this offering, will seek to employ a convertible arbitrage strategy. Under this strategy, investors typically short sell a certain number of shares of our common stock and adjust their short position over time while they continue to hold the mandatory convertible preferred stock. Investors may also implement this type of strategy by entering into swaps on our common stock in lieu of, or in addition to, short selling shares of our common stock.
The SEC and other regulatory authorities have implemented various rules and taken certain actions, and may in the future adopt additional rules and take other actions, that may impact those engaging in short selling activity involving equity securities (including our common stock). These rules and actions include Rule 201 of SEC Regulation SHO, the adoption by the Financial Industry Regulatory Authority, Inc., and the national securities exchanges of a “limit up-limit down” program, the imposition of market-wide circuit breakers that halt trading of securities for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Any governmental or regulatory action that restricts investors’ ability to effect short sales of our common stock or enter into equity swaps on our common stock could depress the trading price of, and the liquidity of the market for, the mandatory convertible preferred stock.
In addition, the liquidity of the market for our common stock and other market conditions could deteriorate, which could reduce, or eliminate entirely, the number of shares available for lending in connection with short sale transactions and the number of counterparties willing to enter into an equity swap on our common stock with an investor of the mandatory convertible preferred stock. These and other market events could make implementing a convertible arbitrage strategy prohibitively expensive or infeasible. If investors in this offering or potential purchasers of the mandatory convertible preferred stock that seek to employ a convertible arbitrage strategy are unable to do so on commercially reasonable terms, or at all, then the trading price of, and the liquidity of the market for, the mandatory convertible preferred stock may significantly decline.
You may be subject to tax if we adjust, or fail to adjust, the boundary conversion rates, even though you will not receive a corresponding cash distribution.
We will adjust the boundary conversion rates of the mandatory convertible preferred stock for certain events, including the payment of cash dividends. If we adjust the boundary conversion rates, then you may be deemed, for U.S. federal income tax purposes, to have received a taxable dividend to the extent of our earnings and profits, without the receipt of any cash. In addition, if we do not adjust (or adjust adequately) the boundary conversion rates after an event that increases your proportionate interest in us (including pursuant to the deferral exception described under the caption “Description of Mandatory Convertible Preferred Stock — Conversion Provisions of the Mandatory Convertible Preferred Stock — Boundary Conversion Rate Adjustments — The Deferral Exception”), then you could be treated as having received a deemed taxable dividend. The deemed dividend may be subject to U.S. federal withholding tax or backup withholding, which may be set off against payments on the mandatory convertible preferred stock or our common stock. See “Description of Mandatory Convertible Preferred Stock — Conversion Provisions of the Mandatory Convertible Preferred Stock — Boundary Conversion Rate Adjustments” and “Material U.S. Federal Income Tax Considerations.”
Provisions of the mandatory convertible preferred stock could delay or prevent an otherwise beneficial takeover of us.
Certain provisions in the mandatory convertible preferred stock could make a third party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a “make-whole fundamental change” under the certificate of designations establishing the terms of the mandatory convertible preferred stock, then preferred stockholders will have the right to convert their mandatory convertible preferred stock at a potentially increased conversion rate and receive an additional payment, in cash or shares of
 
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common stock, to compensate them for future scheduled dividends on their mandatory convertible preferred stock. See “Description of Mandatory Convertible Preferred Stock — Conversion Provisions of the Mandatory Convertible Preferred Stock — Conversion During a Make-Whole Fundamental Change Conversion Period.” These make-whole fundamental change provisions could increase the cost of acquiring us or otherwise discourage a third party from acquiring us, including in a transaction that preferred stockholders or holders of our common stock may view as favorable.
If the Pending Acquisition is not completed, our management will have broad discretion to use the net proceeds from this offering.
We expect to use the net proceeds from this offering and, if they are consummated, the Term Facility, the Revolving Facility and the Additional Offerings, to fund a portion of the cash purchase price for the Pending Acquisition, to pay acquisition-related fees and expenses, and for other general corporate purposes. However, if the Pending Acquisition is not consummated, then our management will have broad discretion to apply the net proceeds. If the Pending Acquisition has not closed as of the close of business on January 26, 2022, or if, before such time, the Purchase Agreement is terminated in accordance with its terms or our board of directors determines, in its reasonable judgment, that the Pending Acquisition will not occur, then we will have the right to redeem all, but not less than all, of the mandatory convertible preferred stock. However, we are not obligated to redeem the mandatory convertible preferred stock, and we may choose not to do so. In such case, investors will rely on our management’s judgment in spending the net proceeds from this offering. Our management will have broad discretion in the application of such net proceeds, including for working capital and other general corporate purposes, and our management may spend or invest such proceeds in a way with which investors disagree. If we do not use the net proceeds we receive from this offering effectively, our business, financial condition and results of operations could be negatively impacted. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade interest-bearing securities such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government. These investments may not yield a favorable return to our investors.
We will not be obligated to redeem mandatory convertible preferred stock if the Pending Acquisition is not completed.
The completion of the Pending Acquisition is subject to numerous risks and uncertainties, including several closing conditions, many of which are beyond our control. See “Risk Factors” in the accompanying prospectus. This offering is not contingent on the completion of the Pending Acquisition, and we will not be obligated to redeem the mandatory convertible preferred stock if the Pending Acquisition is not consummated. Accordingly, in deciding to invest in the mandatory convertible preferred stock, you should not assume that the Pending Acquisition will be completed on the terms or the timeframes that we currently contemplate, if at all, or that the Pending Acquisition, if consummated, will be beneficial to our stockholders, including the preferred stockholders.
This offering is not contingent on the consummation of the Term Facility, the Revolving Facility or the Additional Offerings.
This offering is not contingent on the consummation of the Term Facility, the Revolving Facility or any of the Additional Offerings. We cannot assure you that any of the Term Facility, the Revolving Facility or the Additional Offerings will be completed on the expected terms described herein, if at all. Accordingly, in deciding to invest in our securities, you should not assume that the Term Facility, the Revolving Facility or the Additional Offerings will be completed on the terms or the timeframes that we currently contemplate, if at all, or that the Term Facility, the Revolving Facility or the Additional Offerings, if consummated, will be beneficial to our stockholders, including the preferred stockholders.
The accounting method for the mandatory convertible preferred stock may result in lower reported net earnings attributable to common stockholders and lower reported diluted earnings per share.
The accounting method for reflecting dividends on, and the conversion provisions of, the mandatory convertible preferred stock in our financial statements may adversely affect our reported earnings. For
 
