10-Q 1 a2087143z10-q.txt ROLLERBEARING 10Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 (Mark One) (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended June 29, 2002 ------------- ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ______ to ________ Commission file number: 333-33085 --------- ROLLER BEARING COMPANY OF AMERICA, INC. --------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-3426227 -------- ---------- (State or other jurisdiction (IRS Employer Identification Number) incorporation) 60 ROUND HILL ROAD, FAIRFIELD, CT 06430 (Address of principal executive offices) (Zip code) 203-255-1511 ------------ Registrant's Telephone Number: Indicate by check mark the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during preceding twelve (12) months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 12, 2002 ---------------------------- ------------------------------ Common stock, $.01 par value 100 ROLLER BEARING COMPANY OF AMERICA, INC. INDEX

PAGE Part I Financial Information Item 1. Consolidated Balance Sheets - At ~~December~~June 29, ~~2001~~2002 (unaudited) and March 3130, ~~2001~~2002 3 Consolidated Statements of Operations - Three months ~~and nine months~~ ended ~~December~~June 29, ~~2001~~2002 (unaudited) and ~~December~~June 30, ~~2000~~2001 (unaudited) 4 Consolidated Statements of Cash Flows - Three months ~~and nine months~~ ended ~~December~~June 29, ~~2001~~2002 (unaudited) and ~~December~~June 30, ~~2000~~2001 (unaudited) 5 Notes to Consolidated Financial Statements 6 - 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 -16 Item 3. Quantitative and Qualitative Disclosure of Market Risk 16 Part II Other Information 17 Signatures 18 ~~Exhibit Index 19~~

2 PART I ITEM 1. FINANCIAL INFORMATION ROLLER BEARING COMPANY OF AMERICA, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)

~~DECEMBER~~JUNE 29, MARCH 3130, ~~2001~~2002 ~~2001~~2002 (UNAUDITED) * ----------- --------- ASSETS ~~unaudited~~ Current assets: Cash $ 416,~~969~~472 $ 37,~~126~~178 Accounts receivable, net of allowance for doubtful accounts of $~~243~~631 at ~~December~~June 29, ~~2001~~2002 and $~~257~~621 at March 3130, ~~2001~~2002 3031,~~923~~339 3738,~~019~~415 Inventories 7881,~~864~~108 6776,~~629~~605 Prepaid expenses and other current assets 4,~~976~~840 35,~~531~~127 --------- --------- Total current assets ~~119~~133,~~732~~759 ~~111~~127,~~305~~325 --------- --------- Property, plant and equipment, net ~~of accumulated depreciation of $54,256 at December 29, 2001 and $47,609 at March 31, 2001~~ 58,~~910~~989 6059,~~001~~536 Restricted marketable securities 31,~~000~~255 41,~~041~~255 ~~Excess of costs over net assets acquired~~Goodwill, net of accumulated amortization of $6,~~424~~624 at ~~December~~June 29, ~~2001~~2002 and ~~$5,823 at~~ March 3130, ~~2001~~2002 25,~~350~~150 25,~~951~~150 Deferred financing costs, net of accumulated amortization of $45,~~451~~070 at ~~December~~June 29, ~~2001~~2002 and $34,~~759~~776 at March 3130, ~~2001~~2002 35,~~809~~920 43,~~501~~413 Other assets 1,~~370~~366 1,~~390~~342 --------- --------- Total assets $ ~~212~~226,~~171~~439 $ ~~207~~218,~~189~~021 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable $ 1112,~~691~~838 $ 1413,~~428~~880 Accrued expenses and other current liabilities 1310,~~786~~742 1312,~~349~~312 Current portion of long-term debt 327,~~629~~672 2631,~~631~~594 Obligations under capital leases, current portion ~~280~~493 ~~726~~533 --------- --------- Total current liabilities 5831,~~386~~745 5558,~~134~~319 --------- --------- Long-term debt ~~132~~164,~~625~~258 ~~134~~130,~~785~~135 Capital lease obligations, less current portion ~~615~~56 ~~727~~148 Other non-current liabilities 1016,~~054~~096 1016,~~109~~046 --------- --------- Total liabilities ~~201~~212,~~680~~155 ~~200~~204,~~755~~648 --------- --------- Commitments and contingencies Stockholder's equity: ~~Commonstock~~Common stock - $.01 par value; 1,000 shares authorized; issued and outstanding shares: 100 shares at ~~December~~June 29, ~~2001~~2002 and at March 3130, ~~2001~~2002 -- -- Additional paid-in capital 9,708 9,708 Currency translation adjustment ~~(39)~~174 1288 Retained (deficit) earnings ~~822~~4,402 (3,~~286)~~577 --------- --------- Total stockholder's equity 1014,~~491~~284 613,~~434~~373 Total liabilities and stockholder's equity $ ~~212~~226,~~171~~439 $ ~~207~~218,~~189~~021 ========= =========

* Balances were derived from the audited balance sheet as of March 30, 2002 See Notes to Consolidated Financial Statements 3 ROLLER BEARING COMPANY OF AMERICA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (DOLLARS IN THOUSANDS)

THREE MONTHS ENDED ~~NINE MONTHS ENDED~~ ------------------ -------~~----------~~ ~~DECEMBER~~JUNE 29, ~~DECEMBER~~JUNE 30, ~~DECEMBER~~2002 ~~29, DECEMBER 30,~~ 2001 ~~2000 2001 2000~~ ------- -------~~------------------------------------------~~ Net sales $ 38,~~675~~521 $ 40,~~150~~170 ~~$120,676 $125,171~~ Cost of sales 2627,~~566~~065 27,~~285~~277 ~~82,539 84,414~~ ------- -------~~------------------------------------------~~ Gross margin 1211,~~109~~456 12,~~865~~893 ~~38,137 40,757~~ Operating expenses: Selling, general and administrative 6,~~237~~269 6,~~298~~188 ~~18,866 19,439~~ Other expense, net of other income ~~308~~19 ~~377~~196 ~~751 588~~ ------- -------~~------------------------------------------~~ 6,~~545~~288 6,~~675~~384 ~~19,617 20,027~~ Operating income 5,~~564~~168 6,~~190~~509 ~~18,520 20,730 Other non-operating expense -- 3,000 -- 3,000~~ Interest expense, net 3,~~580~~766 4,~~275~~141 ~~11,543 11,459~~ Minority interest 74 34 ~~15 13~~ ------- -------~~------------------------------------------~~ Income before taxes 1,~~977~~398 (12,~~088)~~364 ~~6,962 6,258~~ Provision for income taxes ~~811~~573 ~~(446)~~970 ~~2,854 2,566~~ ------- -------~~------------------------------------------~~ Net income $ ~~1,166~~825 $ ~~(642) $ 4~~1,~~108~~394 ~~$ 3,692~~ ======= =======~~==========================================~~