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example, because dividends on the mandatory convertible preferred stock are cumulative, we expect that dividends that accumulate on the mandatory convertible preferred stock during the applicable reporting period, regardless of whether they are declared or paid, will be deducted from reported net earnings (or added to reported net loss) for that reporting period to arrive at reported earnings (or loss) attributable to our common stockholders. Accordingly, we expect this accounting treatment to reduce the amount of reported earnings (or increase the amount of reported loss) attributable to our common stockholders. Similarly, we expect that accumulated dividends on the mandatory convertible preferred stock will also reduce our reported basic earnings per share (or increase our reported basic loss per share) of common stock.
In addition, we expect that the ‘‘if-converted’’ method will apply to reflect the mandatory convertible preferred stock in the calculation of our diluted earnings per share. Under this method, we expect that diluted earnings per share will be calculated by adding back accumulated dividends on the mandatory convertible preferred stock to earnings attributable to common stockholders and assuming that the mandatory convertible preferred stock is converted at the beginning of the reporting period (or, if later, the time the mandatory convertible preferred stock is issued). However, these calculations will not be made if reflecting the mandatory convertible preferred stock in diluted earnings per share in this manner is anti-dilutive. Accordingly, the application of the if-converted method to the mandatory convertible preferred stock may result in lower reported diluted earnings per share.
We have not reached a final determination regarding the accounting treatment for the mandatory convertible preferred stock, and the description above is preliminary. In addition, accounting standards may change in the future. Accordingly, we may account for the mandatory convertible preferred stock in a manner that is significantly different than described above.
Because the mandatory convertible preferred stock will initially be held in book-entry form, preferred stockholders must rely on DTC’s procedures to exercise their rights and remedies.
We will initially issue the mandatory convertible preferred stock in the form of one or more “global certificates” registered in the name of Cede & Co., as nominee of DTC. Beneficial interests in global certificates will be shown on, and transfers of global certificates will be effected only through, the records maintained by DTC. Except in limited circumstances, we will not issue physical certificates representing the mandatory convertible preferred stock. See “Description of Mandatory Convertible Preferred Stock — Book Entry, Settlement and Clearance.” Accordingly, if you own a beneficial interest in a global certificate, then you will not be considered an owner or holder of the mandatory convertible preferred stock. Instead, DTC or its nominee will be the sole holder of the mandatory convertible preferred stock. Payments of cash dividends and other cash amounts on global certificates will be made to the paying agent, who will remit the payments to DTC. We expect that DTC will then credit those payments to the DTC participant accounts that hold book-entry interests in the global certificates and that those participants will credit the payments to indirect DTC participants. Unlike persons who have physical certificates registered in their names, owners of beneficial interests in global certificates will not have the direct right to act on our solicitations for consents or requests for waivers or other actions from preferred stockholders. Instead, those beneficial owners will be permitted to act only to the extent that they have received appropriate proxies to do so from DTC or, if applicable, a DTC participant. The applicable procedures for the granting of these proxies may not be sufficient to enable owners of beneficial interests in global certificates to vote on any requested actions on a timely basis.
Reports published by securities or industry analysts, including projections in those reports that exceed our actual results, could adversely affect our share price and trading volume.
Research analysts publish their own quarterly projections regarding our operating results. These projections may vary widely from one another and may not accurately predict the results we actually achieve. Our share price may decline if we fail to meet securities research analysts’ projections. Similarly, if one or more of the analysts who covers us changes its recommendation regarding our common stock or publishes inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline.
 
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We do not currently intend to pay dividends on our common stock.
Except for a $2.00 per common share special dividend paid in 2014, we have not paid any cash dividends on our common stock and may not pay cash dividends in the future. Instead, we plan to apply earnings and excess cash, if any, to the expansion and development of our business. There is no guarantee that our common stock will maintain its value or appreciate in value. Additionally, under applicable Delaware law, our board of directors (or an authorized committee thereof) may only declare and pay dividends on shares of our capital stock out of our statutory “surplus” ​(which is defined as the amount equal to total assets minus total liabilities, in each case at fair market value, minus statutory capital), or if there is no such surplus, out of our net profits for the then-current and/or immediately preceding fiscal year. The terms of our indebtedness and our mandatory convertible preferred stock may also restrict our ability to pay dividends on our common stock. For these reasons, we may not have access to any assets or cash flows of our subsidiaries to pay dividends even if otherwise permitted to do so.
Provisions in our charter documents may prevent or hinder efforts to acquire a controlling interest in us.
Provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions that might benefit our stockholders or in which our stockholders might otherwise receive a premium for their shares. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.
Pursuant to our charter documents, our board of directors consists of eight members serving staggered three-year terms and divided into three classes. As a result, two annual meetings are required to change a majority of the members of the board of directors. In addition to the mandatory convertible preferred stock, our certificate of incorporation authorizes the issuance of additional preferred stock, with such designations, rights and preferences as may be determined from time to time by the board of directors, without stockholder approval. If we were to issue additional preferred stock in the future, it could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of us, or could impede our stockholders’ ability to approve a transaction they consider in their best interests. The preferred stockholders and holders of our common stock do not have preemptive rights to subscribe for a pro rata portion of preferred stock or any other capital stock that we may issue in the future.
Quarterly performance can be affected by the timing of government product inspections and approvals.
A portion of our quarterly revenue is associated with contracts with the U.S. government that require on-site inspection and approval of the products by government personnel before we may ship the products, and we have no control over the timing of those inspections and approvals. If products scheduled for delivery in one quarter are not inspected or approved until the following quarter, the delay would adversely affect our sales and profitability for the quarter in which the shipments were scheduled and may affect the price of our common stock.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the documents incorporated herein and therein by reference contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding the expected completion and timing of the Pending Acquisition and the Financing Transactions, our future financial condition or results of operations, our prospects and strategies for future growth, the development and introduction of new products, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” “could,” “continues,” “predicts,” “potential” or other comparable terminology, or the negative of such terms.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation:

we may not complete the Pending Acquisition within the time frame we anticipate or at all;

we may not complete this offering or the other Financing Transactions on terms acceptable to us within the time frame we anticipate or at all;

we may fail to realize some or all of the anticipated benefits of the Pending Acquisition or those benefits may take longer to realize than expected;

we may not be able to efficiently integrate Dodge into our operations;

we have incurred significant transaction costs and may incur integration costs in connection with the Pending Acquisition;

the bearing and engineered products industries are highly competitive, and this competition could reduce our profitability or limit our ability to grow;

the loss of a major customer, or a material adverse change in a major customer’s business, could result in a material reduction in our revenues, cash flows and profitability;

our results have been and are likely to continue to be impacted by the COVID-19 pandemic;

weakness in any of the industries in which our customers operate, as well as the cyclical nature of our customers’ businesses generally, could materially reduce our revenues, cash flows and profitability;

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

fluctuating supply and costs of subcomponents, raw materials and energy resources, or the imposition of import tariffs, could materially reduce our revenues, cash flows and profitability;

our results could be impacted by governmental trade policies and tariffs relating to our supplies imported from foreign vendors or our finished goods exported to other countries;

our products are subject to certain approvals and government regulations and the loss of such approvals, or our failure to comply with such regulations, could materially reduce our revenues, cash flows and profitability;

the retirement of commercial aircraft could reduce our revenues, cash flows and profitability;

work stoppages and other labor problems could materially reduce our ability to operate our business;

unexpected equipment failures, catastrophic events or capacity constraints could increase our costs and reduce our sales due to production curtailments or shutdowns;
 
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we may not be able to continue to make the Pending Acquisitions necessary for us to realize our growth strategy;

businesses that we have acquired or that we may acquire in the future may have liabilities that are not known to us;

goodwill and indefinite-lived intangibles comprise a significant portion of our total assets, and if we determine that goodwill and indefinite-lived intangibles have become impaired in the future, our results of operations and financial condition in such years may be materially and adversely affected;

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

our international operations are subject to risks inherent in such activities;

currency translation risks may have a material impact on our results of operations;

we are subject to legislative, regulatory and legal developments involving income and other taxes;

we may be required to make significant future contributions to our pension plan;

we may incur material losses for product liability and recall-related claims;

environmental and health and safety laws and regulations impose substantial costs and limitations on our operations, and environmental compliance may be more costly than we expect;

our intellectual property and proprietary information are valuable, and any inability to protect them could adversely affect our business and results of operations; in addition, we may be subject to infringement claims by third parties;

cancellation of orders in our backlog could negatively impact our revenues, cash flows and profitability;

if we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud;

litigation could adversely affect our financial condition;

changes in accounting standards or changes in the interpretations of existing standards could affect our financial results;

risks associated with utilizing information technology systems, including the risk of cyberattacks, could adversely affect our operations; and

other risks and uncertainties discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other similarly titled sections in this prospectus supplement, the accompanying prospectus and any of our filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
The forward-looking statements contained in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference are based on our current expectations and assumptions regarding our business, the economy and other future conditions and are subject to risks, uncertainties and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. You are cautioned not to place undue reliance on these forward-looking statements.
Forward-looking statements speak only as of the date they are made, and unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date they are made.
You should carefully consider the risks specified under the section titled “Risk Factors” in this prospectus supplement and the accompanying prospectus and the documents incorporated by reference
 
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and in subsequent public statements or reports we file with or furnish to the SEC before making any investment decision with respect to our securities. If any of these trends, risks or uncertainties actually occurs or continues, our business, financial condition or results of operations could be materially adversely affected, the trading prices of our securities could decline and you could lose all or part of your investment. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.
 
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USE OF PROCEEDS
We estimate that the net proceeds to us from this offering will be approximately $387.2 million (or approximately $445.4 million if the underwriters fully exercise their option to purchase additional mandatory convertible preferred stock), based on an assumed price of $100 per share of mandatory convertible preferred stock and after deducting underwriting discounts and commissions and our estimated offering expenses. We estimate that the net proceeds to us from the Common Stock Concurrent Offering, if it is consummated, will be approximately $605.6 million (or approximately $696.5 million if the underwriters of the Common Stock Concurrent Offering fully exercise their option to purchase additional shares of common stock), after deducting underwriting discounts and commissions and our estimated offering expenses, assuming we sell 3,000,000 shares of common stock in the Common Stock Concurrent Offering (or 3,450,000 shares of common stock if the underwriters of the Common Stock Concurrent Offering fully exercise their option to purchase additional shares of common stock) and based on an assumed public offering price of $212.24, the last reported sale price of our common stock on Nasdaq on September 16, 2021.
We estimate that the proceeds from the Senior Notes Offering, if it is consummated, will be approximately $500.0 million, before deducting the initial purchasers’ discounts and commissions and before deducting estimated offering expenses. As of the date of this prospectus supplement, we have yet to agree to the terms of or enter into definitive documentation for the Senior Notes Offering. The terms of the Senior Notes and the initial purchasers’ discounts and commissions, estimated offering expenses and net proceeds relating to the Senior Notes Offering remain subject to change. The foregoing estimate of the anticipated proceeds from the Senior Notes Offering reflects assumptions that management considers to be reasonable as of the date hereof, but remains subject to uncertainties and contingencies which may be beyond our control. In addition, the foregoing discussion assumes that such proceeds will be made available to us by our subsidiary that issues the Senior Notes. No assurances can be given that the Senior Notes Offering will be consummated on the terms anticipated by management, if at all. See “Risk Factors — Risks Related to the Pending Acquisition — We may not complete the Financing Transactions on terms acceptable to us, within the time frame we anticipate or at all” of the accompanying prospectus.
We intend to use the net proceeds from this offering and, if they are consummated, the Term Facility, the Revolving Facility and the Additional Offerings, to fund a portion of the cash purchase price for the Pending Acquisition, to pay acquisition-related fees and expenses, and for other general corporate purposes. The completion of this offering is not contingent on the consummation of the Pending Acquisition, the Term Facility, the Revolving Facility or the Additional Offerings.
 