See Notes to Consolidated Financial Statements 4 ROLLER BEARING COMPANY OF AMERICA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)

~~For~~FOR ~~the~~THE ~~Nine~~THREE ~~Months~~MONTHS ~~Ended~~ENDED ~~December~~JUNE 29, ~~December~~JUNE 30, 2002 2001 ~~2000~~ --------~~---~~ --------~~---~~ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ ~~4,108~~825 $ 31,~~692~~394 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 62,~~753~~246 62,~~389~~297 Minority interest 154 184 Amortization of ~~excess~~goodwill of-- ~~costs~~200 ~~over net assets acquired 601 601~~ Amortization of deferred financing costs ~~692~~293 ~~567~~231 Changes in working capital, net of acquisitions: (Increase) decrease in accounts receivable 67,~~765~~076 46,~~223~~718 (Increase) decrease in inventories (104,~~634~~503) (83,~~591~~297) (Increase) decrease in prepaid expenses & other current assets ~~(1,401)~~287 (~~1,005~~664) (Increase) decrease in other non-current assets 19 (8454) 27 Increase (decrease) in accounts payable & accrued expenses (32,~~039~~272) ~~175~~(1,860) Increase (decrease) in other non-current liabilities ~~(72)~~45 --4 --------~~---~~ --------~~---~~ Net cash provided by operating activities 3,~~807~~547 65,~~061~~054 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant & equipment, net (41,~~106~~610) (41,~~917~~724) ~~Acquisition of subsidiaries (2,128) --~~ Sale of restricted marketable securities ~~1,041~~-- ~~659~~445 --------~~---~~ --------~~---~~ Net cash used in investing activities (51,~~193~~610) (41,~~258~~279) CASH FLOWS FROM FINANCING ACTIVITIES: Net ~~increase~~decrease in revolving credit facility 7(28,~~000~~500) ~~11,~~(500) ~~Payments~~Proceeds offrom ~~bank~~long term ~~loan~~debt (340,~~162)~~000 ~~(3,217)~~-- ~~Dividend~~Financing fees paid toin ~~parent~~connection with the credit facility (2,800) -- Payments of bank term loan (31,~~571~~841) (1,640) Principal payments on capital lease obligations (~~558~~132) (~~685~~211) --------~~---~~ --------~~---~~ Net cash ~~provided by~~ (used in) provided by financing activities 36,~~280~~727 4(2,~~027~~351) CASH AND CASH EQUIVALENTS: Effect of exchange rate changes ~~(51)~~630 (~~179~~64) Increase during the period 19,~~843~~294 51,~~651~~360 Cash, at beginning of year 7,178 3,126 ~~1,051~~ --------~~---~~ --------~~---~~ Cash, at end of period $ 416,~~969~~472 $ 64,~~702~~486 ========~~===~~ ========~~===~~ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 136,~~309~~099 $ 136,~~249~~575 ========~~===~~ ========~~===~~ Income taxes $ ~~136~~99 $ ~~1,131~~59 ========~~===~~ ========~~===~~

See Notes to Consolidated Financial Statements 5 ROLLER BEARING COMPANY OF AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS) The consolidated financial statements included herein have been prepared by Roller Bearing Company of America, Inc. (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The fiscal year end balance sheet data was derived from the Company's audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. The interim financial statements furnished with this report have been prepared on a consistent basis with the Company's audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 30, 2002 (the "Form 10-K"). These statements reflect all adjustments, consisting only of items of a normal recurring nature, which are, in the opinion of management, necessary for the fair statement of the consolidated financial condition and consolidated results of operations for the interim periods presented. These financial statements should be read in conjunction with the Company's audited financial statements and notes thereto included in the Form 10-K. The results of operations for the three month period ended June 29, 2002 are not necessarily indicative of the operating results for the full year. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Industrial Tectonics Bearings Corporation ("ITB"), RBC Linear Precision Products ("LPP"), RBC Nice Bearings, Inc. ("Nice"), Bremen Bearings, Inc. ("Bremen"), Miller Bearings, Inc. ("Miller"), Tyson Bearings, Inc. ("Tyson"), RBC Schaublin S.A. ("Schaublin"), OBB Acquisition Corp. ("OBB") and Roller Bearing Company FSC, Inc. ("FSC"). All material intercompany balances and transactions have been eliminated. All references to "Holdings" refer to Roller Bearing Holding Company, Inc., a Delaware corporation, and the parent and sole stockholder of the Company. 1. Debt The Company and its domestic subsidiaries entered into a $94 million senior secured credit facility, dated May 30, 2002, with General Electric Capital Corporation as agent and lender, Congress Financial Corporation (Western) as lender, GECC Capital Markets Group as lead arranger and other lenders signatory thereto from time to time, consisting of a $40 million term loan and a $54 million revolving credit facility. In connection with the new credit facility the Company and its domestic subsidiaries granted liens and mortgages on substantially all of their existing and after-acquired personal and real property. In addition, the Company pledged all of its capital stock in its domestic subsidiaries and a portion of its capital stock in its directly owned foreign subsidiaries. The proceeds of the term loan were used to pay off the Company's senior credit facility, dated June 23, 1997, by and between the Company, Credit Suisse First Boston, as administrative agent and the lenders thereto, to pay fees and expenses with respect to the new credit facility and for other corporate purposes. In addition, the Company has secured the letters of credit issued in connection with its existing senior credit facility pursuant to its new credit facility. The revolving credit facility is available for issuances of letters of credit and for loans in connection with acquisitions, working capital needs or other general corporate purposes. On June 23, 1997, pursuant to a Redemption and Warrant Purchase Agreement dated May 20, 1997, Holdings effected a recapitalization of its outstanding capital stock (including the financing and other transactions consummated by Holdings, the Company and its subsidiaries in connection therewith, the "Recapitalization"). In connection with the financing of the Recapitalization, the Company issued $110,000 aggregate principal amount of 9 5/8% Senior Subordinated Notes due 2007 (the "Notes"). The Notes pay interest semiannually and 6 mature on June 15, 2007, but may be redeemed at the Company's option beginning on June 15, 2002, or earlier under certain conditions specified in the indenture pursuant to which the Notes were issued (the "Indenture"). The Notes are unsecured and subordinated to all existing and future Senior Indebtedness (as defined in the Indenture) of the Company. The Notes are fully and unconditionally and irrevocably guaranteed, jointly and severally, on a senior subordinated basis by each of the wholly owned subsidiaries of the Company. Consolidated financial information regarding the Company, guarantor subsidiaries and non-guarantor subsidiaries as of June 29, 2002 and March 30, 2002 and for fiscal quarters ended June 29, 2002 and June 30, 2001 is presented below for purposes of complying with the reporting requirements of the guarantor subsidiaries.

SUBTOTAL NON CORPORATE AS OF ~~DECEMBER~~ 06/29,/02: ~~2001~~(unaudited) SUBSIDIARY ~~SUBSIDIARY~~GUARANTOR AND TOTAL GUARANTORS ~~GUARANTORS~~SUBSIDIARIES DIVISIONS COMPANY Cash $ (60172) ~~1,705~~$ 3915 $ 15,~~324~~729 4$ 16,~~969~~472 Accounts receivable, net 6,~~236~~671 321,~~192~~431 2131,~~495~~339 303,~~923~~237 - Raw ~~materials~~material 1,~~322~~137 ~~496~~734 1,~~850~~589 3,~~668~~460 Work in process 1110,~~326~~848 12,~~547~~854 65,~~172~~161 1918,~~045~~863 Finished goods 2625,~~297~~683 35,~~422~~453 2627,~~432~~649 5658,~~151~~785 --------- ---------- ---------- ----------~~-----------------------------~~ Inventories 3837,~~945~~668 59,~~465~~041 34,~~454~~399 7881,~~864~~108 Prepaid expense & other current assets ~~629~~522 ~~518~~486 3,~~829~~832 4,~~976~~840 --------- ---------- ---------- ----------~~-----------------------------~~ Total current assets 4544,~~750~~689 1013,~~880~~679 6375,~~102~~391 ~~119~~133,~~732~~759 Property, plant and equipment, net 33,~~510~~462 334,~~144~~139 2221,~~256~~388 58,~~910~~989 Restricted marketable securities ~~1,825~~38 - 1,~~175~~217 31,~~000~~255 ~~Excess of cost over net assets acquired~~Goodwill, net 8,~~110~~054 - 17,~~240~~096 25,~~350~~150 Deferred financing costs, net - - 35,~~809~~920 35,~~809~~920 Other assets ~~(2,128)~~- ~~231~~203 31,~~267~~163 1,~~370~~366 --------- ---------- ---------- ---------- Total assets $ 86,243 $ 18,021 $ 122,175 $ 226,439 --------- ---------- ---------- ~~Total~~---------- ~~assets 87,067 14,255 110,849 212,171 ====================================================================~~ Accounts payable $ 5,~~101~~811 $ 1,~~187~~546 $ 5,~~403~~481 11$ 12,~~691~~838 Interco payable (~~receivable~~receivables) 6361,~~003~~660 ~~(127)~~3,457 (6265,~~876~~117) - Interco ~~loan~~loans - 1,740 (1,740) - ~~Accrued expenses and other current liabilities 3,544 366 9,876 13,786~~ Current portion of long-term debt ~~198~~195 1,~~806~~764 305,~~625~~802 327,~~629~~761 Obligations under capital leases ~~181~~138 -29 99326 ~~280~~493 Accrued expenses and other current liabilities 3,206 1,190 6,257 10,653 --------- ---------- ---------- ----------~~-----------------------------~~ Total current liabilities 7271,~~027~~010 49,~~972~~726 (1848,~~613~~991) 5831,~~386~~745 Long term debt 31,~~577~~639 32,~~548~~833 ~~125~~159,~~500~~786 ~~132~~164,~~625~~258 Capital lease obligations, less current portion 9527 -23 ~~520~~6 ~~615~~56 Other ~~non-current~~noncurrent liabilities 1,~~019~~153 ~~111~~46 814,~~924~~897 1016,~~054~~096 --------- ---------- ---------- ----------~~-----------------------------~~ Total liabilities 7673,~~718~~829 812,~~631~~628 ~~116~~125,~~331~~698 ~~201~~212,~~680~~155 Stockholder's equity (deficit): Common stock - 63 (63) - Additional paid in capital - - 9,708 9,708 Currency translation adjustment - 174 - ~~(39)~~174 ~~(39)~~ Total retained earnings ~~(deficit) 10~~12,~~349~~414 5,~~561~~156 (1513,~~088~~168) ~~822~~4,402 --------- ---------- ---------- ----------~~-----------------------------~~ Total stockholder's equity ~~(deficit) 10~~12,~~349~~414 5,~~624~~393 (53,~~482~~523) 1014,~~491~~284 Total liabilities & stockholder's equity ~~87,067~~$ 1486,~~255~~243 ~~110,849~~$ ~~212~~18,~~171~~021 ~~====================================================================~~$ ~~AS OF MARCH 31~~122,175 ~~2001~~$ ~~Cash (504) 2~~226,~~317~~439 ~~1,313 3,126 Accounts receivable, net 12,118 3,705 21,196 37,019 Raw materials 1,379 431 968 2,778 Work in process 9,891 1,336 5,573 16,800 Finished goods 21,486 2,762 23,803 48,051~~ ---------~~-----------------------------------------------------------~~ ~~Inventories 32,756 4,529 30,344 67,629 Prepaid expense & other current assets 73 438 3,020 3,531~~ ----------~~----------------------------------------------------------~~ ~~Total current assets 44,443 10,989 55,873 111,305 Property, plant and equipment, net 32,871 3,274 23,856 60,001 Restricted marketable securities 2,463~~ - ~~1,578 4,041 Excess of cost over net assets acquired, net 6,111~~ - ~~19,840 25,951 Deferred financing costs, net~~ - - ~~4,501 4,501 Other assets~~ - ~~221 1,169 1,390~~ -----~~---------------------------------------------------------------~~ Total assets 85,888 14,484 106,817 207,189 ==================================================================== 7 Accounts payable 6,913 1,253 6,262 14,428 Interco payable(receivable) 63,579 749 (64,328) - ~~Interco loan~~ - ~~1,740 (1,740)~~ - ~~Accrued expenses and other current liabilities 4,600 805 7,944 13,349 Current portion of long~~-~~term debt 194 1,687 24,750 26,631 Obligations under capital leases 273~~ - ~~453 726~~ -----~~---------------------------------------------------------------~~ ~~Total~~Consolidated ~~current~~Balance liabilities 75,559 6,234 (26,659) 55,134 Long term debt 3,681 4,229 126,875 134,785 Capital lease obligations, less current portion 203 - 524 727 Other non-current liabilities 1,020 166 8,923 10,109 -------------------------------------------------------------------- Total liabilities 80,463 10,629 109,663 200,755 Stockholder's equity (deficit): Common stock - 63 (63) - Additional paid in capital - - 9,708 9,708 Currency translation adjustment - - 12 12 Total retained earnings (deficit) 5,703 3,792 (12,781) (3,286) -------------------------------------------------------------------- Total stockholder's equity (deficit) 5,703 3,855 (3,124) 6,434 Total liabilities & stockholder's equity 86,166 14,484 106,539 207,189 ====================================================================Sheets