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CAPITALIZATION
The following table presents our cash and cash equivalents and our capitalization as of July 3, 2021:

on an actual basis; and

on a pro forma basis to give effect to:

the assumed issuance and sale of 4,000,000 shares of our mandatory convertible preferred stock in this offering (assuming no exercise of the underwriters’ option to purchase additional shares of our mandatory convertible preferred stock to cover over-allotments), at an assumed price of $100 per share of mandatory convertible preferred stock and an assumed dividend rate of 5% per annum, after deducting estimated underwriting discounts and commissions and our estimated offering expenses;

the assumed issuance and sale of 3,000,000 shares of our common stock in the Common Stock Concurrent Offering (assuming no exercise of the option of the underwriters of the Common Stock Concurrent Offering to purchase additional shares of our common stock), at an assumed public offering price of $212.24, the last reported sale price of our common stock on Nasdaq on September 16, 2021, after deducting estimated underwriting discounts and commissions and our estimated offering expenses;

the entry into the Term Facility and the Revolving Facility (which Revolving Facility is expected to be undrawn at the closing of the Financing Transactions) and the assumed issuance and sale of the Senior Notes in the Senior Notes Offering, in each case, after deducting estimated debt issuance costs; and

the consummation of the Pending Acquisition and the other related adjustments presented in the unaudited pro forma condensed combined financial information included as Exhibit 99.3 within our Current Report on Form 8-K filed with the SEC on September 20,2021.
The assumed issuance and sale of shares of mandatory convertible preferred stock in this offering, common stock in the Common Stock Concurrent Offering and Senior Notes in the Senior Notes Offering is subject to change based on the pricing of this offering, the Common Stock Concurrent Offering and Senior Notes Offering. The following table should be read in conjunction with the sections titled “Basis of Presentation,” “Risk Factors” and “Use of Proceeds” and the other information included or incorporated by reference in this prospectus supplement and the accompanying prospectus, including our consolidated financial statements and related notes, which are incorporated by reference herein. In particular, the pro forma information set forth in the following table is illustrative only and should be read in conjunction with the more detailed unaudited pro forma condensed combined financial information included as Exhibit 99.3 within our Current Report on Form 8-K filed with the SEC on September 20, 2021, which is incorporated by reference herein and should be read in its entirety.
 
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As of
July 3, 2021
(In thousands, except share and per share data)
Actual
Pro Forma
Combined(1)
Cash, cash equivalents and marketable securities
$ 296,091 $ 139,668
Debt:
Principal amount of existing revolving and term loan facilities(2)
$ 6,188 $ 6,188
Principal amount of mortgage payable(2)
5,678 5,678
Senior Notes(2)(3)
500,000
Term Facility(2)(3)
1,300,000
Total debt
11,866 1,811,866
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, no shares outstanding, actual; 4,600,000 shares designated as Series A Mandatory Convertible Preferred Stock, pro forma and 4,000,000 shares outstanding, pro forma(4)
40
Common stock, $0.01 par value per share; 60,000,000 shares
authorized, 26,336,894 and 25,420,621 shares issued and
outstanding, respectively, actual; 29,336,894 and 28,420,621 shares
issued and outstanding, respectively, pro forma(4)
263 293
Additional paid-in capital(4)
467,524 1,460,207
Accumulated other comprehensive loss
(8,172) (8,172)
Retained earnings
884,851 840,447
Treasury stock, at cost; 916,273 shares, actual and pro forma
(70,090) (70,090)
Total stockholders’ equity
1,274,376 2,222,725
Total capitalization
$ 1,286,242 $ 4,034,591
(1)
The pro forma figures give effect to the Pending Acquisition, including our use of the proceeds from this offering and the other Financing Transactions, together with cash on hand, to fund the cash purchase price for the Pending Acquisition and related fees and expenses, the consolidation of Dodge’s financial position and results of operations into our financial statements and the other related adjustments presented in the unaudited pro forma condensed combined financial information included as Exhibit 99.3 within our Current Report on Form 8-K filed with the SEC on September 20, 2021. For additional information on the pro forma presentation of the Pending Acquisition and the Financing Transactions, assuming they are consummated, see the unaudited pro forma condensed combined financial information included as Exhibit 99.3 within RBC’s Current Report on Form 8-K filed with the SEC on September 20, 2021, which is incorporated by reference herein and should be read in its entirety.
(2)
Reflects principal amount outstanding, without deduction for debt discounts or issuance costs.
(3)
Pro forma amount assumes that (i) we will enter into a Term Facility providing for term loans in an aggregate principal amount of $1.3 billion and (ii) our subsidiary will issue Senior Notes in an aggregate principal amount of $500.0 million, in each case with a weighted average interest rate of 2.64%. The pro forma amount also reflects expected total debt issuance costs related to the Term Facility, Revolving Facility and Senior Notes of $23.4 million. The Revolving Facility is expected to be undrawn at the closing of the Financing Transactions. However, we could incur significant additional indebtedness by drawing upon the Revolving Facility in accordance with its terms. Assuming no change in the assumed number of shares of mandatory convertible preferred stock offered by us in this offering or in the assumed number of shares of common stock offered by us in the Common Stock Concurrent Offering, in each case, as set forth in this section, (i) a $100.0 million increase/(decrease) in the assumed principal amount of the Term Facility would increase/(decrease) pro forma cash, cash equivalents and marketable securities by approximately $99.3 million, pro forma total debt by $100.0 million and pro forma total capitalization by $100.0 million, after deducting estimated debt issuance costs and (ii) a $100.0 million increase/(decrease) in the assumed principal amount of the Senior Notes would increase/(decrease) pro forma cash, cash equivalents and marketable securities by approximately $98.9 million, pro forma total debt by $100.0 million and pro forma total capitalization by $100.0 million, after deducting estimated debt issuance costs.
(4)
Pro forma amount assumes that we will issue (i) 4,000,000 shares of mandatory convertible preferred stock in this offering (assuming no exercise of the underwriters’ option to purchase additional shares of mandatory convertible preferred stock) at an assumed price of $100 per share of mandatory convertible preferred stock and an assumed dividend rate of 5% per annum, and (ii) 3,000,000 shares of common stock pursuant to the Common Stock Concurrent Offering (assuming no exercise of the underwriters’ option to purchase additional shares of our common stock) at an assumed public offering price of $212.24, the last reported sale price of our common stock on Nasdaq on September 16, 2021. Assuming no change in the number of
 