SUBTOTAL NON CORPORATE ~~SUBSIDIARY~~AS OF 3/30/02: SUBSIDIARY GUARANTOR AND TOTAL ~~THIRD QUARTER FY 2002~~ GUARANTORS ~~GUARANTORS~~SUBSIDIARIES DIVISIONS COMPANY ~~Net~~Cash ~~sales~~$ ~~17,258~~(240) ~~3,725~~$ 171,~~692~~134 ~~38,675~~$ ~~Cost of sales 13~~6,~~382~~284 ~~2,527~~$ ~~10,657 26,566 ------------------------------------------------------------------- Gross margin 3,876 1,198~~ 7,~~035~~178 ~~12,109~~Accounts ~~Operating expenses: Selling~~receivable, ~~general~~net ~~and administrative 1~~8,~~396~~175 ~~859~~ 3,~~982~~084 627,~~237~~156 ~~Other expense~~38,415 ~~net~~Raw ofmaterial ~~other~~870 ~~income~~718 ~~56 - 252 308 --------------------------------------------------------------------~~ 1,~~452~~597 ~~859 4~~3,~~234~~185 ~~6,545~~Work ~~Operating~~in ~~income~~process 28,~~424~~884 ~~339~~ 2,~~801~~582 57,~~564~~110 ~~Interest expense~~18,576 ~~net~~Finished 21goods ~~91 3~~24,~~468~~287 34,~~580~~477 ~~Minority interest - 7 - 7 -------------------------------------------------------------------- Income before taxes 2~~26,~~403~~080 ~~241 (667) 1~~54,~~977~~844 ~~Provision for income taxes 985 99 (273) 811~~ --------- ---------- ---------- --------~~-------------------------------~~ ~~Net~~Inventories ~~income 1~~34,~~418~~041 ~~142 (394) 1~~7,~~166~~777 ~~==================================================================== THIRD QUARTER FY 2001 Net sales 19~~34,~~475~~787 276,~~941~~605 ~~17,734~~Prepaid ~~40,150~~expense ~~Cost~~other ofcurrent ~~sales~~assets ~~13,961~~343 ~~2,050~~474 114,~~274~~310 275,~~285~~127 --------- ---------- ---------- --------~~-------------------------------~~ ~~Gross~~Total ~~margin~~current ~~5,514~~assets ~~891 6~~42,~~460~~319 12,~~865~~469 ~~Operating~~72,537 ~~expenses:~~127,325 ~~Selling~~Property, ~~general~~plant and ~~administrative 1~~equipment,~~251~~ ~~552~~net 432,~~495~~622 63,~~298~~903 ~~Other~~23,011 ~~expense~~59,536 ~~net~~Restricted ofmarketable ~~other~~securities ~~income~~38 56 - ~~321 377 --------------------------------------------------------------------~~ 1,~~307~~217 ~~552 4~~1,~~816~~255 6Goodwill,~~675~~ ~~Operating~~net ~~income 4~~8,~~207~~054 ~~339~~- 117,~~644~~096 625,~~190~~150 ~~Other~~Deferred ~~non-operating~~financing ~~expense~~costs, net - - 3,~~000~~413 3,~~000~~413 ~~Interest~~Other ~~expense~~assets (2,128) ~~net~~180 ~~17 118 4~~3,~~140~~290 41,~~275~~342 ~~Minority interest~~ - 3 - 3 ------- ---------- ---------- --------~~---------------------------------~~ ~~Income~~Total ~~before~~assets ~~taxes~~$ 480,~~190~~905 ~~218~~$ (216,~~496)~~552 ~~(1,088)~~$ ~~Provision for income taxes 1~~120,~~718~~564 ~~89 (2~~$218,~~253)~~021 ~~(446) -------------------------------------------------------------------- Net income 2,472 129 (243) (642)~~ ========= ========== ========== ========~~===============================~~ 8Accounts ~~NINE~~payable ~~MONTHS~~$ ~~FY 2002 Net sales 53~~6,~~232~~113 ~~11,222~~$ 561,~~222~~665 ~~120,676~~$ ~~Costt of Sales 41~~6,~~011~~102 ~~7,463~~$ 3413,~~065~~880 ~~82,539~~Interco ~~--------------------------------------------------------------------~~payable ~~Gross~~(receivable) ~~margin 12~~52,~~221~~245 3,~~759~~989 22(56,~~157~~234) ~~38,137~~- ~~Operating~~Current ~~expenses:~~portion ~~Selling,~~of ~~general~~long-term ~~and~~debt ~~administrative~~203 41,~~104~~515 229,~~313~~876 1231,~~449~~594 ~~18,866~~Obligations ~~Other~~under ~~expense,~~capital ~~net~~leases of151 ~~other~~29 ~~income~~353 ~~168~~533 -Accrued ~~583~~expenses ~~751~~and ~~--------------------------------------------------------------------~~other ~~4,272~~current ~~2,313~~liabilities 138,~~032~~501 ~~19,617 Operating income 7,949~~ 1,~~446~~019 92,~~125~~792 1812,~~520~~312 ~~Interest expense, net 75 297 11,171 11,543 Minority interest~~ - 15 - 15 ------- ---------- ---------- --------~~---------------------------------~~ ~~Income~~Total ~~before~~current ~~taxes~~liabilities 767,~~874~~213 18,~~134~~217 (217,~~046~~111) 658,~~962~~319 ~~Provision~~Long ~~for~~term ~~income~~debt ~~taxes 3~~1,~~228~~680 ~~465 (839)~~ 2,~~854~~955 ~~--------------------------------------------------------------------~~125,500 ~~Net income 4~~130,~~646~~135 ~~669~~Capital ~~(1,207)~~lease 4obligations,~~108~~ ~~====================================================================~~less ~~NINE~~current ~~MONTHS~~portion FY51 ~~2001~~25 ~~Net~~72 ~~sales~~148 ~~38,813~~Other ~~7,117~~noncurrent ~~79,241~~liabilities ~~125~~1,~~171~~158 ~~Cost~~132 ~~of sales 28~~14,~~212~~756 416,~~931~~046 ~~51,271 84,414~~ --------- ---------- ---------- --------~~-------------------------------~~ ~~Gross~~Total ~~margin~~liabilities 1070,~~601~~102 211,~~186~~329 27123,~~970~~217 40204,~~757~~648 ~~Operating~~Stockholder's ~~expenses~~equity (deficit): ~~Selling,~~Common ~~general~~stock ~~and~~- ~~administrative~~63 ~~2,688~~(63) - 1,~~297~~740 ~~15,454~~Additional ~~19,439~~paid ~~Other~~in ~~expense,~~capital ~~net of other income 112~~ - ~~476 588~~ -~~-------------------------------------------------------------------~~ 29,~~800~~708 19,~~297~~708 ~~15,930~~Currency ~~20,027~~translation ~~Operating~~adjustment ~~income~~- ~~7,801~~88 ~~889 12,040 20,730 Other non~~-~~operating~~ ~~expense~~88 -Total -retained ~~3,000~~earnings 310,~~000~~803 ~~Interest expense~~5,072 ~~net 38 222 11~~(12,~~199~~298) 113,~~459~~577 ~~Minority interest~~ - ~~7 6 13~~ -------- ---------- ---------- --------~~--------------------------------~~ ~~Income~~Total ~~before~~stockholder's ~~taxes~~equity 710,~~763~~803 ~~660~~5,223 (2,~~165~~653) 613,~~258~~373 ~~Provision~~Total ~~for~~liabilities ~~income~~& ~~taxes~~stockholder's ~~3,183~~equity ~~271~~$ ~~(887) 2~~80,~~566~~905 ~~--------------------------------------------------------------------~~$ ~~Net income 4~~16,~~580~~552 ~~389~~$ (1120,~~278)~~564 3$218,~~692~~021 ========= ========== ========== ========~~===============================~~

CONSOLIDATING STATEMENTS OF OPERATIONS

NON ~~CORPORATE NINE MONTHS ENDED DECEMBER 29, 2001~~ SUBSIDIARY ~~SUBSIDIARY~~GUARANTOR ~~AND~~CORPORATE TOTAL ~~GUARANTORS~~Three ~~GUARANTORS~~months ~~DIVISIONS~~ended ~~COMPANY~~June ~~CASH FLOWS FROM OPERATING ACTIVITIES: Net income 4~~29,~~646~~ ~~669~~2002 (~~1,207~~Unaudited) ~~4,108~~GUARANTORS ~~Adjustments~~SUBSIDIARIES toAND ~~reconcile~~DIVISIONS ~~net~~COMPANY ~~income~~Net tosales ~~net~~$ ~~cash provided by (used in) operating activities: Depreciation 2~~17,~~734~~547 ~~342~~$ 3,~~677~~654 ~~6,753~~$ ~~Minority interest -- 15 -- 15 Amortization of excess of costs over net assets acquired 168 -- 433 601 Amortization of deferred financing costs -- -- 692 692 Changes in working capital~~17, ~~net of acquisitions: (Increase) decrease in current assets (6,235) (40) 935 (5,340) (Increase) decrease in non-current assets -- (8) 27 19 Increase (decrease) in current liabilities 1,189 (~~320) ~~(3,908)~~$ (338,~~039)~~521 ~~Increase~~Cost (decrease) in non-current liabilities -- -- (2) (2) ----------------------------------------------------------- Net cash provided by operating activities 2,502 658 647 3,807 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of ~~property,~~sales ~~plant & equipment~~13,383 ~~net (~~2,~~392)~~464 ~~(527) (1~~11,~~187)~~218 (427,~~106)~~065 ~~Acquisition of subsidiaries~~ -- -- ~~(2,128) (2,128) Sale of restricted marketable securities 638~~ -- ~~403 1,041~~ -- ------- --------~~------------------------------------------~~ Net cash used in investing activities (1,754) (527) (2,912) (5,193) CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in revolving credit facility 7,000 7,000 Payments of bank term loan (100) (743) (2,319) (3,162) Principal payments on capital lease obligations (204) -- ~~(354) (558)~~ ------~~-----------------------------------------------------~~ ~~Net~~Gross ~~cash~~margin ~~(used in) provided by financing activities (304) (743)~~ 4,~~327~~164 ~~3,280 9 CASH AND CASH EQUIVALENTS: Effect of exchange rate changes -- -- (51) (51) Increase during the period 444 (612) 2,011~~ 1,~~843~~190 ~~Cash~~6,102 ~~at beginning of year (504) 2~~11,~~317~~456 1Selling,~~313~~ ~~3,126~~general ~~-----------------------------------------------------------~~and ~~Cash,~~administrative ~~at end of period (60)~~ 1,~~705~~416 ~~3,324~~839 4,~~969~~014 =========================================================== NINE MONTHS ENDED DECEMBER 30, 2000 CASH FLOWS FROM OPERATING ACTIVITIES: Net income 977 (642) 3,357 3,692 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 2,643 312 3,434 6,~~389~~269 ~~Minority~~Other ~~interest -- 18 -- 18 Amortization of excess of costs over net assets acquired 168 -- 433 601 Amortization of deferred financing costs -- -- 567 567 Changes in working capital~~expense, net of ~~acquisitions:~~other ~~(Increase)~~income ~~decrease in current assets (~~6~~,607)~~ ~~719~~16 ~~515~~ (~~5,373~~3) ~~(Increase)~~19 ~~decrease in non~~-~~current assets~~ -- ~~(18) 10 (8) Increase (decrease) in current liabilities 4,416 1,609 (5,850) 175 Increase (decrease) in non~~-~~current liabilities 286 162 (448)~~ -- -- ------- -------- --------~~----------------------------------~~ ~~Net~~Operating ~~cash~~income ~~provided by operating activities 1,883~~ 2,~~160~~742 335 2,~~018~~091 65,~~061~~168 ~~CASH~~Interest ~~FLOWS FROM INVESTING ACTIVITIES: Purchase of property~~expense, ~~plant & equipment,~~ net ~~(2,399)~~12 ~~(256)~~43 (23,~~262)~~711 (43,~~917)~~766 ~~Sale~~Minority ofinterest ~~restricted~~- ~~marketable~~4 ~~securities 285~~ -- ~~374~~4 ~~659~~ -------- ------- -------- --------~~----------------------------~~ ~~Net~~Income ~~cash~~before ~~used~~taxes ~~in investing activities (~~2,~~114)~~730 ~~256~~288 (1,~~888~~620) (41,~~258)~~398 ~~CASH~~Provision ~~FLOWS~~for ~~FROM~~income ~~FINANCING~~taxes ~~ACTIVITIES: Net (decrease) increase in revolving credit facility -- -- 11~~1,~~500 11,500 Payments of bank term loan (133) (~~119) ~~(2,965)~~118 (~~3,217~~664) ~~Dividend~~573 ~~paid to parent~~ -- -- ~~(3,571) (3,571) Principal payments on capital lease obligations (137)~~ -- ~~(548) (685)~~ -- ------- -------- --------~~----------------------------------~~ Net ~~cash~~income ~~(used~~$ ~~in) provided by financing activities (270) (119) 4,416 4,027 CASH AND CASH EQUIVALENTS: Effect of exchange rate changes -- -- (179) (179) Increase during the period (501)~~ 1,~~785~~611 ~~4,367~~$ ~~5,651~~170 ~~Cash,~~$ ~~at beginning of year~~ (3956) ~~532~~$ ~~522~~825 ~~1,051 ----------------------------------------------------------- Cash, at end of period (504) 2,317 4,889 6,702~~ ======== ======= ======== ========~~============================~~