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shares of mandatory convertible preferred stock sold in this offering or in the number of shares of common stock offered by us in the Common Stock Concurrent Offering as set forth in this section, a $1.00 increase/(decrease) in the assumed public offering price of the common stock offered by us pursuant to the Common Stock Concurrent Offering would increase/(decrease) pro forma cash, cash equivalents and marketable securities by approximately $2.9 million, pro forma total stockholders’ equity by $2.9 million and pro forma total capitalization by $2.9 million, after deducting underwriting discounts and commissions and estimated offering expenses. An increase/(decrease) in the number of shares of mandatory convertible preferred stock offered by us in this offering by 1 million shares would increase/(decrease) pro forma cash, cash equivalents and marketable securities by approximately $97.0 million, pro forma total stockholders’ equity by $97.0 million and pro forma total capitalization by $97.0 million, after deducting underwriting discounts and commissions and estimated offering expenses.
The number of shares of our common stock to be outstanding after this offering is based on 25,420,621 shares outstanding as of July 3, 2021. The outstanding share information set forth above assumes no issuance of shares of common stock reserved for issuance under our equity incentive plans, including our 2013 Long-Term Incentive Plan, our 2017 Long-Term Incentive Plan and our 2021 Long-Term Incentive Plan. It excludes (i)         (or         , if the underwriters fully exercise their option to purchase additional shares of mandatory convertible preferred stock) shares of common stock issuable upon conversion of the mandatory convertible preferred stock at the initial maximum conversion rate; and (ii) additional shares of common stock that we may elect to issue as payment for all or any portion of declared dividends on the mandatory convertible preferred stock. Additionally, the outstanding share information set forth above assumes:

no exercise of options outstanding under our 2013 Long-Term Incentive Plan. As of July 3, 2021, there were 190,847 outstanding options to purchase shares of common stock granted under the 2013 Long-Term Incentive Plan with a weighted average exercise price of $92.20; and

no exercise of options outstanding under our 2017 Long-Term Incentive Plan. As of July 3, 2021, there were 503,794 outstanding options to purchase shares of common stock granted under the 2017 Long-Term Incentive Plan with a weighted average exercise price of $156.77.
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF DODGE’S FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the purpose of this section, references to “Dodge,” “we,” or “our” refer to the Dodge Mechanical Power Transmission Business of ABB Asea Brown Boveri Ltd. and references to “ABB” or “Parent” refer to ABB Asea Brown Boveri Ltd. As used herein, the “Combined Financial Statements” refer, as applicable, to the (i) audited combined financial statements of Dodge as of and for the fiscal years ended December 31, 2020 and 2019 and (ii) unaudited condensed combined financial statements of Dodge, which consist of the combined balance sheet as of June 30, 2021, the related combined statements of income and comprehensive income for the three and six months ended June 30, 2021 and 2020, and the combined statements of changes in equity and cash flows for the six months ended June 30, 2021 and 2020 . Such financial statements have been filed by RBC as exhibits to a Current Report on Form 8-K on September 20, 2021 and are incorporated by reference into this prospectus supplement. See “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference.” The following discussion should be read together with the Combined Financial Statements as well as the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in this prospectus supplement and comparable sections in the documents incorporated by reference herein.
OVERVIEW
Dodge has designed, manufactured and marketed mechanical power transmission products for over 140 years and provides products and services to a global customer base. Dodge offers customers a complete line of mounted bearings, enclosed gearing and precision components across a diverse set of industrial end markets. Dodge primarily operates across the construction and mining aftermarket, food & beverage, warehousing and general machinery verticals. Dodge predominantly manufactures its products in the United States, with a smaller manufacturing facility in China, and its global operations comprises approximately 1,500 employees located in six countries as of June 30, 2021. In total Dodge operates six manufacturing facilities and two R&D centers.
Dodge’s products are sold to a diverse customer base consisting of OEMs and distributors, serving markets in the United States and throughout the world. OEMs primarily use Dodge’s products in new installations, which expands its installed base and typically leads to future replacement product sales. Dodge has established strong long-term relationships with its customers, driven by industry leading pre- and post-order support, logistics and an e-commerce platform. Additionally, Dodge’s lifecycle solutions support its customers by providing remanufacturing services, monitoring and high-value component replacement.
Demand for Dodge’s products is closely tied to growth trends in the economy and levels of industrial activity and capital investment. Specific drivers of demand for Dodge’s products include process automation, efforts in energy conservation and productivity improvement, regulatory and safety requirements, new technologies and replacement of worn parts. Dodge’s products are typically critical components of customers’ end applications, and the end user’s cost associated with their failure is high. Consequently, end users of Dodge’s products base their purchasing decisions on the quality, reliability, efficiency and availability of Dodge’s products, as well as on the quality of Dodge’s customer service.
BASIS OF PRESENTATION AND PRINCIPLE OF COMBINATIONS
The Combined Financial Statements have been derived from the consolidated financial statements and accounting records of ABB. These Combined Financial Statements reflect the combined historical results of operations, financial position and cash flows of Dodge for the periods presented as historically managed within ABB in conformity with U.S. GAAP based on a going concern assumption and are presented in United States dollars unless otherwise stated. The Combined Financial Statements may not be indicative of Dodge’s future performance and do not necessarily reflect what the results of operations, financial position and cash flows would have been had it operated as an independent business during the periods presented.
The Combined Financial Statements are prepared on a carve-out basis from financial information of the Parent. The operations of Dodge are consistent with the components of the Parent which are planned
 