8 CONSOLIDATING STATEMENTS OF OPERATIONS

~~December~~NON ~~29,~~SUBSIDIARY ~~2001~~GUARANTOR ~~March~~CORPORATE ~~31,~~TOTAL ~~2001~~Three ~~-----------------~~months ~~--------------~~ended ~~SENIOR~~June ~~SUBORDINATED NOTES PAYABLE $110~~30,~~000~~ ~~$110,000~~2001 ~~CREDIT~~(Unaudited) ~~FACILITY~~GUARANTORS ~~---------------~~SUBSIDIARIES ~~Term~~AND ~~Loan,~~DIVISIONS ~~payable~~COMPANY inNet ~~quarterly~~sales ~~installments of~~ $~~250,~~ ~~commencing December 30~~17,119 ~~1997, increasing annually thereafter to~~ $~~1,375~~ ~~from September 30~~4,093 ~~2001~~$ ~~with final payment due June 30~~18,958 ~~2002;~~$ ~~bears interest at variable rates~~40,170 ~~payable~~Cost ~~monthly~~of ~~and~~sales ~~quarterly for prime and LIBOR-based elections~~13,145 ~~respectively 4~~2,~~125~~714 611,~~625~~418 ~~REVOLVING CREDIT FACILITY BORROWINGS OUTSTANDING 26~~27,~~500~~277 ~~19,500~~-------- ~~SWISS CREDIT FACILITY~~ ------- -------- -------- ~~Term~~Gross ~~Loan~~margin 3,974 ~~payable~~1,379 in7,540 ~~quarterly installments of approximately $287~~12,893 ~~commencing March 2001~~Selling, ~~increasing~~general ~~thereafter~~and toadministrative ~~approximately~~1,373 ~~$430~~745 ~~from~~4,070 ~~March~~6,188 ~~2004;~~Other ~~bears~~expense, ~~interest~~net atof ~~variable~~other ~~rates,~~income ~~payable~~74 ~~quarterly~~ (4~~,881~~) ~~5,461~~126 ~~SCHAUBLIN~~196 ~~NOTE~~-------- ------- -------- ~~Term~~-------- ~~Loan~~Operating ~~bears~~income ~~interest~~2,527 at638 5%3,344 ~~473~~6,509 ~~454~~Interest ~~OTHER~~expense, ~~LOANS~~net ~~775~~25 ~~876~~105 ~~-----------~~4,011 ~~INDUSTRIAL~~4,141 ~~DEVELOPMENT~~Minority ~~REVENUE~~interest ~~BONDS~~- 4 - 4 -------- ------- -------- --------~~----~~ ~~Series~~Income ~~1994~~before Ataxes ~~due in annual installments of $180 beginning September 1~~2,502 ~~2006,~~529 ~~graduating~~(667) ~~to $815 on September 1~~2,364 ~~2014~~Provision ~~with~~for ~~final~~income ~~payment~~taxes ~~due on September~~ 1,026 ~~2017;~~217 ~~bears~~(273) ~~interest~~970 ~~at a variable rate, payable monthly through December 2017 7,700 7,700 Series 1994 B bears interest at a variable rate, payable monthly through December 2017 3,000 3,000 Series 1998 tax~~-~~exempt industrial development bonds; bearing interest at variable rates, payable monthly through December 2021 3,000 3,000 Series 1999 tax~~-~~exempt industrial development bonds; bearing interest at variable rates, payable monthly through April 2024 4,800 4,800~~ -------- -------- ~~TOTAL DEBT 165,254 161,416 LESS: CURRENT PORTION 32,629 26,631~~ -------- -------- ~~LONG-TERM~~Net ~~DEBT~~income $~~132~~ 1,~~625~~476 $~~134~~ 312 $ (394) $ 1,~~785~~394 ======== ======= ======== ========

CONSOLIDATING STATEMENTS OF CASH FLOWS

~~Fiscal~~NON ~~Quarter~~SUBSIDIARY ~~Ended~~GUARANTOR ~~Nine~~CORPORATE TOTAL Three Months Ended June 29, 2002 (Unaudited) GUARANTORS SUBSIDIARIES AND DIVISIONS COMPANY Cash flows from operating activities: Net income $ 1,611 $ 170 $ (956) $ 825 Adjustments to reconcile net income to net cash provided by operations: Depreciation 919 177 1,150 2,246 Minority interest - 4 - 4 Amortization of goodwill - - - - Amortization of deferred financing costs - - 293 293 Changes in working capital, net of acquisitions: (Increase) decrease in current assets (411) 20 3,251 2,860 (Increase) decrease in non-current assets - - (454) (454) Increase (decrease) in current liabilities (1,266) (620) (386) (2,272) Increase (decrease) in non-current liabilities - - 45 45 ---------- --------- ----------- ~~December~~-------- 29Net cash provided by operating activities 853 (249) 2,943 ~~December~~3,547 30Cash flows from investing activities: Purchase of property, ~~December~~plant 29& equipment, ~~December~~net 30(659) (143) (808) (1,610) ~~2001~~Sale ~~2000~~of ~~2001~~restricted ~~2000~~marketable securities - - - - Net cash used in investing activities (659) (143) (808) (1,610) Cash flows from financing activities: Net increase (decrease)in revolving credit facility - - (28,500) (28,500) Proceeds from long term debt - - 40,000 40,000 Financing fees paid in connection with the credit facility - - (2,800) (2,800) Payments on bank term loan (59) (457) (1,325) (1,841) Principal payments on capital lease obligations (68) - (64) (132) ---------- --------- ----------- -------- Net ~~income~~cash $used ~~1,166~~in $financing activities (~~642~~127) $(457) 47,~~108~~311 ~~$ 3~~6,~~692~~727 ~~Foreign~~Cash ~~currency~~and ~~translation~~cash ~~adjustments~~equivalents: 1Effect of exchange rate changes - 630 - 630 Increase (~~151~~decrease) during the year 67 (51219) 9,446 9,294 Cash, at beginning of year (~~179~~240) 1,134 6,284 7,178 ---------- --------- ----------- -------- ~~Total~~Cash, ~~comprehensive~~at ~~income~~end $of ~~1,167~~period $ (~~793~~ 173) $ 4915 $ 15,~~057~~730 $ 316,~~513~~472 ========== ========= =========== ========

Approximately $16,900 of the Revolving Credit Facility is being utilized to provide letters of credit to secure the Company's obligations relating to certain Industrial Development Revenue Bonds. As of June 29, 2002 the Company had the ability to borrow up to an additional $6,900 under the Revolving Credit Facility. 10 The balances payable under all borrowing facilities are as follows:

The current portion of long-term debt as of March 30, 2002 includes $28,500 borrowing on the Revolving Credit Facility, which was retired in connection with the GECC financing agreement completed in June 2002. 11 2. RECENTLY ISSUED PRONOUNCEMENTS In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". Statement No. 144 supersedes Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". The provisions of this statement are effective for financial statements issued for fiscal years beginning after December 13, 2001. The Company has not yet determined the impact, if any, this new standard will have on its reported results of operations, financial position and cash flows. 3. COMPREHENSIVE INCOME Comprehensive income includes all changes in a company's equity including, among other things, unrealized holding gains and losses on available-for-sale securities and foreign currency translation adjustments. Total comprehensive income is as follows:

4. GOODWILL The Company adopted statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets, effective March 31, 2002. Under SFAS No. 142, goodwill is no longer amortized but reviewed for impairment annually, or more frequently if certain indicators arise. The Company is required to complete the initial step of a transitional impairment test within six months of adoption of SFAS No. 142 and to complete the final step of the transitional impairment test by the end of the fiscal year. Any impairment loss resulting from the transitional impairment test will be recorded as a cumulative effect of a change in accounting principle for the quarter ended June 30, 2001. Subsequent impairment losses will be reflected in operating income in the income statement. Had the Company been accounting for its goodwill under SFAS No. 142 for all periods presented, the Company's net income (in thousands) and earnings per share would have been as follows:

5. SUBSEQUENT EVENT During July 2002, Whitney Acquisition II, Corp. ("Whitney"), a principal investor in Holdings, and Dr. Michael J. Hartnett, the Company's President, Chief Executive Officer and Chairman of the Board, purchased an aggregate of 240,000 shares of Holdings' Class B Exchangeable Convertible Participating Preferred Stock in exchange for gross proceeds of $24,000. In connection with the purchase, Holdings paid a fee of $750 Whitney and amended the terms of the management services agreement. Following the closing of the sale, Holdings utilized the proceeds of the sale and certain of the Company's cash on hand to repurchase approximately $30,400 in principal amount at maturity of 12 certain debt issued in connection with the Recapitalization (Note 1). This repurchase satisfied Holdings' obligation to make a scheduled redemption payment relating to such debt in December 2002. Holdings will recognize a pretax gain on the extinguishment of this debt obligation of approximately $780, net of transaction expenses of $406. The holders of Holdings' Class B Preferred Stock are entitled to an 8% per annum accumulating dividend and are further entitled to participate in any dividends paid to the holders of shares of Holdings' Common Stock. The Class B Preferred Stock is subject to conversion by Holdings or exchange by the holders thereof. In either situation, each share of Class B Preferred would yield a number of shares o f Holdings' Class A Common Stock determined by reference to a formula set forth in Holdings' Amended and Reseated Certificate of Incorporation (which includes anti-dilution protections), a number of shares of Holdings' Class C Redeemable Preferred Stock also determined by reference to a formula set forth in Holdings' Amended and Restated Certificate of Incorporation and one share of Class D Preferred Stock. Any holders of Class C Preferred Stock would be entitled to an 8% per annum accumulating dividend. The Class C Preferred Stock is subject to redemption by Holdings at its option but is not subject to mandatory redemption. The Class D Preferred Stock entitles the holders thereof, upon liquidation, to a payment determined by reference to a formula set forth in Holdings' Amended and Restated Certificate of Incorporation. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except for the historical information and current statements contained in this Quarterly Report on Form 10-Q, certain matters discussed herein, including, without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward looking statements that involve risks and uncertainties, including, without limitation, the effect of economic and market conditions and competition, the cyclical nature of the Company's target markets, particularly, the aerospace industry, the cost of raw materials and the Company's ability to pass cost increases to its customers, the reliance of the Company on certain customers, the ability of the Company to expand into new markets, the ability of the Company to integrate acquisitions and other factors discussed from time to time in the reports filed by the Company with the Securities and Exchange Commission, which could cause actual results to differ materially. The following discussion addresses the financial condition of the Company as of June 29, 2002 and the results of its operations for the three month period ended June 29, 2002, compared to the comparable periods last year. The discussion should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended March 30, 2002 included in the Form 10-K. THREE MONTHS ENDED JUNE 29, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001 Net sales for the quarter ended June 29, 2002 were $38.5 million, a decrease of $1.7 million or 4.1% over the quarter ended June 30, 2001. The decrease in net sales is primarily attributed to overall sluggishness in the manufacturing sector and softness in distributor areas. Gross margin decreased by $1.4 million or 11.1% to $11.5 million for the quarter ended June 29, 2002, as compared to the first quarter of last year. Gross margin as a percentage of net sales decreased 2.4%, from 32.1% for the first quarter of fiscal 2002, to 29.7% for the first quarter of fiscal 2003. This decrease is primarily the result of the reduced sales and a change in the product mix. Selling, general and administrative ("SG&A") expenses increased by $0.1 million or 1.3% to $6.3 million for the three month period ended June 29, 2002 as compared to the comparable period last year. Operating income decreased by $1.3 million or 20.6% to $5.2 million for the quarter ended June 29, 2002 compared to $6.5 million for the quarter ended June 29, 2002. The decrease primarily resulted from lower gross margin somewhat offset by lower operating expenses relating to goodwill amortization. Interest expense for the first quarter of fiscal 2003 was $3.8 million compared to $4.1 million for the first quarter of fiscal 2002, primarily due to lower interest rates on the outstanding revolving credit facility. Income before taxes decreased $1.0 million for the quarter ended June 29, 2002 to $1.4 million from $2.4 million for the quarter ended June 30, 2001, as a result lower operating income and was somewhat offset by lower interest expense in the first quarter of fiscal 2003. Net income for the quarter ended June 29, 2002 reflects a tax provision of $0.6 million compared to $1.0 million for the quarter ended June 30, 2001. Net income decreased by $0.6 million to $0.8 million from $1.4 million for last year, as a result of the lower income before taxes. 14 LIQUIDITY AND CAPITAL RESOURCES ------------------------------- For the three months ended June 29, 2002, the Company provided cash of $3.6 million from operating activities compared to $5.1 million for the comparable period last year. The decrease of $1.5 million is primarily the result of a decrease in net income of $0.6, goodwill amortization decrease of $0.2 million and an increase in other non-cash working capital of $0.7 million. Cash used for investing activities for the three months ended June 29, 2002 consisted of $1.6 million relating to capital expenditures compared to $1.7 million for the three months ended June 30, 2001. Additionally, in the three months ended June 30, 2001, $0.4 million was remitted to the Company in connection with qualifying equipment purchases related to and Industrial Revenue Bond. For the three months ended June 29, 2002, the Company had net cash inflows from financing activities of $6.7 million resulting from retirement of its 1997 revolving credit facility of $28.5 million, issuance of a new bank term loan of $40.0 million, an increase in non current assets associated with deferred finance fees in connection with the new credit facility of $2.8 million, payments on bank debt of $1.8 million and payments on capital lease obligations of $0.1 million. In the first quarter of fiscal 2001, the Company had net cash outflows from financing activities of $2.3 million, consisting of repayments on its revolving credit facility of $0.5 million, payments of bank debt of $1.6 million and capital lease obligations of $0.2 million. The Company terminated its previous senior credit facility and the Company and its domestic subsidiaries entered into a $94 million senior secured credit facility (the "New Credit Facility"), dated May 30, 2002, with General Electric Capital Corporation as agent and lender, Congress Financial Corporation (Western) as lender, GECC Capital Markets Group as lead arranger and other lenders signatory thereto from time to time, consisting of a $40 million term loan (the "Term Loan") and a $54 million revolving credit facility (the "Revolving Credit Facility"). In connection with the New Credit Facility the Company and its domestic subsidiaries granted liens and mortgages on substantially all of their existing and after-acquired personal and real property. In addition, the Company pledged all of its capital stock in its domestic subsidiaries and a portion of its capital stock in its directly owned foreign subsidiaries. The proceeds of the Term Loan were used to pay off the Company's senior credit facility, dated June 23, 1997, by and between the Company, Credit Suisse First Boston, as administrative agent and the lenders thereto, to pay fees and expenses with respect to the new credit facility and for other corporate purposes. In addition, the Company has secured the letters of credit issued in connection with its previous senior credit facility pursuant to the New Credit Facility. The Revolving Credit Facility is available for issuances of letters of credit and for loans in connection with acquisitions, working capital needs or other general corporate purposes. As of August 3, 2002 letters of credit in a total amount of $19.1 million were issued under the Revolving Credit Facility. No additional amounts have been drawn under the Revolving Credit Facility. Principal and interest payments under the New Credit Facility, interest payments on the Notes, and the funding of acquisitions, represent significant liquidity requirements for the Company. With respect to the Term Loan, the Company will begin to make its required quarterly scheduled principal payments on September 30, 2002. The Term Loan bears interest at a floating rate based upon an interest rate option elected by the Company. The Company's ability to incur indebtedness is limited by the terms of the Credit Agreement, the Indenture and the Discount Debentures. During July 2002, Whitney Acquisition II, Corp., a principal investor in Holdings, and Dr. Michael J. Hartnett, the Company's President, Chief Executive Officer and Chairman of the Board, purchased an aggregate of 240,000 shares of Holdings' Class B Exchangeable Convertible Participating Preferred Stock in exchange for gross proceeds of $24.0 million. In connection with the purchase, Holdings paid a fee of $0.7 million to Whitney and the terms of the management services agreement were amended. Following the closing of the sale, Holdings utilized the proceeds of the sale and certain of the Company's cash on hand to repurchase approximately $30.4 million in principal amount at maturity of certain debt 15 issued in connection with the Recapitalization (See Note 1 to the interim financial statements included in this Quarterly Report on Form 10-Q). This repurchase satisfied Holdings' obligation to make a scheduled redemption payment relating to such debt in December 2002. Holdings will recognize a pretax gain on the extinguishment of this debt obligation of approximately $780, net of transaction expenses of $406. The Company believes that borrowings available under the Senior Secured Credit Facility, cash flow from operations and cash on hand will provide adequate funds for its ongoing operations and planned capital expenditures. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company's Swiss operations utilize the Swiss franc as the functional currency. Foreign currency transaction gains and losses are included in earnings. Foreign currency transaction exposure arises primarily from the transfer of foreign currency from one subsidiary to another within the group, and to foreign currency denominated trade receivables. Currency transaction and translation exposures are not hedged as the Company does not use any derivative financial instruments, and transaction gains and losses have not been significant. Unrealized currency translation gains and losses are recognized upon translation of the foreign subsidiaries' balance sheets to U.S. dollars. Borrowings of the Company are denominated in U.S. dollars. Management believes that the carrying amount of the Company's borrowings approximates fair value because the interest rates are variable and reset frequently or are reasonable to the quoted market prices of similar debt instruments. 16 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are various claims and legal proceedings against the Company relating to its operations in the normal course of business, none of which the Company believes is material. The Company currently maintains insurance coverage for product liability claims. There can be no assurance that indemnification from its customers and coverage under insurance policies will be adequate to cover any future product liability claims against the Company. ITEMS 2, 4, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned thereunto duly authorized. ROLLER BEARING COMPANY OF AMERICA, INC. August 9, 2002 /s/ Michael J. Hartnett --------------------------------------------- By: Michael J. Hartnett President & Chief Executive Officer Principal Executive Officer August 9, 2002 /s/ Anthony S. Cavalieri -------------------------------------------- By: Anthony S. Cavalieri Vice President & Chief Financial Officer Principal Financial and Accounting Officer 18

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