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to be divested in the Pending Acquisition. All amounts presented relate to companies or the relevant portions of companies that are directly controlled by the Parent and all intercompany accounts within Dodge and transactions within Dodge are eliminated. Intercompany transactions between us and the Parent are deemed to have been settled immediately through “Parent company investment.”
External debt, including any interest expense, associated with the debt of the Parent which is not directly attributable to Dodge has been excluded from the combined financial statements of Dodge. The equity of Dodge represents the net investment of the Parent in Dodge. The Parent’s historical retained earnings related to Dodge are included within “Parent company investment.”
Current and deferred income taxes have been determined based on the stand-alone results of Dodge. However, because Dodge has prepared and filed its tax returns as part of ABB’s tax group in certain jurisdictions, Dodge’s actual tax balances may differ from those reported.
KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Impact of Covid-19 Pandemic
On March 11, 2020 the World Health Organization designated a new coronavirus disease (“COVID-19”) as a global pandemic. Governments around the world implemented public health and social measures to slow the transmission of the virus. These initiatives included physical and social distancing measures, as well as domestic and international travel restrictions. These initiatives have had a significant impact on certain businesses and economies, leading to economic uncertainty.
The global COVID-19 pandemic reduced our sales volume across all three of our product lines and had an overall negative impact on our business for the six months ended June 30, 2020 and the fiscal year ended December 31, 2020. Total revenues for the fiscal year ended December 31, 2020 declined by $62.4 million, or 10.2%, compared to the fiscal year ended December 31, 2019. The decrease was partially offset by price increases. However, throughout the fiscal year ended December 31, 2020 we experienced strong cash flow generation as our business continued to be resilient during the COVID-19 pandemic, primarily due to the aforementioned price increases, as well as cost reduction initiatives undertaken in response to the COVID-19 pandemic. During the fiscal year ended December 31, 2020, we focused on maintaining adequate workforce strength, sourcing capabilities and inventory levels to ensure that we were well-positioned to serve customers in the post-pandemic recovery. We implemented specific training and guidelines to educate our workforce and highlight health and safety protocols, provide clarity on employee responsibilities and deploy best practices to prevent the spread of COVID-19.
As the countries in which we operate have reopened and social measures taken to slow the transmission of the virus have relaxed, we have seen a recovery in our business results for the six months ended June 30, 2021. Accordingly, our total revenues for the six months ended June 30, 2021 increased by $61.9 million, or 22.6%, compared to the six months ended June 30, 2020.
The extent to which the global COVID-19 pandemic affects our business will depend on future developments in the United States and around the world, which are highly uncertain and cannot be predicted, including the duration and spread of the pandemic and different COVID-19 variants, new information which may emerge concerning the severity of COVID-19 and the actions required to contain and treat it, among others. Although the ultimate impact of the global COVID-19 pandemic on our business and financial results remains uncertain, a continued and prolonged public health crisis such as the global COVID-19 pandemic could have a material negative impact on our business, operating results and financial condition. See “Risk Factors — Risk Factors Relating to Our Company — Our results have been and are likely to continue to be impacted by the COVID-19 pandemic” in RBC’s annual report on Form 10-K for RBC’s fiscal year ended April 3, 2021 for more information.
Revenue
Our revenues primarily consist of product sales across three product lines — mounted bearings, enclosed gearing and power transmission components:
 
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Mounted bearings — Offers fully assembled bearings with a wide range of shaft attachment methods, rolling elements, housings and seal choices. Products include ball bearings, roller bearings and plain bearings, which are used in light to heavy loads, clean, corrosive and harsh environments. Applications include unit & bulk handling, industrial air handling, large rotor fans, food processing, roll out tables, and forest pulp and paper processing. For the six months ended June 30, 2021 and the fiscal year ended December 31, 2020, revenues from the bearings product line represented 50% and 48% of Dodge’s total revenues, respectively.

Enclosed gearing — Consists of products such as Tigear, Quantis Gearmotor, Torque Arm, MagnaGear & Maxum and CST and focuses on reliability which delivers performance and value-added product features providing maximum uptime and less maintenance. For each of the six months ended June 30, 2021 and the fiscal year ended December 31, 2020, revenues from the gearings product line represented 35% of Dodge’s total revenues.

Power transmission components — includes products such as mechanical drive components, couplings and conveyor components and offers coupling solutions for both elastomeric and metallic design with the potential to increase torque capacity, accommodate shaft misalignment and extend life, and complete pulley assembly packages, including the pulley, shafting, bearings, couplings and gearing. This is a complementary offering that drives pull through of high margin mounted bearings and enclosed gearing products. For each of the six months ended June 30, 2021 and the fiscal year ended December 31, 2020, revenues from the power transmission components product line represented 14% of Dodge’s total revenues.
Additionally, we have a smaller service revenue stream resulting from repairs and maintenance activities associated with our large gearing components.
Cost of sales
Cost of sales consists of direct materials and labor costs, as well as overhead costs, warehousing costs, freight costs, customer order engineering and warranty related expenses. During periods of rising material costs, we seek to offset these costs through sourcing initiatives with alternative suppliers and redesign of products to optimize material input. Materials costs for the six months ended June 30, 2020 and 2021 and for the fiscal years ended December 31, 2019 and 2020 remained relatively consistent as a percentage of overall cost of sales.
We monitor gross profit performance through a process of monthly operational reviews and undertook certain cost management initiatives during the six months ended June 30, 2020 and the fiscal year ended December 31, 2020 in response to the COVID-19 pandemic. These cost management initiatives included the following:

Labor cost management was the most significant initiative with production plants cutting down labor hours as orders declined;

Workforce hours were reduced through the implementation of furloughs and Dodge was able to benefit from the United States government’s Paycheck Protection Program, which supplemented employee unemployment benefits; and

Reduction in discretionary expenses such as elimination of all employee travel and trade shows participation.
We experienced a 0.3% decrease in gross profit from 30.9% in the fiscal year ended December 31, 2019 to 30.6% in the fiscal year ended December 31, 2020. As a result of our cost management initiatives taken during the six months ended June 30, 2020 coupled with increasing sales volumes during the six months ended June 30, 2021 as a result of the continued economic recovery from the COVID-19 pandemic, we experienced a favorable change in our gross profit by 2.7%.
Selling, general and administrative expenses
Our selling, general and administrative expenses consists of primarily personnel cost, including standard salaries, commissions and other payroll related items. These cost generally remain consistent year over year with variations driven through commissions cost that are directly correlated to the sales volumes generated.
 
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Non-order related research and development expense
Our non-order related research and development expense consists of direct expenditures relating to our efforts to develop, design, and enhance our products, services, and processes. The research and development costs not related to specific customer orders are generally expensed as incurred resulting in a reduction in income from operations.
Income tax expense
We are subject to income taxes in the numerous tax jurisdictions across the U.S. as a result of the differing state tax legislators. Further, the majority of our pretax income is generated within the U.S. and therefore, we have limited international implications from a tax perspective. We account for income taxes using an asset and liability method. Under this method, income tax expense reflects income taxes paid or payable (or received or receivable) for the current year plus the change in deferred taxes during the year calculated as if the business was a standalone taxpayer.
RESULTS OF OPERATIONS
Three and Six Months Ended June 30, 2021 Compared to Three and Six Months Ended June 30, 2020
The following discussion includes comments and analysis relating to our results of operations for the three and six months ended June 30, 2021 and 2020.
Three Months
Ended June 30,
($ in thousands)
2021
2020
Revenues
$ 166,958 $ 126,704
Net income
24,354 14,186
Net income as a percentage of revenues
14.6% 11.2%
Revenues increased by $40.3 million, or 31.8%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase in revenues was experienced across all three of our product lines and was primarily due to increasing sales volumes as a result of the continued economic recovery from the COVID-19 pandemic. As economies began to reopen and social initiatives were relaxed, our business operations experienced a return to pre-COVID-19 levels.
Net income increased by $10.2 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase in net income was primarily driven by the increased sales volumes and gross profit, partially offset by increased operating expenses, primarily due to our business operations returning to pre-COVID-19 levels. Accordingly, net income as a percentage of revenues increased by 3.4% for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.
Six Months
Ended June 30,
($ in thousands)
2021
2020
Revenues
$ 335,923 $ 274,054
Net income
50,772 34,983
Net income as a percentage of revenues
15.1% 12.8%
Revenues increased by $61.9 million, or 22.6%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase in revenues was experienced across all three of our product lines and was primarily due to increasing sales volumes as a result of the continued economic recovery from the COVID-19 pandemic. As economies began to reopen and social initiatives were relaxed, our business operations experienced a return to pre-COVID-19 levels.
 
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Net income increased by $15.8 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase in net income was primarily driven by the increased sales volumes and gross profit, partially offset by increased operating expenses, primarily due to our business operations returning to pre-COVID-19 levels. Accordingly, net income as a percentage of revenues increased by 2.3% for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.
Gross profit
Three Months
Ended June 30,
($ in thousands)
2021
2020
Gross profit
$ 56,188 $ 37,120
Gross profit as a percentage of revenues
33.7% 29.3%
Gross profit increased by $19.1 million, or 51.4%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase in gross profit was mainly driven by increased sales volumes as the industry began to recover from the COVID-19 pandemic. As such, gross profit as a percentage of revenues increased by 4.4% for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.
Six Months
Ended June 30,
($ in thousands)
2021
2020
Gross profit
$ 114,108 $ 85,792
Gross profit as a percentage of revenues
34.0% 31.3%
Gross profit increased by $28.3 million, or 33.0%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase in gross profit was mainly driven by increased sales volumes as the industry began to recover from the COVID-19 pandemic. As such, gross profit as a percentage of revenues increased by 2.7% for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.
Selling, general and administrative expenses
Three Months
Ended June 30,
($ in thousands)
2021
2020
Selling, general and administrative expenses
$ 21,409 $ 16,445
Selling, general and administrative expenses as a percentage of revenues
12.8% 13.0%
Selling, general and administrative expenses increased by $5.0 million, or 30.2%, in the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase was primarily due to the increased commission cost driven by increased sales volumes, coupled with traveling and marketing costs returning to levels seen prior to COVID-19.
 
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Six Months
Ended June 30,
($ in thousands)
2021
2020
Selling, general and administrative expenses
$ 41,374 $ 35,693
Selling, general and administrative expenses as a percentage of revenues
12.3% 13.0%
Selling, general and administrative expenses increased by $5.7 million, or 15.9%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase was primarily due to the increased commission cost driven by increased sales volumes, coupled with traveling and marketing costs returning to levels seen prior to COVID-19.
Non-order related research and development expenses
Three Months
Ended June 30,
($ in thousands)
2021
2020
Non-order related research and development expenses
$ 2,985 $ 1,894
Non-order related research and development expenses as a percentage
of revenues
1.8% 1.5%
Other non-order related research and development expense increased by $1.1 million, or 57.6%, in the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily as a result of increased research and development expenses incurred by our business coupled with an increase in expenses allocated to Dodge from ABB.
Six Months
Ended June 30,
($ in thousands)
2021
2020
Non-order related research and development expenses
$ 6,250 $ 3,629
Non-order related research and development expenses as a percentage
of revenues
1.9% 1.3%
Other non-order related research and development expense increased by $2.6 million, or 72.2%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily as a result of increased research and development expenses incurred by our business coupled with an increase in expenses allocated to Dodge from ABB.
Income tax expense
Three Months
Ended June 30,
($ in thousands)
2021
2020
Income from operations, before income taxes
$ 32,342 $ 18,854
Income tax expense
7,988 4,668
Effective tax rate
24.7% 24.8%
Income tax expense increased by $3.3 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. Our effective income tax rate for the three months ended June 30, 2021 was 24.7% compared to 24.8% for the three months ended June 30, 2020. The effective income tax rates are different from the United States statutory rate primarily due to state and local income taxes, net of federal tax benefits.
 
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Six Months
Ended June 30,
($ in thousands)
2021
2020
Income from operations, before income taxes
$ 67,426 $ 46,492
Income tax expense
16,654 11,509
Effective tax rate
24.7% 24.8%
Income tax expense increased by $5.1 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. Our effective income tax rate for the six months ended June 30, 2021 was 24.7% compared to 24.8% for the six months ended June 30, 2020. The effective income tax rates are different from the United States statutory rate primarily due to state and local income taxes, net of federal tax benefits.
Fiscal Year Ended December 31, 2020 Compared to Fiscal Year Ended December 31, 2019
The following discussion includes comments and analysis relating to our results of operations for the fiscal years ended December 31, 2020 and 2019.
Fiscal Year
Ended December 31,
($ in thousands)
2020
2019
Revenues
$ 549,997 $ 612,390
Net income
67,564 77,001
Net income as a percentage of revenues
12.3% 12.6%
Revenues decreased by $62.4 million, or 10.2%, for the fiscal year ended December 31, 2020 compared to the fiscal year ended December 31, 2019. The decrease in revenues was experienced by all three of our product lines and was primarily due to the global impact of the COVID-19 pandemic, as we experienced decreasing sales volumes as a result of government-imposed lockdowns in key markets, customer plant shutdowns and a general global economic slowdown. Further, large distributor customers reduced purchases during the fiscal year ended December 31, 2020 in an effort to reduce their inventory in response to the COVID-19 pandemic. We were able to partially offset the decrease in sales volumes by increasing prices across its bearings, gearing and power transmission product lines.
Net income decreased by $9.4 million, or 12.3%, for the fiscal year ended December 31, 2020 compared to the fiscal year ended December 31, 2019. The decrease in net income was primarily driven by the reduced sales volumes due to the COVID-19 pandemic, partially offset by price increases, lower material and overhead costs and reduced operating expenses, primarily due to reducing headcount throughout the fiscal year ended December 31, 2020. Accordingly, net income as a percentage of revenues decreased by 0.3% for the fiscal year ended December 31, 2020 compared to the fiscal year ended December 31, 2019.
Gross profit
Fiscal Year
Ended December 31,
($ in thousands)
2020
2019
Gross profit
$ 168,261 $ 189,267
Gross profit as a percentage of revenues
30.6% 30.9%
Gross profit decreased by $21.0 million, or 11.1%, for the fiscal year ended December 31, 2020 compared to the fiscal year ended December 31, 2019. The decrease in gross profit was mainly driven by reduced sales volumes due to the COVID-19 pandemic, partially offset by price increases, lower material costs and lower overhead costs. As such, gross profit as a percentage of revenues decreased by 0.3% for the fiscal year ended December 31, 2019 compared to the fiscal year ended December 31, 2020.
 
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Selling, general and administrative expenses
Fiscal Year Ended
December 31,
($ in thousands)
2020
2019
Selling, general and administrative expenses
$ 70,850 $ 78,672
Selling, general and administrative expenses as a percentage of revenues
12.9% 12.8%
Selling, general and administrative expenses decreased by $7.8 million, or 9.9%, in the fiscal year ended December 31, 2020 compared to the fiscal year ended December 31, 2019. The decrease was primarily due to delaying the backfilling of vacant positions in connection with employee turnover, coupled with reduced travel and marketing spending as a result of COVID-19 restrictions.
Non-order related research and development expenses
Fiscal Year Ended
December 31,
($ in thousands)
2020
2019
Non-order related research and development expenses
$ 7,439 $ 8,539
Non-order related research and development expenses as a percentage of revenues
1.4% 1.4%
Other non-order related research and development expense decreased by $1.1 million, or 12.9%, in the fiscal year ended December 31, 2020 compared to the fiscal year ended December 31, 2019, primarily as a result of reduced research and development expenses allocated to Dodge from ABB.
Income tax expense
Fiscal Year Ended
December 31,
($ in thousands)
2020
2019
Income from operations, before income taxes
$ 89,743 $ 102,084
Income tax expense
22,179 25,083
Effective tax rate
24.7% 24.6%
Income tax expense decreased by $2.9 million, or 11.6%, for the fiscal year ended December 31, 2020 compared to the fiscal year ended December 31, 2019. Our effective income tax rate for the fiscal year ended December 31, 2020 was 24.7% compared to 24.6% for the fiscal year ended December 31, 2019. The effective income tax rates are different from the United States statutory rate primarily due to state and local income taxes, net of federal tax benefits.
LIQUIDITY AND CAPITAL RESOURCES
Dodge has historically participated in ABB’s centralized treasury management, including centralized cash pooling and overall financing arrangements. Transfers of cash both to and from these arrangements are reflected as a component of “Parent company investment” within the combined balance sheets. However, historically, we have generated operating cash flow sufficient to fund our working capital, capital expenditures and financing requirements.
Following the closing of the Pending Acquisition, the capital structure and sources of liquidity for Dodge are not expected to change significantly. While we will no longer participate in ABB’s centralized treasury management, we expect to continue our ability to fund our capital needs from continued ability to generate cash from operations, and expect little to no need to access to our bank lines of credit.
 
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Cash Flows
The following table presents a summary of our cash flows from operating, investing and financing activities for the periods indicated:
Six Months Ended
June 30,
Fiscal Year Ended
December 31,
($ in thousands)
2021
2020
2020
2019
Net cash provided by (used in):
Operating activities
$ 71,776 $ 42,839 $ 101,670 $ 101,868
Investing activities
(8,916) (10,503) (20,169) (15,085)
Financing activities
(62,860) (32,336)